424B4 1 ea0200464-424b4_vocodia.htm PROSPECTUS

Filed Pursuant to Rule 424(b)(4)
Registration No. 333-269489

 

PROSPECTUS

 

 

VOCODIA HOLDINGS CORP

 

1,400,000 Units

Each Consisting of:

 

One Share of Common Stock
One Series A Warrant to Purchase One Share of Common Stock
One Series B Warrant to Purchase One Share of Common Stock

 

42,000

Shares of Common Stock Underlying the Representative’s Warrants

 

2,296,956 Shares of Common Stock

held by the Selling Shareholders

 

This is an initial public offering of Vocodia Holdings Corp, a Wyoming corporation on a firm commitment basis. This offering consists of 1,400,000 units (the “Units”), each consisting of (i) one share (the “IPO Share”) of common stock, par value $0.0001 per share, of the Company (“Common Stock”); (ii) one Series A Warrant to purchase one share of Common Stock (a “Series A Warrant”); and (iii) one Series B Warrant to purchase one share of Common Stock (a “Series B Warrant,” and together with the Series A Warrant, an “IPO Warrant”). Each Series A Warrant is exercisable at an exercise price of $5.5250 per share (130% of the offering price per Unit), subject to reset as described below, and each Series B Warrant is exercisable at an exercise price of $8.5000 per share (200% of the offering price per Unit). Each Series A Warrant and each Series B Warrant will be immediately exercisable from the date of issuance and will expire five years after the date of issuance. We refer to the Units, IPO Shares and the IPO Warrants, and the Common Stock issued or issuable upon exercise of the IPO Warrants, collectively, as the securities.

 

The initial public offering price is $4.2500 per Unit. Each Series A Warrant is exercisable at an exercise price of $5.5250 per share of Common Stock (130% of the offering price per Unit), subject to reset as described below, and each Series B Warrant is exercisable at an exercise price of $8.5000 per share (200% of the offering price per Unit). Each Series A Warrant and each Series B Warrant will be immediately exercisable from the date of issuance and will expire five years after the date of issuance. The initial public offering price of the Units offered hereby has been determined between the underwriters and us considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business (see “Underwriting — Determination of Offering Price” for additional information). The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The IPO Shares and IPO Warrants are immediately separable and will be issued separately in this offering. The IPO Warrants offered hereby will be immediately exercisable on the date of issuance and will expire five years from the date of issuance.

 

We have granted Alexander Capital, L.P., the representative of the underwriters of this offering (the “Representative”), a 45-day option to purchase up to an additional 210,000 shares of Common Stock and/or Series A Warrant and/or Series B Warrants, which may be purchased in any combination of Common Stock, Series A Warrant and Series B Warrants (collectively, the “Option Securities”) to cover over-allotments, if any.

 

We have also registered for public sale: (i) 1,801,880 shares of our Common Stock issuable under the approximately $4,470,233 in original issue discount principal and interest amount of the 2022 Convertible Notes and the approximately $736,778 in original issue discount principal and interest amount of the 2023 Convertible Notes, including 876,658 Increased Conversion Shares (as defined below) and (ii) 495,076 shares of our Common Stock issuable under 495,076 Series C Warrants to purchase one share of Common Stock (“Series C Warrants”) issued to certain holders of our existing warrants (“Investors’ Warrants”) upon the exercise of such Series C Warrants by certain investors. The offering of Selling Stockholder Shares by the Selling Stockholders is conditioned on the closing of the IPO. If the Selling Shareholders choose to sell their Selling Shareholders Securities, we will not receive any of the proceeds from the sale of such securities by the Selling Shareholders. The Selling Shareholders may sell or otherwise dispose of their shares in a number of different ways and at varying prices, but will not sell any Selling Shareholders Securities until after the closing of this offering. The offering of the Selling Shareholders Securities by the Selling Shareholders will terminate at the earlier of such time as all of the Selling Shareholders Securities have been sold pursuant to the registration statement and the date on which it is no longer necessary to maintain the registration of the Selling Shareholders Securities as a result of such shares being permitted to be offered and resold without restriction pursuant to the provisions of Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), and the offering of the Selling Shareholders Securities may extend for a longer period of time than the offering of the Units. The Selling Shareholders Securities will be resold from time to time by the Selling Shareholders. We will pay all expenses (other than discounts, concessions, commissions and similar selling expenses, if any) relating to the registration of the Selling Shareholders’ shares of Common Stock with the U.S. Securities and Exchange Commission (the “SEC”).

 

In addition, we have also registered shares of Common Stock underlying the Representative’s Warrants (discussed below).

 

 

 

Prior to this offering, there has been no public market for our securities. Our Common Stock, Series A Warrants and Series B Warrants are listed on the Cboe BZX Exchange, Inc. (the “CBOE”) under the symbols “VHAI,” “VHAI+A” and “VHAI+B, respectively. Simultaneously to this offering, we are also issuing 495,076 Series C Warrants to purchase one share of Common Stock each to certain holders of our Investors’ Warrants. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants are not registered with the SEC under the Securities Act and are not listed on any stock exchange.

 

As of December 31, 2023, our Chief Executive Officer, Mr. Brian Podolak is entitled to vote 35.8%, and our Chief Technology Officer, Mr. James Sposato, is entitled to vote 35.7% of our total shares outstanding. This percentage accounts for all of Mr. Podolak’s and Mr. Sposato’s common stock and Series A preferred stock, par value $0.0001 per share (the “Series A Preferred Stock”).

 

We intend to use the proceeds from this offering for acquisitions of websites, technologies, or other assets, building improved phone switch capabilities for our product, expanding our product offerings from other digital channels, sales and marketing, working capital and other general corporate purposes. Our phone switch capacity allows us to scale more calls simultaneously, which translates into our services being more readily available to handle the increased demands of current and future customers. See “Use of Proceeds.”

 

We are an “emerging growth company” and a “smaller reporting company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and have elected to comply with certain reduced public company reporting requirements. See “Summary-Implications of Being an Emerging Growth Company and Smaller Reporting Company.”

 

If the Selling Shareholders choose to do so, they may sell or otherwise dispose of their Selling Shareholders Securities from time to time on terms to be determined at the time of sale through ordinary brokerage transactions or through any other means described in this prospectus under “Selling Shareholders-Plan of Distribution.” The prices at which the Selling Shareholders may sell the Selling Shareholders Securities will be determined by the prevailing market price of the shares or in negotiated transactions. We will not receive any proceeds from the sale of the Selling Shareholders Securities by the Selling Shareholders.

 

Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 16 of this prospectus before making a decision to purchase our securities.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

 

 

 

   Per Unit   Total (1) 
Initial public offering price(1)  $4.2500    $5,950,000 
Underwriting discounts and commissions(2)  $0.2975   $416,500 
Non-accountable expense allowance(3)  $0.0425   $59,500 
Proceeds to the Company before expenses(4)  $3.9100   $5,474,000 

 

(1)Assumes no exercise of the over-allotment option we have granted to the underwriters, as described below.

 

(2)Represents an underwriting discount equal to 7.0% of the gross offering proceeds; provided that such underwriting discount will be equal to 4.0% of the gross proceeds received by the Company in this offering from investors identified and introduced to by the Company, which number is not reflected in the table above. For a description of the other compensation to be received by the underwriters, please see “Underwriting” beginning on page 105.

 

(3)Represents a non-accountable expense allowance equal to 1.0% of the gross proceeds of this offering, payable to the Representative.

 

(4)  We estimate that the total fees, commissions, expenses and other costs of this offering will be approximately $750,000. These expenses do not include the issuance to the Representative of the warrant (the “Representative’s Warrant”) exercisable for up to 42,000 shares of common stock, equal to 3.0% of the number of shares of common stock sold in this offering, at a per share exercise price equal to 120% of the initial public offering price of the Units offered hereby, including Option Securities sold to cover over-allotments, if any, or the reimbursement of certain expenses of the underwriters. See “Underwriting” beginning on page 105 of this prospectus for additional information regarding compensation to be paid by the Company to the underwriters in connection with this offering. 

 

We have granted the Representative an option to purchase from us, at the initial public offering price, up to 210,000 additional Option Securities, less the underwriting discounts and commissions, within 45 days from the date of this prospectus to cover over-allotments, if any. If the representative exercises the option in full, the total underwriting discounts and commissions payable will be $547,400, and the total proceeds to us, before expenses, will be $6,295,100.

 

For a description of the other compensation to be received by the underwriters, please see “Underwriting” beginning on page 105.

 

The underwriters expect to deliver the securities to purchasers in the offering on or about February 26, 2024.

 

The date of this prospectus is February 21, 2024.

 

Sole Book-Running Manager

 

ALEXANDER CAPITAL, L.P.

 

Co-Manager

 

Network 1 Financial Securities, Inc.

 

 

 

 

ABOUT THIS PROSPECTUS

 

In this prospectus, unless the context suggests otherwise, references to “Company,” “Vocodia,” “we,” “us,” and “our” collectively refer to Vocodia Holdings Corp, a Wyoming corporation, and its subsidiaries.

 

The registration statement of which this prospectus forms a part that we have filed with the U.S. Securities and Exchange Commission (the “SEC”) includes exhibits that provide more detail of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC, together with the additional information described under the heading “Where You Can Find More Information,” before making your investment decision.

 

You should rely only on the information provided in this prospectus or in any prospectus supplement or any free writing prospectuses or amendments thereto, or to which we have referred you, before making your investment decision. Neither we nor the underwriters have authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or any related free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any prospectus supplement, or any free writing prospectuses or amendments thereto do not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus, any prospectus supplement or any free writing prospectuses or amendments thereto in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer or solicitation of an offer in such jurisdiction. You should not assume that the information contained in this prospectus, any prospectus supplement or any free writing prospectuses or amendments thereto, as well as information we have previously filed with the SEC, is accurate as of any date other than the date on the front cover of the applicable document.

 

To the extent there is a conflict between the information contained in this prospectus and any prospectus supplement, you should rely on the information in such prospectus supplement, provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date - for example, a document incorporated by reference in this prospectus or any prospectus supplement - the statement in the document having the later date modifies or supersedes the earlier statement.

 

Neither the delivery of this prospectus nor any distribution of any of the securities pursuant to this prospectus shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated by reference into this prospectus or in our affairs since the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since such date.

 

Neither we nor the underwriters are offering to sell or seeking offers to purchase such securities offered hereby in any jurisdiction where the offer or sale is not permitted. Neither we, nor the underwriters, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of such securities as to distribution of the prospectus outside of the United States.

 

For investors outside the United States: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

Neither our Company, any of its officers, directors, agents or representatives, nor the underwriters, make any representation to you about the legality of an investment in our Company’s securities. You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our Company’s securities.

 

 

 

 

TRADEMARKS AND TRADE NAMES

 

This prospectus includes trademarks that are protected under applicable intellectual property laws and the Company’s property. This prospectus also contains trademarks, service marks, trade names and/or copyrights of other companies, which are the property of its owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its rights or the right of the applicable licensor to these trademarks and trade names.

 

INDUSTRY AND MARKET DATA

 

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which it operates, including market position and market opportunity, is based on information from management’s estimates, as well as from industry publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, its knowledge of the industry, and assumptions based on such information and knowledge, which management believes to be reasonable and appropriate. However, assumptions and estimates of our future performance, and the future performance of its industry, are subject to numerous known and unknown risks and uncertainties, including those described under the heading “Risk Factors” in this prospectus and those described elsewhere in this prospectus, and the other documents our files with the SEC from time to time. These and other important factors could result in its estimates and assumptions being materially different from future results. You should read the information contained in this prospectus completely and with the understanding that future results may be materially different and worse from what we expect. See the information included under the heading “Cautionary Statement Regarding Forward-Looking Information.”

 

 

 

  

TABLE OF CONTENTS

 

  Page No.
PROSPECTUS SUMMARY 1
SUMMARY FINANCIAL INFORMATION 15
RISK FACTORS 16
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 38
USE OF PROCEEDS 39
DIVIDEND POLICY 40
CAPITALIZATION 41
DILUTION 43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 45
BUSINESS 63
MANAGEMENT 75
EXECUTIVE COMPENSATION 82
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 84
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 86
SELLING SHAREHOLDERS 88
DESCRIPTION OF SECURITIES 94
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF THE COMPANY’S COMMON STOCK 99
SHARES ELIGIBLE FOR FUTURE SALE 103
UNDERWRITING 105
LEGAL MATTERS 110
EXPERTS 110
WHERE YOU CAN FIND MORE INFORMATION 110
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

 

i

 

 

PROSPECTUS SUMMARY 

 

The following summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Company’s historical financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless otherwise noted, the terms “Company,” “Vocodia” “we,” “us,” and “our” refer to Vocodia Holdings Corp.

 

OVERVIEW 

 

Company Overview

 

Vocodia Holdings Corp (“Vocodia” or “VHC”) was incorporated in the State of Wyoming on April 27, 2021 and is a conversational artificial intelligence (“AI”) technology provider. Our technology is designed to drive better sales and services for our customers. Clients turn to us for their product and service needs.

 

Business Summary

 

We are an AI software company that build practical AI functions and makes them easily obtainable for businesses on cloud-based platform solutions at low costs and scalable to multiagent vast enterprise solutions.

 

Our operations include three wholly owned subsidiaries: (1) Vocodia FL, LLC (“Vocodia FL”), which was incorporated in the State of Florida on June 2, 2021 and manages all of VHC’s human resources and payroll functions, (2) Vocodia JV, LLC (“Vocodia JV”), which was incorporated in the State of Delaware on October 7, 2021 and was formed with the intention to conduct any and all joint ventures or acquisitions for VHC, which do not exist as of the date of this prospectus, and (3) Click Fish Media, Inc. (“CFM”), which was incorporated in the State of Florida on November 26, 2019 and is an IT services provider. CFM was formerly owned by James Sposato, who is an officer and director of the Company. CFM was acquired by us from Mr. Sposato per the Contribution Agreement, dated August 1, 2022 (the “Contribution Agreement”). In the Contribution Agreement, Mr. Sposato (“Contributor”), has contributed, assigned, transferred and delivered to us, the outstanding capital stock of CFM and we have accepted the contributed shares from the Contributor. As full consideration for the Contribution, we have paid the Contributor consideration in the amount of $10.

 

An illustration of our organizational structure is provided below:

 

 

We aim to offer corporate clients scalable enterprise AI sales and customer service solutions intended to rapidly increase sales and service, while lowering employment costs.

 

1

 

 

We seek to enhance rapport and relationship building for customers, which is as necessary component to sales. We believe that there is a positive correlation between AI which sounds similar to a human voice over the phone and better customer rapport and customer service benefits. With our advanced AI, we believe that it will be difficult for customers to distinguish between speaking to a human sales representative and to an AI bot. We believe we can increase customer satisfaction and maximize potential service efficiency for our clients. Our goal is to provide quick training and deployment, potentially unlimited scalability, easy integration with existing corporate platforms and other benefits to our customers from AI’s efficiency. We strive to help our customers manage budgets and perform better than the high costs of existing sales and service personnel.

 

Our Mission

 

We are a conversational AI software developer and provider. Our mission is to maximize value in communications between organizations and their consumer bases from “hello” to “goodbye”. Our goal is to be the conversational leader in corporate and organizational, agenda driven communications, to drive convenience, scale, and empowerment, while reducing operational costs and risk.

 

We offer our corporate clients scalable enterprise-level AI sales and customer service solutions which allow for AI sales representatives to reduce human labor costs and responsibilities while increasing the reach and efficacy of human-led, purposeful, agenda driven and conversational communications. We deliver our patent pending conversational AI software in the form of Digital Intelligent Sales Agents, which we refer to as DISAs® (the “DISAs”). The DISAs are built with AI software programmed for the DISAs to sound and feel human and to perform business tasks that require humans to converse with one another effectively, and thus to provide the best representation for each of our customers’ businesses.

 

Our DISAs have been programmed to provide the marketplace with an alternative to human sales representatives in the function of (1) sales; (2) customer service; (3) supportive agency; (4) intermediary communications; and (5) alerts with automated transfers and queuing. The DISAs are tailored to serve the specific requirements of each of our customers and are delivered via our proprietary platform.

 

We view our DISAs as the total solution for those in need of sales and customer service automation, which provides the marketplace alternative to a role that has primarily been serviced by humans in the sales and customer service departments, in part or in whole, to increase our clients’ revenues and lower costs, providing them with the ability to produce campaigns fast and scale them up or down as necessary.

 

Our AI software is intended to provide a solution for operational costs and efficiency deficits by improving business automation and reducing the inefficiencies caused by human limitations. Our motto is to “Go Beyond Human”, with AI alternative of human salespeople and customer service representatives. We aim to lower costs associated with sales campaigns that rely on humans and provide scalability of agent quantity, style, mission, and other personalization at varying levels for each organization’s needs.

 

Market Opportunity

 

AI Reduces Labor Spending

 

Growth for most businesses means increasing sales and services. However, growth is often limited by available resources, such as customers and employees. Planning, recruiting, training and retaining employees to focus on growth (sales), and retaining such employees (attrition), is typically expensive and costs can be prohibitive. Further, labor costs can be a considerable percentage of overall costs for running the business as they include, without limitation, employee wages, benefits, payroll or other related taxes. There may be no relief for businesses faced with the necessary employment costs of sales agents and customer service personnel.

 

2

 

 

Key Highlights

 

Voice Quality: We provide AI with high-level voice quality and seeks to deliver superior service in the marketplace.

 

  Quality Sales: We use the following sales and marketing strategy: Prospects – Qualifies – Closes – Processes Orders – Upsells. Our DISAs are able to generate more leads and more transfers to clients so they can sell or upsell their new leads and transfers on their products. We believe that our customers can become more efficient by hiring DISA “fronters”, rather than traditional “fronters”. These traditional human “fronters” have served as the driving force in call centers making 150 or so calls daily to qualify potential clients. Once qualified, they then transfer the call to another department of the call center which handles the final transactional element of the sales call. The fronter position is the high turnover, low pay, very hard to hire, part for call centers that are the costliest and least productive. We automate this part of the process using AI to make these calls, instead of the human fronters. In addition, AI only has to be trained once, does not take vacation, can call 24/7, and could cost less than human fronters. Thereby, corporate clients can receive the same level of sales expected from their top 85% of employees. We deliver effective, dependable, scalable to the hour, low variance sales and customer service solutions.

 

  Affordability: AI sales agents (also known as AI bots) cost less than one-third of human sales agents without human issues that tend to affect the processes, human resources and bottom line.

 

  Scalability: Our software is cloud-based and Application Programming Interface (“API”)-friendly, which is interoperable with third-party platforms. We offer companies scalable enterprise-level AI sales and customer service solutions which reduce human labor costs and responsibilities while increasing the reach and efficacy of human led, purposeful, agenda driven and conversational communications.

 

Compliance: DISAs parameters are set by our clients’ needs and uploaded data. These inputs can include, but are not limited to, recordings, scripts and rebuttals supplied by a respective client. We use our clients’ data and trains their respective DISAs to converse with prospective customers, qualify them, and then transfer the call to a “closer” to sell to the customer. The AI/DISA can only say what they are trained and programmed to say. We believe this will lead to higher level of compliance, avoiding impromptu human errors which will not occur for our DISAs.

 

Speedy Training: The AI can be trained in 3 days with: recordings of existing sales calls; and sales script for baseline and target goals. AI bots also continue to learn on the job from call interactions, thus machine learning progressively improves over time.

  

Our Competitive Advantages

 

We have created software that is intended to replicate the functions of human sales representatives, such as calling prospects by telephone, announcing the purpose of a call and reason for the call, and identifying interest in a conversational manner. The AI/platform can be programmed for each client to provide scalable solutions which can reduce sales inefficiencies and improve customer service results. We commoditize and standardize our AI solution to improve traditional sales and customer service support operations in order to meet our clients’ sales and service goals.

 

Our proprietary software allows us to adjust our approach to the market, to either offer sales or customer service as a call center at competitive rates. On an hour-to-hour basis we can replace human sales and customer service agents in a cost-effective manner.

 

Market rates for sales and customer service agents can range from approximately $5.00 dollars per hour to approximately $55.00 dollars per hour. Our platform allows us to control the cost to market rates of sales and customer service agents because machine accuracy and programming allow for significant reduction of costs across standard corporate departments such as human resources, legal, management, customer relations management software, compliance, commissions, real estate, equipment, supporting software, telecommunications and more.

 

We offer our platform to individual sales agents, customer service agents and small businesses, providing enterprise-level agent services for market tiers of all sizes and scope. Our software allows small, single-owner businesses the equivalent sales and service platform used by enterprise-level clients. We believe that the platform can equalize the opportunities available for smaller businesses and larger organizations.

 

Additional Opportunities

 

We plan on pursuing opportunities beyond our present goals of delivering sales and customer service software agents. We believe there may be other uses of our conversational AI software and platform, such as in the areas of education, including the areas of philosophy and religion. In the long run, we envision a world in which businesses and consumers have conversational AIs, such as our DISAs, performing the tasks of humans, while maximizing efficiencies in many fields and improving timing, quality, budget, and convenience, using automated tools. In short, we aim to make the world a better place by using our proprietary AI to improve current processes.

 

3

 

 

Our Strategy

 

Technology

 

We believe that we have built, and will continue to build, AI conversational systems that sound virtually the same as humans. Proprietary software and systems have been developed in-house from scratch with streamlined integration and a growing number of customer relationship managements (“CRMs”) and platforms all over the world. Our software uses Artificial Intelligence, Augmented Intelligence, Natural Language Processing and Machine Learning to provide a robust, continuously learning engine which can perform multiagent functions simultaneously. Our software is cloud-based, permitting easy API integration with most systems and platforms commonly used by businesses today.

 

Products

 

We have developed and released its first software product and platform, which we refer to as “DISA”, a humanized conversational AI technology, that can complete each stage of the conversational aspect of the sales process, business-to-business (“B2B”) and business-to-consumer (“B2C”).

 

Our prospects for direct software sales are any enterprise clients who are in the phone and call center markets. The initial sales targets were call centers who needed to replace poor performing staff in the pre-Covid-19 era. Now, our sales targets have shifted to filling empty seats in the call centers. Our technology powers our virtual agent, the DISA. In the current marketplace, we consider any corporate client with a 50-seat call center at a telephony location a potential sales client. These potential clients span many industry verticals, including but not limited to, health, solar, employee retention credit, insurance, recruiting and real estate, automotive, cruise lines and hospitality and lodging.

 

Our AI sales agents not only sell and serve prospects and customers, but also gather and report robust intelligence from customers and the marketplace. Vocodia’s DISAs are programmed to instantly answer customer service calls and to upsell and provide personalized customer care.

 

Development Strategy

 

We plan three phases of development to become the largest and most profitable AI service provider, globally, in the next five years:

 

Integrate AI sales agents and customer service offerings directly into existing enterprises and then via CRM applications;

 

Increase sales of AI-assisted workflow to more enterprises in a variety of functions and industries (e.g., food ordering, administration, accounting, bookkeeping and human resources). Grow revenue streams, including based upon market pricing where our DISAs can perform at advantageous margins such as notable efficiencies or less operational costs to achieve the same function to the satisfaction of the end customer (acquisitions may become a significant part of our growth strategy, but at this time we have not identified any specific candidates that meet our objectives); and

 

Integrate personal AI assistants to individuals for overall life assistance, integrated with existing sales and other AI bots, to serve members of the community.

 

4

 

 

Acquisition Strategy

 

Our strategy includes seeking to selectively pursue acquisitions, including companies with revenue streams where our DISAs can perform at advantageous margins with noticeable efficiency or less operational costs to achieve the same function. We will concentrate on several important priorities in evaluating potential acquisition candidates, including the key considerations and objectives we hope to achieve, which are listed below:

 

  acquiring beneficial technology or use;
     
  accelerating market share;
     
  increasing revenue;
     
  enhancing efficiencies in product and service delivery;
     
  identifying and addressing possible threats to our organization;
     
  acquiring access to targeted and specified client base;
     
  reducing client acquisition costs by reducing our demands on resources and time (opportunity costs);
     
  acquiring client bases from companies who have service relationships with consumers and acquisitions of companies with or without offerings of similar services;
     
  reducing our client acquisition costs, preserving going rates of such services, and extending our wrapped services to such client base; and
     
  maintaining our dynamic pricing thereby potentially creating greater value opportunities and allows us to minimize market price arbitrage to maximize profit potential.

 

Management and Operating Strategy

 

Our management is market-receptive: as a new technology company, we seek to continuously identify new markets as well as industries where our services would be beneficial to potential customers. We believe that our technologies offer businesses and consumers significant advantages, but our technology is not yet generally recognized. We remain open to discovering new opportunities to offer our technology solutions.

 

We believe that we have an attractive operating model due to the scalability of our AI platform, the recurring nature of our revenue (Software-as-a Service (“SaaS”)) and the potentially high operating margins. We rely on conversions (sales) to generate increased free cash flow. Conversions happen for us when our clients use our services to sell their products/services to their customers. Our operational structure and AI focus allow us to convert enterprise clients in their call center environments (allowing us to rapidly convert clients in a cost-effective manner).

 

Given the fixed-cost nature of our technology, DISAs allow us to scale our solutions quickly with low marginal costs. These DISAs can pitch and close, as well as manage full customer service operations, in high data interactive demand-based industries, while providing a full human conversation experience to human customers. We offer our customers a contract term of 12 months, with a monthly fee of $1,495 per DISA per month. Additionally, we offer custom setup for a fee to begin building a DISA for a client (i.e., one-time setup fee for each client campaign). We believe that our recurring revenue, combined with our robust sales pipeline and enterprise customer base, will continue to contribute to our long-term growth and strong operating margins, giving us flexibility to allocate capital for our continued success.

 

5

 

 

Growth Strategy

 

We believe that we are well positioned for continued growth across the various markets in the call center space. Our strategy for achieving growth includes the following:

 

Build upon our extensive client relationships

 

We have a diversified pipeline of potential clients. Current clients include health insurance providers, health insurance recruiting new agents, employee retention credits, solar, real estate recruitment and real estate new clients. Through the development of our proprietary switch (as described below) and technical team, we have the ability to scale our DISAs over time. We also intend to scale our client base by strategically adding new sales development personnel and customer service and support team members. We believe that we are in the early stages of penetrating this expanding market with our DISA technology platform.  Key elements of this strategy include:

 

widely commercializing this new humanized conversational AI platform in the marketplace;

 

increasing the enterprise client usage by increasing the number of DISAs per client;

 

adding multi-channel capabilities to our platform in the form of text message, voicemail, social media (such as LinkedIn), etc. to increase connection rates; and

 

acquiring new strategic partners who bring enhanced complimentary technology and revenue to help us increase market share.

 

We are in formal negotiations with SEDENA – Secretaría de la Defensa Nacional (The National Defense Department of Mexico) – to provide services of AI driven information and emergency services. We anticipate initiation of services, pricing, and finalization by the first quarter of 2024. We have initiated a Spanish library creation of SEDENA’s AI conversation engine to fulfill this potential arrangement. We believe that the launch of our services with SEDENA will exemplify case use of citizen warnings, alerts and intelligence gathering for other government agencies and municipalities. The negotiations with SEDENA are ongoing and we cannot assure you that we will be able to reach a definitive agreement with respect to the arrangement.

 

We have also recently completed the approved build-out of a sales DISA for Vertical Merchant Solutions (“VMS”), a large merchant services credit card processing provider. VMS is a pre-release client under agency capacity and is preparing to expand its operations with our technology in 2024. VMS has indicated interest in exclusive software licensing for the merchant services industry.

 

Continue to innovate

 

We believe a significant opportunity exists to enhance our technology platform and analytics using our vast database. We intend to expand our technology services offerings to capitalize on the evolving call center and customer service environment. Our investments in human capital, technology and services capabilities position us to continue to pursue rapid innovation. Examples of our recent innovations include upgrading our own proprietary switch. Our platform depends on phone switch capability (generally voice over internet protocol switches) to generate the actual connection from AI to the customer on the outside. Thus, we are dependent on outside telecom switches and infrastructure to manage the speed of our connection pace. This dynamic creates operational risk, due to the reliance of each switch provider’s technology and infrastructure limits. The bulk of our challenges come from switch uncertainty. Therefore, our goal is to improve our own company-controlled switch, which is critical to our economic health, growth and can facilitate easier delivery of services provided in each software sale. We believe this development would provide us with switch independence, allowing us to obtain more control, efficiency and certainty of delivery while lowering internal costs and managing traffic to external, non-company managed switches. The benefits of building our own switch allows us to scale faster in the quantity of software licenses, the variety of industries and verticals served, the independent scale of service utilized by each individual software licensee (end user), and the quantity of connections made by the hour.

 

The Mega Switch

 

We have achieved a new milestone. Our telephonic switch, connecting our conversational AI to the world via telephone, can now manage and connect a single DISA to 20,000 simultaneous unique telephone conversations (unique customers). We call this quantity of active telephone lines, “Clusters”.

 

We can add on new Clusters in 4 to 5 minutes, and to date, we have not identified a limit of Clusters managing simultaneous conversations. Using Voice Over Internet Protocol (VOIP) and our proprietary switch, customers can dial in on 20,000 lines and be answered by our AI representatives, as well as dial out and initiate full sales and customer service functions. The advantage of this technology is that organizations may now manage surges of interest, customer service, or emergencies, without backlog or hold times.

 

We believe this scale of “telephone switch clusters” is a unique service in the world, providing benefit to organizations in unanticipated surges of customer services, sales and information exchange demand.

 

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Expand portfolio through strategic acquisitions

 

We have developed an internal capability to source, evaluate and integrate acquisitions that have created value for our stockholders. We plan to target strategic acquisitions subsequent to the closing of this initial public offering, but we have not currently entered into any agreements for the acquisition of significant assets, businesses or companies. While there is no guarantee that any acquisition will be completed, successful acquisitions may bring a collection of complimentary technology and existing revenue to us.  We also plan to continue to pursue strategic acquisitions to grow our platform and enhance our ability to provide more services to our clients. We also expect to seek favorable commercial opportunities, primarily in the areas of technological platforms, data suppliers and consulting services providers.

 

Recent Developments

 

During the nine months ended September 30, 2023, the Company issued $941,177 in original issue discount senior secured convertible notes (together, the “2023 Convertible Notes”). The 2023 Convertible Notes bear interest at an annualized rate of 15%, with no interest for the first six months. The 2023 Convertible Notes mature nine months after the original issue date of the 2023 Convertible Notes, whereupon all outstanding principal and accrued interest is due to the holders of the 2023 Convertible Notes.

 

The 2023 Convertible Notes include a conversion feature, whereupon the closing of our initial public offering (the “Liquidity Event”), the 2023 Convertible Notes may be payable to the holders by the Company delivering to the holders shares of common stock equal to the payment amount due at the date of the Liquidity Event divided by the conversion price, which is 65% of the offering price per share of common stock paid in a Liquidity Event.

 

In connection with the issuance of the 2023 Convertible Notes, the Company issued common stock purchase warrants to the holders of the 2023 Convertible Notes (the “2023 Warrants”). The 2023 Warrants give the holders the right, but not the obligation, to purchase shares of common stock of the Company. The exercise price of the 2023 Warrants is equal to 120% of the conversion price of the 2023 Convertible Notes. The 2023 Warrants expire five (5) years from the consummation of the first Liquidity Event.

 

The 2022 Convertible Notes issued in August through December 2022, totaling $2,427,059, are currently in default. The Company recorded a default penalty of $485,412, for the nine months ended September 30, 2023. During the nine months ended September 30, 2023 and 2022, the Company recorded interest expense of $2,365,004 and $60,096, respectively, which included amortization of debt discount of $1,671,003 and $60,096, respectively, default penalty of $485,412 and $0, respectively, and accrued interest of $208,589 and $0, respectively. As of September 30, 2023 and December 31, 2022, accrued interest was $208,589 and $0, respectively.

 

As of January 10, 2024, the Company has entered into extension and waiver letters (collectively, the “Note Extension”) with the holders of the 2022 Convertible Notes and the 2023 Convertible Notes to extend the maturity dates of each of the 2022 Convertible Notes and the 2023 Convertible Notes to February 14, 2024, in exchange for an increased amount of the Company’s conversion shares payable to the convertible note holders, totaling, in the aggregate, 876,658 shares (the “Increased Conversion Shares”). Pursuant to the terms of the Note Extension, the Company has agreed to register the Increased Conversion Shares for public sale pursuant to this registration statement. Subsequently, the Company and certain holders of the Investors Warrants have mutually agreed that such holders would receive Series C Warrants in this offering in lieu of the Investors’ Warrants, which would be cancelled. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants will not be registered with the SEC under the Securities Act and will not be listed on any stock exchange.

 

On October 25, 2023, Richard Shuster resigned as Chief Financial Officer of the Company. Mr. Shuster’s resignation as Chief Financial Officer was not because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices, including accounting principles and practices.

 

On November 2, 2023, the Company entered into a consulting agreement with EverAsia Financial Group, Inc, (“EverAsia Financial Group”), as amended, whereby its President, Scott Silverman, has agreed to serve as the Company’s Chief Financial Officer, effective November 1, 2023. In connection therewith, the Company shall compensate EverAsia Financial Group. $20,000 per month. Additionally, the Company issued 120,000 RSUs representing 120,000 shares of common stock to JJL Capital Management, LLC, a company majority owned by the Chief Financial Officer. RSUs issued in connection with the 2022 Plan shall be subject to a twelve-month vesting period, whereas 10,000 shares shall vest upon the first of every month. However, should the Company successfully complete an initial public offering of its common shares on any stock exchange in the United States of America, including, but not limited to, the New York Stock Exchange, Nasdaq Stock Exchange, or CBOE, 100% of the then unvested RSU’s shall immediately vest upon the completion of the IPO.

 

In October and December 2023, the Company issued an aggregate of 400 shares of our Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) to two individuals pursuant to certain stock purchase agreements, at a price per share of $1,000 for the total amount of $400,000. Such 400 shares of Series B Preferred Stock shall be automatically converted into 144,796 shares of common stock upon the closing of this offering.

 

In January 2024, the Company issued an aggregate of 605 shares of our Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) to several individuals pursuant to certain stock purchase agreements, at a price per share of $1,000 for the total amount of $605,000. Such 605 shares of Series B Preferred Stock shall be automatically converted into 219,005 shares of common stock upon the closing of this offering.

 

On April 24, 2023, the Company issued to two lenders certain 15% Original Issue Discount Secured Convertible Notes and related agreements (the “15% Secured Convertible Notes”) in the original principal amount of $294,117.65 for each lender. On February 15, 2024, the Company entered into Forbearance Agreements with each of such lenders whereby such lenders have agreed to forbear from exercising their rights and remedies against the Company under the 15% Secured Convertible Notes commencing on February 14, 2024 and ending on February 28, 2024, provided that (i) there is no new event of default that occurs, or becomes known to the lenders, and (ii) on or before February 28, 2024, the Company pays each of the lenders $36,989.37 in cash in respect of amounts outstanding under the 15% Secured Convertible Notes, and (iii) on the date of the consummation of the liquidity event represented by this offering, the Company pays each lender an additional $147,059 in cash.

 

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Our Company Website

 

As of the date of this prospectus, our website is www.vocodia.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our securities) contained on, or that can be accessed through, our website as part of this prospectus.

 

Going Concern

 

The consolidated financial statements which accompany this prospectus have been prepared assuming that the Company will continue as a going concern. As discussed in the report of the independent registered public accounting firm and the consolidated financial statements, we have suffered recurring losses from operations that raise substantial doubt about the Company’s ability to continue as a going concern.

 

Implications of being an Emerging Growth Company

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies” including, but not limited to: 

 

being permitted to present only two years of audited financial statements and only two years of related disclosure in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus;

 

being permitted to provide less extensive narrative disclosure than other public companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;

 

being permitted to utilize exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved;

 

being permitted to defer complying with certain changes in accounting standards; and

 

being permitted to use test-the-waters communications with qualified institutional buyers and institutional accredited investors.

 

We intend to take advantage of these and other exemptions available to “emerging growth companies.” We could remain an “emerging growth company” until the earliest of (i) the last day of our fiscal year following the fifth anniversary of the closing of this offering, (ii) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (iii) the last day of our fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”) (which would occur if the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter), or (iv) the date on which we have issued more than $1 billion in nonconvertible debt during the preceding three-year period.

 

The JOBS Act permits an “emerging growth company” like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay such adoption of new or revised accounting standards.

 

Corporate History and Information

 

Vocodia Holdings Corp was incorporated under the laws of the State of Wyoming on April 27, 2021.

 

Our principal executive office is located at 6401 Congress Avenue, Suite #160 Boca Raton, FL 33487. Our telephone number is (561) 484-5234. Our website address is https://vocodia.com/ and our general email is sales@vocodia.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our securities) contained on, or that can be accessed through, our website as part of this prospectus.

 

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Summary of Risk Factors

 

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under the section titled “Risk Factors” in this prospectus. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under the section titled “Risk Factors” as part of your evaluation of an investment in our securities:

 

  We will need to raise additional capital to expand our business to meet our long-term business objectives. We have limited revenues and we cannot predict when we will achieve significant revenues and sustained profitability.
     
  We require additional capital to support our present business plans and our anticipated business growth, and such capital may not be available on acceptable terms, or at all, which would adversely affect our ability to operate.
     
  Our independent auditors concurred with our management’s assessment that raises substantial doubt as to our ability to continue as a going concern.
     
  We cannot predict our future capital needs and we may not be able to secure additional financing.
     
  If we fail to retain certain of our key personnel and attract and retain additional qualified personnel, we might not be able to pursue our growth strategy.
     
  We are anticipating a period of rapid growth in our headcount and operations, which may place, to the extent that we are able to sustain such growth, a significant strain on our management and our administrative, operational and financial reporting infrastructure.
     
  Negative publicity could adversely affect our reputation, our business, and our operating results.
     
  Natural disasters and other events beyond our control could materially adversely affect us.
     
  Political and economic factors may negatively affect our financial condition or results of operations.
     
  The COVID-19 pandemic has negatively affected our operations and may continue to do so in the future.
     
  Market and economic conditions may negatively impact our business, financial condition and share price.
     
  We are authorized to issue preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.
     
  Risks related to common stock and preferred stock voting rights. 
     
    Our inability to fulfill debt obligations could adversely affect working capital needs and financial condition.
     
  If we are unable to attract new customers and retain customers on a cost-effective basis, our business and results of operations will be adversely affected.
     
  If we fail to develop our brands cost-effectively, our business may be adversely affected.
     
  The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
     
  We are reliant upon information technology to operate our business and maintain our competitiveness.
     
  Any significant disruption in service on our website or in our computer systems, or in our customer support services, could reduce the attractiveness of our services and result in a loss of customers.
     
  We do not have a disaster recovery system, which could lead to losses.
     
  There is a risk of a costly intellectual property lawsuit that may negatively impact Vocodia.
     
  If the security of our customers’ confidential information stored in our systems is breached or otherwise subjected to unauthorized access, our reputation may be severely harmed, we may be exposed to liability and we may lose the ability to offer our customers a credit card payment option.
     
  We may be the subject of intentional cyber disruptions and attacks.
     
  We may not be able to adequately protect our proprietary technology, and our competitors may be able to offer similar products and services which would harm our competitive position.

 

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  We could be harmed by improper disclosure or loss of sensitive or confidential data.

 

  Unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services could have a material adverse effect on our business.
     
 

We may be subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security. Our actual or perceived failure to comply with such obligations could adversely affect our business.

 

 

Online applications are subject to various laws and regulations relating to children’s privacy and protection, which if violated, could subject us to an increased risk of litigation and regulatory actions.

 

 

An acquisition may risk the dilution of our stockholders shares or it could otherwise disrupt our operations and adversely affect our operating results.

 

  An acquisition may not be in the best interests of common stockholders in the near term or at all.
     
  It may be more difficult for us to acquire target companies that meet our acquisition criteria. 
     
  We may be required to take write-downs or incur write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities.
     
  We will likely not obtain an opinion from an independent accounting or investment banking firm in connection with the acquisition of a target business.
     
  Our resources could be wasted by acquisition transactions that are not completed.
     
  The officers and directors of a target business may resign upon completion of our acquisition. The loss of a target business key personnel could negatively impact the operations and profitability of the target business post-acquisition.
     
  If we fail to keep pace with changing technologies, we may lose clients.
     
  Our clients may adopt technologies that decrease the demand for our services, which could adversely affect our revenues and results of operations.
     
  We may be liable to our clients for damages caused by system failures.
     
  There is a risk of our technology not being applied effectively.
     
  If our future products incorporate technologies that may infringe the proprietary rights of third parties, and we do not secure licenses from them, we could be liable for substantial damages.
     
  We are dependent on the continued availability of third-party data hosting and transmission services.
     
  A sustained, active trading market for our common stock and our warrants may not develop or be maintained.
     
  The price of our common stock and warrants may fluctuate substantially.
     
  There is an increased potential risk for new public companies similar to ours of rapid and substantial price volatility which may add to the risk of investing in this offering.
     
 

The initial public offering price of the shares of common stock and warrants may not be indicative of the value of our assets or the price at which your shares can be resold. The initial public offering price of the shares of common stock and warrants may not be an indication of our actual value.

     
The IPO Warrants included in the Units are listed on CBOE separately, investors may be provided with an arbitrage opportunity that could adversely affect the trading price of our common stock.
   
The IPO Warrants are speculative in nature.
   
The IPO Warrants offered by this prospectus may dilute your investment and cause our stock price to decline.
   
A Series A Warrant or Series B Warrant does not entitle the holder to any rights as a common stockholder until the holder exercises such warrant for a share of our common stock.

 

10

 

 

  Investors in this offering will experience immediate and substantial dilution in the net tangible book value per share of common stock.
     
  We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
     
 

There is no established trading market for our securities; further, our common stock will be subject to potential delisting if we do not maintain compliance with the listing requirements of the CBOE.

     
  There is a risk of unfavorable commentary or downgrade our common stock, hurting the stock price.
     
  We may issue additional securities or other equity securities, or engage in other transactions that could dilute our book value or relative rights of our common stock, which may adversely affect the market price of our common stock and further dilute existing shareholders.
     
  Neither we nor the Selling Shareholders have authorized any other party to provide you with information concerning us or this offering.
     
  The Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our common stock.
     
  The company may be dissolved or terminated.
     
  We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as such, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
     
  We are an “emerging growth company” and are able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

 

  Financial reporting obligations of being a public company are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.
     
  If we fail to comply with the rules under Sarbanes-Oxley related to accounting controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.
     
  We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.
     
  Future sales of a substantial number of our common stock cause impact our stock price’s volatility.
     
  Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to an equity incentive plan could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
     
  Potential comprehensive tax reform bills could adversely affect our business and financial condition.
     
  Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
     
  We will likely be considered a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
     
  Changes in accounting principles and guidance, or their interpretation, could result in unfavorable accounting changes or effects, including changes to our previously filed financial statements, which could cause our stock price to decline. 

 

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THE OFFERING

 

Units offered by us Up to 1,400,000 Units (or 1,610,000 Units if the underwriters exercise in full their over-allotment option to purchase Option Securities at the initial public offering price), assuming no exercise of any Representative’s Warrant. Each Unit consists of one share of Common Stock, one Series A Warrant and one Series B Warrant. The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The IPO Shares and the IPO Warrants are immediately separable and will be issued separately in this offering. 
   
Initial public offering price  The price per Unit will be $4.2500.

 

IPO Warrants

Series A Warrants:

 

We are offering Series A Warrants to purchase an aggregate of 1,400,000 shares of our Common Stock. Each Unit will include a Series A Warrant. Each Series A Warrant is exercisable to purchase one share of Common Stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock, will have an exercise price of $5.5250 per share (representing 130% of the offering price per Unit), will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. The exercise price of the Series A Warrants will be reduced on each trading day commencing on the third trading day immediately following the closing date of this offering until the 40th trading day following the closing date of this offering (each a “Reset Date”) to a new exercise price equal to the lower of (i) the then exercise price, taking into account any prior reductions to the exercise price, and (ii) a price equal to 105% of the lowest per share volume weighted average price (VWAPs) of the common stock on CBOE during the period from the closing date of this offering to such Reset Date. Any reduction to the exercise price of the Series A Warrants shall also result in an increase in the number of shares of common stock issuable upon exercise of the Series A Warrants such that the aggregate exercise price on any unexercised Series A Warrants immediately following the adjustment equals the aggregate exercise price of such unexercised Series A Warrants on the closing date of this offering.

 

If we pay a stock dividend or make a distribution in common stock or subdivide our outstanding common stock into a larger number of shares or combine our outstanding common stock (including a reverse stock split) into a smaller number of shares, the number of shares issuable upon exercise of the Series A Warrants (each a “Stock Combination Event”) shall be proportionately adjusted such that the aggregate exercise price shall remain unchanged. In addition, following such Stock Combination Event, the exercise price of the Series A Warrants will be reduced on each trading day commencing on the second trading day immediately following such Stock Combination Event until the 40th trading day following such Stock Combination Event (each a “Stock Combination Reset Date”) to a new exercise price equal to the lower of (i) the then exercise price, taking into account any prior reductions to the exercise price, and (ii) a price equal to 105% of the lowest VWAP of the common stock on CBOE during the period from the date of such Stock Combination Date to such Stock Combination Reset Date. Any such reduction to the exercise price of the Series A Warrants shall also result in an increase in the number of shares of common stock issuable upon exercise of the Series A Warrants such that the aggregate exercise price of any unexercised Series A Warrants immediately following the adjustment equals the aggregate exercise price of such unexercised Series A Warrants on the closing date of this offering.

 

The Series A Warrants will be exercisable on a cashless basis in the event we do not have an effective registration statement under the Securities Act that includes the shares of common stock issuable upon exercise of the Series A Warrants. Notwithstanding the foregoing, on the termination date of the Series A Warrants, the Series A Warrants shall be automatically exercised via a cashless exercise. See “Description of Securities Being Offered in This Offering — Warrants.”

 

Series B Warrants:   We are also offering Series B Warrants to purchase an aggregate of 1,400,000 shares of our common stock. Each Unit will include a Series B Warrant. Each Series B Warrant is exercisable for one share of common stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock and subject to the alternative cashless exercise of the Series B Warrants as discussed below. Each Series B Warrant will have an exercise price of $8.5000 per share (representing 200% of the offering price per Unit), will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. The Series B Warrants will be exercisable on a cashless basis in the event we do not have an effective registration statement under the Securities Act that includes the shares of common stock issuable upon exercise of the Series B Warrants. The holders of a Series B Warrant may, at any time and in their sole discretion, exercise such Warrants in whole or in part by means of an “alternative cashless exercise” in which a holder shall be entitled to receive, without the payment of additional consideration, a number of shares of common stock issuable upon exercise that will equal the product of (a) the number of shares of common stock that would be issuable upon exercise of such warrant in accordance with the terms of such warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (b) the quotient obtained by dividing (i) the exercise price minus the lowest VWAP during the ten trading days immediately prior to the applicable exercise date by (ii) 50% of the lowest VWAP during the ten trading days immediately prior to the applicable exercise date.

 

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  Notwithstanding the foregoing, the Series B Warrants may not be exercised on an alternative cashless exercise basis by using a VWAP in the calculation of such exercise that is below twenty percent (20%) of the public offering price of the common stock in this offering (the “Floor Price”) until such lower VWAP is approved by our stockholders. In the Series B Warrants, we will agree to obtain majority stockholder consent to remove the Floor Price by filing an information statement with the SEC within 15 days of the closing of this offering that will become effective 20 days after filing. In the event the closing price of our common stock is below $.01 for five (5) consecutive trading days, we will be required to promptly effect a reverse stock split of our common stock.   A holder of a Series A Warrant or a Series B Warrant will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after such election.
   
Series C Warrants Simultaneously to this offering, we are also issuing 495,076 Series C Warrants to purchase one share of Common Stock each to certain holders of our Investors’ Warrants. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants are not registered with the SEC under the Securities Act and are not listed on any stock exchange.
   
Shares of common stock offered by the Selling Shareholders Up to 2,296,956 shares.
   
Shares of common stock outstanding before this offering(1) 4,234,746 shares.  
   
Shares of common stock outstanding after this 
offering(1):
8,197,048 shares (or 8,407,048 shares if the underwriters exercise in full their over-allotment option to purchase 210,000 additional Option Securities at the initial public offering price), assuming no exercise of any Representative’s Warrant and no exercise of the IPO Warrants issued in this offering.
   
Over-allotment option: We have granted the underwriters an over-allotment option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of 210,000 additional Option Securities (15% of the Units sold in this offering) to cover over-allotments, if any.
   
Use of proceeds(2): We estimate that the net proceeds from this offering will be approximately $5,406,900, or approximately $6,118,000 if the underwriters exercise their over-allotment option in full, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, assuming no exercise of the Representative’s Warrant and no exercise of the IPO Warrants issued in this offering, based on an initial public offering price of $4.2500 per Unit. We intend to use the net proceeds from this offering for acquisitions of websites, technologies, or other assets, building an improved switch, for expanding product offerings from other digital channels, sales and marketing, working capital and general other corporate purposes. See section entitled “Use of Proceeds” for a more complete description of the intended use of proceeds from this offering.
   
Representative’s Warrant: We have agreed to issue the Representative Warrant to purchase up to 42,000 shares of common stock (equal to 3% of the aggregate number of shares of common stock sold in this offering, including any shares of common stock to cover over-allotments, if any). The Representative’s Warrant are not redeemable, and will be exercisable during the period beginning on the date that is 180 days following the commencement of sales of the securities in connection with this offering and ending on the fifth anniversary of the effective date of this registration statement of which this prospectus forms a part at an exercise price of $5.10 per share (120% of the initial public offering price of the shares of common stock). The registration statement of which this prospectus forms a part also registers the Representative’s Warrant and the common stock underlying the Representative’s Warrant. See “Underwriting — Representative’s Warrant” in this prospectus for more information regarding the Representative’s Warrant.

 

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Lock-up agreements: Our executive officers and directors have agreed with the underwriters not to sell, transfer or dispose of any common stock or similar securities for 180 days following the effective date of the registration statement for this offering without the prior written consent of the Representative. In addition, certain holders of Convertible Notes have agreed with the underwriters not to sell, transfer or dispose of any shares of common stock or similar securities issuable pursuant to such Convertible Notes for 30 days following the effective date of the registration statement for this offering without the prior written consent of the Representative. For additional information regarding our arrangement with the underwriters, please see “Underwriting.”

 

Dividend policy: We have never declared any cash dividends on our shares of common stock. We do not anticipate paying any cash dividends on our shares of common stock for the foreseeable future. See “Dividend Policy,” “Risk Factors – Risks Related to the Offering and our Common Stock” in this prospectus for more information regarding our dividend policy.
   
Proposed trading symbol: Our common stock, Series A Warrants and Series B Warrants are listed on the CBOE under the symbols “VHAI,” “VHAI+A” and “VHAI+B, respectively. 
   
Transfer Agent and Warrant Agent: Vstock Transfer, LLC
   
Risk factors: You should carefully consider the information set forth in this prospectus and the specific factors set forth in the “Risk Factors” section beginning on page 16 of this prospectus before deciding whether or not to invest in the shares of our common stock.

  

(1)As of the date of this prospectus, such number excludes:

 

  up to 1,801,880 shares of common stock issuable upon exercise of the shares issuable under the 2022 and 2023 Convertible Notes, including the Increased Conversion Shares;

 

  up to 495,076 shares of common stock issuable upon exercise of Series C Warrants issued to the holders of the Investors’ Warrants;
     
  the issuance of 691,403 shares of common stock from the conversion of shares of Series B Preferred Stock;
     
  the issuance of up to 2,800,000 shares of common stock issuable upon the exercise of the IPO Warrants;
     
  up to 210,000 shares of common stock issuable in case of exercise of the underwriters’ option to purchase up to an additional 15% of Option Securities to cover over-allotments, if any;

 

  up to 42,000 shares of common stock issuable upon exercise of the Representative’s Warrant to be issued to the underwriters in connection with this offering; and

 

  the issuance of 143,262 shares of common stock from the settlement of certain accounts payable.

 

Except as otherwise indicated, all information in this prospectus assumes:  

 

  (i)

no exercise of the underwriters’ option to purchase up to an additional 15% of Option Securities to cover over-allotments, if any; (ii) no exercise of the Representative’s Warrant to be issued to the underwriters in connection with this offering; (iii) no exercise of any Series C Warrants issued to the holders of the Investors’ Warrants; (iv) no exercise of the stock options to be granted to directors or officers, if any; (v) no exercise of conversion rights under the 2022 Convertible Notes, (vi) no conversion of any shares of Series B Preferred Stock, and (vii) no issuance of up to 69,019 shares of the Company’s common stock from the exercise of Exchange Listing, LLC’s anti-dilution protection to maintain two percent of the Company’s issued and outstanding shares; and

 

  (ii) no exercise of the IPO Warrants issued in this offering

 

All share and per share information referenced throughout this prospectus has been retroactively adjusted to reflect a 1-for-20 Reverse Stock Split (the “Reverse Stock Split”) of our issued and outstanding common stock effected on January 27, 2023. Any fractional shares resulting from the Reverse Stock Split have been rounded up to the nearest whole share.  

 

(2) We estimate that it may use up to $750,000 from the gross proceeds raised from this offering to pay the total fees, commissions, expenses and other costs associated with this offering (including, but not limited, to the: underwriting fees and commissions, SEC registration fee, FINRA filing fee, CBOE initial listing fee, accounting fees and expenses, legal fees and expenses, printing fees and expenses, and other miscellaneous fees).

 

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SUMMARY FINANCIAL INFORMATION

 

The following tables set forth our summary financial data as of the dates and for the periods indicated. We have derived the summary statement of operations data for the years ended December 31, 2022 and 2021 from our audited financial statements included elsewhere in this prospectus. The summary statements of operations data for the nine months ended September 30, 2023 and 2022 and the summary balance sheet data as of September 30, 2023 have been derived from our unaudited financial statements included elsewhere in this prospectus. The following summary financial data should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes and other information included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future and the results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full fiscal year.

 

Statement of Operations Data:

 

    Nine months Ended     Years Ended  
    September 30,     December 31,  
    2023     2022     2022     2021  
Revenues   $ 252,820     $ 150,475     $ 658,875     $ 14,950  
Cost of revenue     200,289       306,104       804,404       61,905  
Gross profit (loss)     52,531       (155,629 )     (145,529 )     (46,955 )
Total Operating Expenses     4,676,396       17,940,185       20,257,332       59,817,918  
Total Other income (expenses)     (2,525,075 )     (56,980 )     (352,358 )     (1,176,875 )
Net loss   $ (7,148,940 )   $ (18,152,794 )   $ (20,755,219 )   $ (61,041,748 )
Basic and diluted loss per Common Share   $ (1.77 )   $ (6.24 )   $ (6.98 )   $ (34.98 )
Basic and diluted weighted average number of common shares outstanding     4,031,338       2,910,298       2,972,487       1,744,886  

 

Balance  Sheet Data:

 

    September 30,     December 31,     December 31,  
    2023     2022     2021  
    (Unaudited)              
Cash   $ 31,533     $ 697,626     $ 638,641  
Current Assets     60,528       872,083       694,601  
Total assets     4,490,892       4,911,724       1,277,491  
Current Liabilities     6,766,133       2,934,182       243,598  
Total liabilities     7,026,799       3,273,947       680,948  
Stockholders’ equity (deficit)     (2,535,907 )     1,637,777       596,543  
Total liabilities and shareholders’ equity (deficit)   $ 4,490,892       4,911,724       1,277,491  

  

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RISK FACTORS

 

Investing in our shares of common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in this prospectus, before purchasing our shares of common stock. There are numerous and varied risks that may prevent us from achieving its goals. If any of these risks actually occur, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.

 

Risks Related to Our Business - General

 

We will need to raise additional capital to expand our business to meet our long-term business objectives. We have limited revenues and we cannot predict when we will achieve significant revenues and sustained profitability.

 

We have limited revenues and cannot definitively predict when we will achieve significant revenues and sustained profitability. We do not anticipate generating significant revenues until we successfully raise funds pursuant to this offering and execute our business strategy and operations, of which we can give no assurance. We are unable to determine when we will generate significant revenues from our operations. We cannot predict when we will achieve profitability, if ever. Our inability to become profitable may force us to sell certain of our websites, reduce operations or reduce our staff. Furthermore, we cannot assure you that profitability, if achieved, can be sustained on an ongoing or long-term basis.

  

We require additional capital to support our present business plans and our anticipated business growth, and such capital may not be available on acceptable terms, or at all, which would adversely affect our ability to operate.

 

We will require additional funds to further develop our business plan. Based on our current operating plans, we plan to use approximately $500,000 in capital to fund our acquisitions of websites, technologies or other assets (as of the date of this prospectus, we have no agreements in place to make any acquisitions), approximately $1,500,000 for research and development, and approximately $2,350,000 for sales and marketing, working capital and general corporate purposes. We may choose to raise additional capital beyond these amounts in order to expedite and propel growth more rapidly. We can give no assurance that we will be successful in raising any additional funds. Additionally, if we are unable to generate sufficient revenues from our sales and operating activities, we may need to raise additional funds, doing so through debt and equity offerings, in order to meet our expected future liquidity and capital requirements, including capital required for operations. Any such financing that we undertake will likely be dilutive to current stockholders.

 

We intend to continue to make investments to support our business growth, including acquiring additional assets. In addition, we may also need additional funds to respond to other business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek to raise additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all our business plans.

 

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We cannot predict our future capital needs and we may not be able to secure additional financing.

 

We will need to raise additional funds in the future to fund our working capital needs and to fund further expansion of our business. We may require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, we may have to delay or scale back our growth plans.

 

Our independent auditors concurred with our management’s assessment that raises substantial doubt as to our ability to continue as a going concern.

 

Management has determined and has stated in the notes to the Company’s 2022 and 2021 Consolidated Financial Statements that we have suffered recurring losses from operations that raise substantial doubt about our ability to continue as a going concern, which are still present. Our independent auditors concurred with our management’s assessment that raises substantial doubt as to our ability to continue as a going concern.

 

If we fail to retain certain of our key personnel and attract and retain additional qualified personnel, we might not be able to pursue our growth strategy.

 

Our future success will depend upon the continued services of Brian Podolak, our Chief Executive Officer, Scott Silverman, our Chief Financial Officer, James Sposato, our Chief Technology Officer, and other members of our key management team and our consultants. We especially consider Mr. Podolak to be critical to the management of our business and operations and the development of our strategic direction. Though no individual is indispensable, the loss of the services of these individuals could have a material adverse effect on our business, operations, revenues or prospects. We do not currently maintain key man life insurance on the lives of these individuals. Our future success will also depend on our ability to identify, hire, develop, motivate and retain highly skilled personnel. Competition in our industry for qualified employees is intense, and our compensation arrangements may not always be successful in attracting new employees and/or retaining and motivating our existing employees. Future acquisitions by us may also cause uncertainty among our current employees and employees of the acquired business, which could lead to the departure of key individuals. Such departures could have an adverse impact on the anticipated benefits of an acquisition.

 

Our Chief Financial Officer is currently employed on a part-time basis.

 

Our Chief Financial Officer, Scott Silverman, is a consultant who works with other small, private companies as chief financial officer and may not commit his full time to our affairs, which may result in a conflict of interest in allocating his time between our business and the other businesses. Mr. Silverman intends to spend at least 20-30 hours per week working on our matters, although he is not obligated to contribute any specific number of his hours per week to our affairs. If other business affairs require Mr. Silverman to devote a greater portion of his time and attention, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to expand our business or could cause us to experience delays in the processing and preparation of our financial information which is necessary for the timely filing our financial reports with the SEC. Failure to file SEC disclosures in both an accurate and timely manner could cause a material adverse effect on the Company’s business and has an impact on the Company’s ability to remain listed.. The Company does not plan to hire a full time Chief Financial Officer until a later, but as of yet undetermined date, which could have a material adverse impact on the Company’s business.

 

We are anticipating a period of rapid growth in our headcount and operations, which may place, to the extent that we are able to sustain such growth, a significant strain on our management and our administrative, operational and financial reporting infrastructure.

 

Our success will depend in part on the ability of our senior management to manage this expected growth effectively. To do so, we believe we will need to continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational and financial controls and update our reporting procedures and systems. The expected addition of new employees and the capital investments that we anticipate will be necessary to manage our anticipated growth and will increase our cost base, which may make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage our anticipated growth, then we will be unable to execute our business plan.

 

Negative publicity could adversely affect our reputation, our business, and our operating results.

 

Negative publicity about our Company (including, but not limited to the quality and reliability of our products and services, our privacy and security practices, and litigation involving or relating to us) could adversely affect our reputation which, in turn, could adversely affect our business, results of operations and financial condition. Because Vocodia is in a competitive industry where public perception is important, any harm to the Company’s reputation could be significant. Negative perception about the Company or its software and platform could harm sales and business prospects.

  

Natural disasters and other events beyond our control could materially adversely affect us.

 

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Such events could make it difficult or impossible for us to deliver our products and services to our customers and could decrease demand for our products and services.

 

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Additionally, we depend on the efficient and uninterrupted operations of our third-party data centers and hardware systems. The data centers and hardware systems are vulnerable to damage from earthquakes, tornados, hurricanes, fire, floods, power loss, telecommunications failures and similar events. If any of these events results in damage to third-party data centers or systems, we may be unable to provide our clients with our products and services until the damage is repaired and may accordingly lose clients and revenues. In addition, subject to applicable insurance coverage, we may incur substantial costs in repairing any damage.

 

Political and economic factors may negatively affect our financial condition or results of operations.

 

Supply chain interruptions, regulatory changes, or political climate concerns could potentially adversely impact our relationships. Additionally, rising inflation could cause our product, marketing, and labor costs to rise beyond an acceptable level to us or cause us to increase our prices to a level not accepted by consumers. Furthermore, market volatility and macro-economic risks, including a slowdown or potential recession, could harm us and our business. We operate in the sales and customer service sector, and reductions in discretionary spending or consumer demand could have a significant negative impact on our operations and prospects. Any of the foregoing factors could negatively impact our financial condition or the results of our operations.

 

The COVID-19 pandemic has negatively affected our operations and may continue to do so in the future.

 

The World Health Organization declared the COVID-19 outbreak a pandemic. The COVID-19 pandemic has negatively affected our operations and may continue to do so in the future. The COVID-19 pandemic has resulted in social distancing, travel bans and quarantine, which has limited access to our facilities, potential customers, management, support staff and professional advisors and can, in the future, impact our supply chain. These factors, in turn, may not only impact our operations, financial condition and demand for our products but our overall ability to react in a timely manner, to mitigate the impact of this event.

 

In the past, the pandemic negatively affected the development of software, limited identification and cooperation with development partners and slowed the progress of development and deployment. We were also negatively affected due to lack of coordination with early customers, which paid and contracted with management to provide our software as it was developed. We believe that business contracts were jeopardized due to lack of cooperation and the business disruption resulting from stay-at-home policies which severely derailed our coordination with other parties. Further we believe that the pandemic had an adverse effect on development of other in-development partners, including key personnel in software coding and development who suffered health conditions during the pandemic and limited our performance.

 

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on our customers and employees, all of which are uncertain and cannot be predicted. At this point, the overall extent to which COVID-19 may impact our financial condition or results of operations in the future is uncertain.

 

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Market and economic conditions may negatively impact our business, financial condition and share price.

 

Concerns over the COVID-19 pandemic, inflation, energy costs, geopolitical issues, the U.S. mortgage market and unstable real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and overall plan of business.

 

We are authorized to issue preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.

 

Our articles of incorporation authorize us to issue up to 24,000,000 shares of Series A Preferred Stock and 3,000 shares of Series B Preferred Stock, of which 4,000,000 and 1,910 shares are currently issued and outstanding respectively. Any shares or series of preferred stock that we issue in the future may rank ahead of our other securities in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, we may issue preferred stock that could contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of our common stock to current stockholders and could adversely affect the market price, if any, of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company.

 

Risks related to common stock and preferred stock voting rights.

 

Each share of our common stock is entitled to one vote per share, while our Series A Preferred Stock, par value $0.0001, and our Series B Preferred Stock are not entitled to vote. As of the date of this prospectus, we have issued 4,000,000 shares of our Series A Preferred Stock: 2,000,000 shares of Series A Preferred Stock are owned by Mr. Podolak, our Chief Executive Officer and the remaining 2,000,000 shares of Series A Preferred Stock are owned by Mr. Sposato, our Chief Technology Officer. Although we have no present intention to issue any additional shares of authorized Series A Preferred Stock, there can be no assurance that we will not do so in the future. The holders of the Series A Preferred Stock have no right to vote on any matters brought before the stockholders of the Company.

 

As of January 31, 2024, we have issued 1,910 shares of our Series B Preferred Stock to fund the cash needs of our operations in the ordinary course of our business, and we intend to continue to issue Series B Preferred Stock until the closing of this offering. Our Series B Preferred Stock has no voting rights, but shall be mandatorily converted into common stock with voting rights upon the completion of our initial public offering or our change of control. There can be no assurance that we will not issue additional shares in the future. There is a risk that the holders of the Series B Preferred Stock, after conversion into our common stock, may control a significant amount of our activities once they acquire voting rights.

 

Our inability to fulfill debt obligations could adversely affect working capital needs and financial condition.

 

As our business is currently unable to meet cash flow demands to fulfill debt obligations timely, we have defaulted on our outstanding indebtedness and there is a continued risk of additional defaults on debt to creditors. The 2022 Convertible Notes issued in August through December 2022, totaling $2,427,059, are currently in default. We recorded a default penalty of $485,412 for the nine months ended September 30, 2023. During the nine months ended September 30, 2023 and 2022, the Company recorded interest expense of $2,365,004 and $60,096, respectively, which included amortization of debt discount of $1,671,003 and $60,096, respectively, default penalty of $485,412 and $0, respectively, and accrued interest of $208,589 and $0, respectively. As of September 30, 2023 and December 31, 2022, accrued interest was $208,589 and $0, respectively. As of January 31, 2024, we have entered into the Note Extension with the holders of the 2022 Convertible Notes and the 2023 Convertible Notes to extend the maturity dates of each of the 2022 Convertible Notes and the 2023 Convertible Notes to February 14, 2024, in exchange for the Increased Conversion Shares. Subsequently, the Company and certain holders of the Investors Warrants have mutually agreed that such holders would receive Series C Warrants in this offering in lieu of the Investors’ Warrants, which would be cancelled. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants will not be registered with the SEC under the Securities Act and will not be listed on any stock exchange. We can give no assurance as to whether we will ever be able to repay such indebtedness, the failure of which could have a material adverse effect on us and our ability to continue as a going concern, and ultimately lead to bankruptcy or shutting down our business.

 

Risks Related to Our Business – Operating Our Website

 

If we are unable to attract new customers and retain customers on a cost-effective basis, our business and results of operations will be adversely affected.

 

To succeed, we must attract and retain customers on a cost-effective basis. We rely on a variety of methods to attract new customers, such as paying providers of online services, search engines, directories and other websites to provide content, advertising banners and other links that direct customers to our website, direct sales and partner sales. If we are unable to use any of our current marketing initiatives or the cost of such initiatives were to significantly increase or such initiatives or our efforts to satisfy our existing customers are not successful, we may not be able to attract new customers or retain customers on a cost-effective basis and, as a result, our revenue and results of operations would be adversely affected.

 

Additionally, factors outside of our control, such as new terms, conditions, policies, or other changes made by the online services, search engines, directories and other websites that we rely upon to attract new customers could cause our websites to experience short- or long-term business disruptions, which could adversely affect our revenue and results of operations.

 

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If we fail to develop our brands cost-effectively, our business may be adversely affected.

 

Successful promotion of our Company’s brands will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful products and services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brands. If we fail to successfully promote and maintain our brands or incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract enough new customers or retain existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business and results of operations could suffer.

 

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

 

The market for our clients, goods and services is competitive and rapidly changing, and the barriers to entry are relatively low. With the influx of new entrants to the market, we expect competition to persist and intensify in the future, which could harm our ability to increase sales, limit customer attrition and maintain our prices. Competition could result in reduced sales, reduced margins or the failure of our products and services to achieve or maintain more widespread market acceptance, any of which could harm our business. We compete with large established companies possessing large, existing customer bases, substantial financial resources and established distribution channels, as well as smaller less established businesses. If either of these types of competitors decide to develop, market or resell competitive services, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed. Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products and services. Our current and potential competitors have more extensive customer bases and broader customer relationships than we have. If we are unable to compete with such companies, the demand for our products could substantially decline.

 

Risks Related to Information Technology Systems, Intellectual Property and Privacy Laws

 

We are reliant upon information technology to operate our business and maintain our competitiveness.

 

Our ability to leverage our technology and data scale is critical to our long-term strategy. Our business increasingly depends upon the use of sophisticated information technologies and systems, including technology and systems (cloud solutions, mobile and otherwise) utilized for communications, marketing, productivity tools, training, lead generation, records of transactions, business records (employment, accounting, tax, etc.), procurement and administrative systems. The operation of these technologies and systems is dependent upon third-party technologies, systems and services, for which there are no assurances of continued or uninterrupted availability and support by the applicable third-party vendors on commercially reasonable terms. We also cannot assure that we will be able to continue to effectively operate and maintain our information technologies and systems. In addition, our information technologies and systems are expected to require refinements and enhancements on an ongoing basis, and we expect that advanced new technologies and systems will continue to be introduced. We may not be able to obtain such new technologies and systems, or to replace or introduce new technologies and systems as quickly as our competitors or in a cost-effective manner. Also, we may not achieve the benefits anticipated or required from any new technology or system, and we may not be able to devote financial resources to new technologies and systems in the future.

 

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Any significant disruption in service on our website or in our computer systems, or in our customer support services, could reduce the attractiveness of our services and result in a loss of customers.

 

The satisfactory performance, reliability and availability of our services are critical to our operations, level of customer service, reputation and ability to attract new customers and retain customers. Most of our computing hardware is co-located in third-party hosting facilities. None of the companies who host our systems guarantee that our customers’ access to our products will be uninterrupted, error-free or secure. Our operations depend on their ability to protect their and our systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. If our arrangements with third-party data centers are terminated, or there is a lapse of service or damage to their facilities, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in access to our services, whether as a result of a third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and our reputation. These factors could damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to cancel their accounts, any of which could adversely affect our business, financial condition and results of operations.

 

We do not have a disaster recovery system, which could lead to service interruptions and result in a loss of customers.

 

Although we have all of our data backed up with multiple services, we do not have any disaster recovery systems. In the event of a disaster in which our software or hardware are irreparably damaged or destroyed, we would experience interruptions in access to our services. Any or all these events could cause our customers to lose access to our services.

 

If a third party asserts that we are infringing its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected.

 

Our industry is characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Third parties may assert patent and other intellectual property infringement claims against us in the form of lawsuits, letters or other forms of communication. These claims, whether or not successful, could: 

 

divert management’s attention;

 

  result in costly and time-consuming litigation;

 

  require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or at all;

 

  in the case of any open source software-related claims, require us to release our software code under the terms of an open source license; or

 

  require us to redesign our software and services to avoid infringement.

 

As a result, any third-party intellectual property claims against us could increase our expenses and adversely affect our business. Even if we have not infringed any third parties’ intellectual property rights, we cannot be sure our legal defenses will be successful, and even if we are successful in defending against such claims, our legal defense could require significant financial resources and management time. Finally, if a third party successfully asserts a claim that our products infringe its proprietary rights, royalty or licensing agreements might not be available on terms we find acceptable or at all, and we may be required to pay significant monetary damages to such third party.

 

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If the security of our customers’ confidential information stored in our systems is breached or otherwise subjected to unauthorized access, our reputation may be severely harmed, we may be exposed to liability and we may lose the ability to offer our customers a credit card payment option.

 

Our system stores our customers’ proprietary email distribution lists, credit card information and other critical data. Any accidental or willful security breaches or other unauthorized access could expose us to liability for the loss of such information, adverse regulatory action by federal and state governments, time-consuming and expensive litigation and other possible liabilities as well as negative publicity, which could severely damage our reputation. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our customers’ data, our relationships with our customers will be severely damaged, and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, and we could lose customers and fail to acquire new customers.

 

If we fail to maintain our compliance with the data protection policy documentation standards adopted by the major credit card issuers, we could lose our ability to offer our customers a credit card payment option. Any loss of our ability to offer our customers a credit card payment option would make our products less attractive to many small organizations by negatively impacting our customer experience and significantly increasing our administrative costs related to customer payment processing.

 

We may be the subject of intentional cyber disruptions and attacks.

 

We expect to be an ongoing target of attacks specifically designed to impede the performance of our products and services. Experienced computer programmers, or hackers, may attempt to penetrate our network security or the security of our data centers and IT environments. These hackers, or others, which may include our employees or vendors, may cause interruptions of our services. Although we continually seek to improve our countermeasures to prevent and detect such incidents, if these efforts are not successful, our business operations, and those of our customers, could be adversely affected, losses or theft of data could occur, our reputation and future sales could be harmed, governmental regulatory action or litigation could be commenced against us and our business, financial condition, operating results and cash flow could be materially adversely affected.

 

We may not be able to adequately protect our proprietary technology, and our competitors may be able to offer similar products and services which would harm our competitive position.

 

Our success, in part, depends upon our proprietary technology. We have various forms of intellectual property including copyright, trademark, confidentiality procedures and contractual provisions to establish and protect our proprietary rights. Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization, or develop similar technology independently. We also pursue the registration of our domain names, trademarks, and service marks in the United States. If we file patent applications, we cannot assure you that any of the patent applications that we file will ultimately result in an issued patent or, if issued, that they will provide sufficient protections for our technology against competitors. We cannot assure you that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technology, duplicate our products and services or design around any intellectual property rights we hold. 

 

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We could be harmed by improper disclosure or loss of sensitive or confidential data.

 

Our business operations require us to process and transmit data. Unauthorized disclosure or loss of sensitive or confidential data may occur through a variety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through our information systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/or state-sponsored organizations, who may develop and deploy viruses, worms or other malicious software programs.

 

Such disclosure, loss or breach could harm our reputation and subject us to government sanctions and liability under laws and regulations that protect sensitive or personal data and confidential information, resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks may increase as we acquire additional business and introduce new services and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions in which our websites operate. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment to our reputation in the marketplace.

 

Unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services could have a material adverse effect on our business.

 

Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, and the increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked to terrorist organizations or hostile foreign governments. Cybersecurity attacks are becoming more sophisticated and include malicious attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Our security systems are designed to maintain the security of our users’ confidential information, as well as our own proprietary information. Accidental or willful security breaches or other unauthorized access by third parties or our employees, our information systems or the systems of our third-party providers, or the existence of computer viruses or malware in our or their data or software could expose us to risks of information loss and misappropriation of proprietary and confidential information, including information relating to our products or customers and the personal information of our employees.

 

In addition, we could become subject to unauthorized network intrusions and malware on our own IT networks. Any theft or misuse of confidential, personal or proprietary information as a result of such activities or failure to prevent security breaches could result in, among other things, unfavorable publicity, damage to our reputation, loss of our trade secrets and other competitive information, difficulty in marketing our products, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of such information, as well as fines and other sanctions resulting from any related breaches of data privacy regulations, any of which could have a material adverse effect on our reputation, business, profitability and financial condition. Furthermore, the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until launched against a target, and we may be unable to anticipate these techniques or to implement adequate preventative measures.

 

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We may be subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security. Our actual or perceived failure to comply with such obligations could adversely affect our business.

 

We receive, collect, store, and process certain personally identifiable information about individuals and other data relating to our customers. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of certain data, including personally identifiable and other potentially sensitive information about individuals. We may be subject to numerous federal, state, local, and international laws, directives, and regulations regarding privacy, data protection, and data security and the collection, storing, sharing, use, processing, transfer, disclosure, disposal and protection of information about individuals and other data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other legal and regulatory requirements. We strive to comply with our applicable data privacy and security policies, regulations, contractual obligations, and other legal obligations relating to privacy, data protection, and data security. However, the regulatory framework for privacy, data protection and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from one jurisdiction to another and may conflict with other legal obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security, processing, transfer or disclosure of data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention, security, processing, transfer or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to receive, collect, store, process, transfer, and otherwise use user data or develop new services and features.

 

If we are found in violation of any applicable laws or regulations relating to privacy, data protection, or security, our business may be materially and adversely affected and we would likely have to change our business practices and potentially the services and features, integrations or other capabilities of websites. In addition, these laws and regulations could impose significant costs on us and could constrain our ability to use and process data in a commercially desirable manner. In addition, if a breach of data security were to occur or be alleged to have occurred, if any violation of laws and regulations relating to privacy, data protection or data security were to be alleged, or if we were to discover any actual or alleged defect in our safeguards or practices relating to privacy, data protection, or data security, our business websites may be perceived as less desirable and our business, financial condition, results of operations and growth prospects could be materially and adversely affected.

 

Online applications are subject to various laws and regulations relating to children’s privacy and protection, which if violated, could subject us to an increased risk of litigation and regulatory actions.

 

A variety of laws and regulations have been adopted in recent years aimed at protecting children using the internet such as the U.S. Federal Trade Commission’s Children’s Online Privacy Protection Rule (the “COPPA”) and Article 8 of the European Union’s General Data Protection Regulation (the “GDPR”). We implement certain precautions to ensure that we do not knowingly collect personal information from children under the age of 13 through our websites. Despite our efforts, no assurances can be given that such measures will be sufficient to completely avoid allegations of COPPA violations, any of which could expose us to significant liability, penalties, reputational harm and loss of revenue, among other things. Additionally, new regulations are being considered in various jurisdictions to require the monitoring of user content or the verification of users’ identities and age. Such new regulations, or changes to existing regulations, could increase the cost of our operations.

 

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Risks Related to Our Business – Our Acquisition Plans

 

As part of our business plan, we intend to acquire or make investments in other companies, or engage in business relationships with other companies, which will divert our management’s attention, result in dilution to our stockholders, consume resources that may be necessary to sustain our business and could otherwise disrupt our operations and adversely affect our operating results.

 

As part of our business plan, we will plan to acquire or invest in websites, applications and services or technologies that we believe could offer growth opportunities or complement or expand our business or otherwise. The pursuit of target companies will divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

 

As we acquire additional companies, we may not be able to integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business or investments in other companies, due to a number of factors, including: 

 

inability to integrate or benefit from acquired technologies or services in a profitable manner;

 

unanticipated costs or liabilities associated with the acquisition;

 

difficulty integrating the accounting systems, operations and personnel of the acquired business;

  

difficulty converting the customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company;

 

adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; and

 

use of substantial portions of our available cash to consummate the acquisition.

 

In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If future acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process and this could adversely affect our results of operations.

 

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer. As of the date of this prospectus, we have no agreements in place to make any acquisitions. 

 

Pursuant to our long-term investment strategy, we may pursue future acquisitions or business relationships, or make business dispositions that may not be in the best interests of common stockholders in the near term or at all.

 

As part of our long-term investment strategy, we will plan to acquire or invest in websites, applications and services or technologies that we believe could complement or expand our services or otherwise offer growth opportunities in the long run. We may incur indebtedness for future acquisitions, which would be senior to our common shares. Future acquisitions may also reduce our cash available for distribution to our stockholders, including holders of common shares, following such acquisitions. To the extent such acquisitions do not perform as expected, such risk may be particularly heightened. As of the date of this prospectus, we have no agreements in place to make any acquisitions.

 

In addition to acquiring businesses, we may sell those companies that we own from time to time when attractive opportunities arise that outweigh the future growth and value that we believe we will be able to bring to such companies consistent with our long-term business and investment strategy. As such, our decision to sell a business will be based on our belief that doing so will increase stockholder value to a greater extent than through our continued ownership of that business. Future dispositions of companies may reduce our cash flows from operations. We cannot assure you that we will use the proceeds from any future dispositions in a manner with which you agree. You will generally not be entitled to vote with respect to our future acquisitions or dispositions, and we may pursue future acquisitions or dispositions with which you do not agree.

 

Because of our limited resources and the significant competition for acquisition opportunities, it may be more difficult for us to acquire target companies that meet our acquisition criteria. 

 

We expect to encounter competition from other companies having a business plan similar to ours, including private investors (which may be individuals or investment partnerships), blank check companies and other entities, domestic and international, competing for the types of companies we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess similar or greater technical, human and other resources to ours or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of this offering, our ability to compete with respect to the acquisition of certain target companies that are attractive to us will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain companies. As of the date of this prospectus, we have no agreements in place to make any acquisitions.

 

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Subsequent to the acquisition of any target business, we may be required to take write-downs or incur write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities.

 

Even if we conduct extensive due diligence on target companies that we acquire, we cannot assure you that this diligence will identify all material issues that may be present with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our shares of common stock. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining debt financing to partially finance the acquisition transaction or thereafter. Accordingly, we could experience a significant negative effect on our financial condition, results of operations and the price of our securities. As of the date of this prospectus, we have no agreements to make any acquisitions.

 

We will likely not obtain an opinion from an independent accounting or investment banking firm in connection with the acquisition of a target business.

 

We will likely not obtain an opinion from an independent accounting firm or independent investment banking firm that the price we are paying for a target business is fair to our stockholders. If no opinion is obtained, our stockholders will be relying on the judgment of our Board, who will determine fair market value based on standards generally accepted by the financial community.

 

Our resources could be wasted by acquisition transactions that are not completed.

 

We anticipate that the investigation of each target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require management time and attention and costs for accountants, attorneys and others. If we decide not to complete a specific acquisition transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our acquisition transaction for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred. As of the date of this prospectus, we have no agreements in place to make any acquisitions.

 

The officers and directors of a target business may resign upon completion of our acquisition. The loss of a target business key personnel could negatively impact the operations and profitability of the target business post-acquisition.

 

Although we contemplate that certain members of a target business’ management team will remain associated with the target business following our acquisition transaction, it is possible that members of the management of a target business will not remain in place. The loss of a target business’ key personnel could negatively impact the operations and profitability of the target business post-acquisition. As of the date of this prospectus, we have no agreements in place to make any acquisitions.

 

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Risks Related to Our Business – Industry Changes and Technology Developments

 

If we fail to keep pace with changing technologies, we may lose clients.

 

Our market is characterized by rapidly changing client requirements and evolving technologies and industry standards. If we cannot keep pace with these changes, our business could suffer. To achieve our goals, we need to continue to develop strategic business solutions and to develop and integrate proprietary applications for use in our various facilities in order to keep pace with continuing changes in client expectations, information technologies and industry standards. If we are unable to keep pace with changing technologies, we may lose clients and our revenues and results of operations could be adversely affected.

 

Our clients may adopt technologies that decrease the demand for our services, which could adversely affect our revenues and results of operations.

 

We target clients with a particular need for our services. However, after we complete an engagement, our clients may adopt new technologies or implement various processes that automate a portion of the services which we offer and thereby substantially reduce their need for our services. The adoption of such technologies or processes could place negative pressure on our pricing and adversely affect our revenues and result of operations.

 

We may be liable to our clients for damages caused by system failures, which could damage our reputation and cause us to lose clients.

 

Many of our contracts involve services that are critical to the operations of our clients’ businesses, and provide benefits which may be difficult to quantify. Any failure in a client’s system or breaches of security could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Our exposure to legal liability may be increased in the case of outsourcing contracts in which we become more involved in our clients’ operations. Although we attempt to limit our contractual liability for consequential damages in rendering our services, we cannot assure you that the limitations on liability we typically provide for in our service contracts will be enforceable, or that they will otherwise be sufficient to protect us from liability for damages. The general liability insurance coverage that we maintain is subject to important exclusions and limitations. We cannot assure you that such coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of a large deductible or co-insurance requirement, could adversely affect our results of operations.

 

If we are unable to apply technology effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.

 

Our future success depends, in part, on our ability to anticipate and respond effectively to the threat and opportunity presented by new technology disruption and developments. These may include new software applications or related services based on artificial intelligence, machine learning, or robotics. We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants or new entrants, start-up companies and others. These new entrants are focused on using technology and innovation, including artificial intelligence to simplify and improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate. We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, client preferences and internal control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, client relationships, growth and compliance programs.

 

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If our future products incorporate technologies that may infringe the proprietary rights of third parties, and we do not secure licenses from them, we could be liable for substantial damages.

 

We are not aware that our current products infringe the intellectual property rights of any third parties. We also are not aware of any third-party intellectual property rights that may hamper our ability to provide future products and services. However, we recognize that the development of our services or products may require that we acquire intellectual property licenses from third parties to avoid infringement of those parties’ intellectual property rights. These licenses may not be available at all or may only be available on terms that are not commercially reasonable. If third parties make infringement claims against us whether or not they are upheld, such claims could:

 

consume substantial time and financial resources;

 

divert the attention of management from growing our business and managing operations; and

 

disrupt product sales and shipments.

 

If any third party prevails in an action against us for infringement of its proprietary rights, we could be required to pay damages and either enter into costly licensing arrangements or redesign our products so as to exclude any infringing use. As a result, we would incur substantial costs, delays in product development, sales and shipments, and our revenues may decline substantially. Additionally, we may not be able to achieve the minimum necessary growth for our continued success.

 

We are dependent on the continued availability of third-party data hosting and transmission services.

 

Although we develop and operate our own phone switch, we rely on third parties for hosting and other transmission services. As such, a significant portion of our operating cost is from our third-party data hosting and transmission services. If the costs for such services increase due to vendor consolidation, regulation, contract renegotiation, or otherwise, we may not be able to increase the fees for our inbound platform or services to cover the changes. As a result, our operating results may be significantly worse than forecasted.  

 

Risks Related to the Offering, Our Common Stock and our Warrants

 

A sustained, active trading market for our common stock and our warrants may not develop or be maintained which may limit investors’ ability to sell shares or warrants at all or at an acceptable price.

 

As we are in our early stage of development, an investment in our Company will likely require a long-term commitment, with no certainty of return. There is currently no trading market for our common stock and warrants and we cannot predict whether an active market for our shares of common stock will ever develop or be sustained in the future. In the absence of an active trading market:

 

investors may have difficulty buying and selling or obtaining market quotations;

 

market visibility for our common stock may be limited; and

 

  A lack of visibility for our common stock may have a depressive effect on the market price for our common stock and warrants.

 

The lack of an active market impairs your ability to sell your shares of common stock and warrants at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares of common stock and warrants. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares of common stock and warrants, and may impair our ability to acquire additional assets by using our shares of common stock as consideration.

 

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The price of our common stock and warrants may fluctuate substantially.

 

You should consider an investment in our common stock and warrants to be risky, and you should invest in our common stock and warrants only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock and warrants to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this prospectus, are:

 

  sale of our common stock and warrants by our stockholders, executives, and directors;

 

  volatility and limitations in trading volumes of our shares of common stock and warrants;

 

our ability to obtain financing;

 

the timing and success of introductions of new products by us or our competitors or any other change in the competitive dynamics of our business’ industries;

 

our ability to attract new customers;

 

  changes in our capital structure or dividend policy, future issuances of common stock or warrants, sales of large blocks of common stock or warrants by our stockholders;

 

our cash position;

 

announcements and events surrounding financing efforts, including debt and equity securities;

 

our inability to enter into new markets or develop new products;

 

reputational issues;

 

announcements of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors;

 

changes in general economic, political and market conditions in any of the regions in which we conduct our business, including, without limitation, the effect on the global economy and financial markets due to the current or anticipated impact of military conflict and related sanctions imposed on Russia by the United States and other countries due to Russia’s recent invasion of Ukraine;

 

changes in industry conditions or perceptions;

 

analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage;

 

departures and additions of key personnel;

 

disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations;

 

changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and

 

other events or factors, many of which may be out of our control.

 

In addition, if the market for equities in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. 

 

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Our common stock’s and warrants market price may experience rapid and substantial volatility price fluctuations.

 

After this offering, the market price for our common stock and warrants is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to several factors, most of which we cannot control, including:

 

actual or anticipated variations in our periodic operating results;

 
  increases in market interest rates that lead investors of our common stock to demand a higher investment return; stock-run up;

 

changes in earnings estimates;

 

changes in market valuations of similar companies;

 

actions or announcements by our competitors;

 

adverse market reaction to any increased indebtedness we may incur in the future;

 

additions or departures of key personnel;

 

actions by stockholders;

 

speculation in the media, online forums, or investment community; and

 

  our intentions and ability to list our common stock on the CBOE and our subsequent ability to maintain such listing.

 

The public offering price of our common stock and warrants has been determined by negotiations between us and the underwriter based upon many factors and may not be indicative of prices that will prevail following the closing of this offering. In addition, the stock market in general, and the stock of early-stage companies like ours in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Such rapid and substantial price volatility, including any stock run-up, may be unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for investors to assess the rapidly changing value of our stock. Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price.

 

There is an increased potential risk for new public companies similar to ours of rapid and substantial price volatility which may add to the risk of investing in this offering.

 

Further, there have been recent instances of extreme stock price run-ups followed by rapid price declines and stock price volatility seemingly unrelated to company performance following a number of recent initial public offerings, particularly among companies with relatively smaller public floats. Additionally, our common stock may be subject to rapid and substantial price volatility, including any stock-run up, which may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common shares. As a result, you may suffer a loss on your investment.

 

The initial public offering price of the shares of common stock and warrants may not be indicative of the value of our assets or the price at which your shares and warrants can be resold. The initial public offering price of the shares of common stock and warrants may not be an indication of our actual value.

 

Prior to this offering, there has been no public market for our shares of common stock and warrants. The initial public offering price of each share and warrant will be determined based upon negotiations between the underwriters and us. Factors considered in determining such price in addition to prevailing market conditions will include an assessment of our future prospects, an increase in value of our common stock due to becoming a public company and prior valuations of our shares of common stock and warrants prepared for us. Such price does not have any relationship to any established criteria of value, such as book value or earnings per share. Such price may not be indicative of the current market value of our assets. No assurance can be given that our shares of common stock and warrants can be resold at or above the initial public offering price. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention. You may not receive a positive return on your investment when you sell your shares and you may lose the entire amount of your investment.

 

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The IPO Warrants included in the Units are listed on CBOE separately, investors may be provided with an arbitrage opportunity that could adversely affect the trading price of our common stock.

 

Because the Units will never trade as a unit, and the IPO Warrants are traded on CBOE, investors may be provided with an arbitrage opportunity that could depress the price of our common stock.

 

The IPO Warrants are speculative in nature.

 

Except as otherwise set forth therein, the IPO Warrants offered in this offering do not confer any rights of Common Stock ownership on their holders, such as voting rights, but rather merely represent the right to acquire Common Stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the IPO Warrants may exercise their right to acquire Common Stock prior to five years from the date of issuance, after which date any unexercised IPO Warrants will expire and have no further value. There can be no assurance that the market price of our Common Stock will ever equal or exceed the exercise price of the IPO Warrants offered by this prospectus. In the event that our Common Stock price does not exceed the exercise price of such IPO Warrants during the period when such IPO Warrants are exercisable, the IPO Warrants may not have any value.

 

The IPO Warrants offered by this prospectus may dilute your investment and cause our stock price to decline.

 

The Series A Warrants and the Series B Warrants offered by this prospectus will be exercisable for five years from the date of initial issuance at initial exercise prices equal to 130% and 200%, respectively, of the public offering price per Unit in this offering. However, the exercise price of the Series A Warrants will be reduced on each trading day commencing on the third trading day immediately following the closing date of this offering until the 40th trading day following the closing date of this offering (each a “Reset Date”) to a new exercise price equal to the lower of (i) the then exercise price, taking into account any prior reductions to the exercise price, and (ii) a price equal to 105% of the lowest per share volume weighted average price (VWAPs) of the common stock on CBOE during the period from the closing date of this offering to such Reset Date. Any reduction to the exercise price of the Series A Warrants will also result in an increase in the number of shares of common stock issuable upon exercise of the Series A Warrants such that the aggregate exercise price on any unexercised Series A Warrants immediately following the adjustment equals the aggregate exercise price of such unexercised Series A Warrants on the closing date of this offering. In addition, the holders of a Series B Warrant may, at any time and in their sole discretion, exercise such Series B Warrants in whole or in part by means of an “alternative cashless exercise” in which a holder will be entitled to receive, without the payment of additional consideration, a number of shares of common stock issuable upon exercise that will equal the product of (a) the number of shares of common stock that would be issuable upon exercise of such warrant in accordance with the terms of such warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (b) the quotient obtained by dividing (i) the exercise price minus the lowest VWAP during the ten trading days immediately prior to the applicable exercise date by (ii) 50% of the lowest VWAP during the ten trading days immediately prior to the applicable exercise date.

 

While a holder will not have the right to exercise any portion of the Series A Warrants or Series B Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants, the aggregate number of shares of common stock that may be issuable upon exercise of the Series A Warrants and the Series B Warrants cannot be determined until such time that reduced exercise prices of the Series A Warrants are determined, initially during the 40-trading day period following the closing of this offering, and the number of shares issuable upon an “alternative cashless exercise” of the Series B Warrants is determined from time to time during the life of the Series B Warrants. Such number of shares of common stock is expected to be substantial and to be dilutive to the holders of the outstanding shares of our common stock upon the exercise from time to time of such warrants. In addition to causing the market price of our common stock to decline, such sales could also greatly increase the volatility associated with the trading of our common stock. Furthermore, stockholders may initiate securities class action lawsuits if the market price of our common stock drops significantly.

 

A Series A Warrant or Series B Warrant does not entitle the holder to any rights as a common stockholder until the holder exercises such warrant for a share of our common stock.

 

Until you acquire shares of our common stock upon exercise of your Series A Warrants or Series B Warrants, your warrants will not provide you any rights as a common stockholder. Upon exercise of your warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

 

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Investors in this offering will experience immediate and substantial dilution in the net tangible book value per share of common stock.

 

You will incur immediate and substantial dilution as a result of this offering. After giving effect to the sale by us of an 1,400,000 Units (including 1,400,000 shares of common stock) based on an initial public offering price of $4.2500 per Unit, and after deducting the underwriter’s discounts and commissions and estimated offering expenses payable by us, and assuming (1) 1,801,880 shares of our Common Stock issuable under the approximately $4,470,233 in original issue discount principal and interest amount of the 2022 Notes and the approximately $736,778 in original issue discount principal and interest amount of the 2022 and 2023 Convertible Notes, including 876,658 Increased Conversion Shares, (2) the issuance of 69,019 shares of the Company’s common stock from the exercise of Exchange Listing, LLC’s anti-dilution protection, (3) the issuance of 1,005 shares of Series B Preferred Stock at a price of $1,000 per share, (4) the issuance of 691,403 shares of common stock from the conversion of 1,910 shares of Series B Preferred Stock, (5) the issuance of 120,000 RSU’s from the 2022 Equity Plan, which represents 120,000 shares of common stock to our CFO, (6) no exercise of the underwriter’s over-allotment option nor the Representative’s Warrant, and (7) no exercise of the IPO Warrants issued in this offering, investors in this offering can expect an immediate dilution of $3.68 per share. Accordingly, should we be liquidated at our book value, you would not receive the full amount of your investment.

 

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

 

Our management will have broad discretion in the application of the net proceeds from this initial public offering, including for any of the currently intended purposes described in the section entitled “Use of Proceeds.” Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management may not apply our cash from this offering in ways that ultimately increase the value of any investment in our shares of common stock or enhance stockholder value. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply our cash in ways that enhance stockholder value, we may fail to achieve expected financial results, which may result in a decline in the price of our shares of common stock, and, therefore, may negatively impact our ability to raise capital, invest in or expand our business, acquire additional products or licenses, commercialize our products, or continue our operations.

 

There is no established trading market for our shares of common stock; further, our common stock will be subject to potential delisting if we do not maintain compliance with the listing requirements of the CBOE.

 

This offering constitutes our initial public offering of 1,400,000 Units (including 1,400,000 IPO Shares and 2,800,000 IPO Warrants). No public market for these securities currently exists. The IPO Shares and the IPO Warrants are listed on the CBOE. There can be no assurance that an active trading market for our shares of common stock and warrants will develop or be sustained after this offering is completed. The initial public offering price has been determined by negotiations among the underwriter and us. Among the factors considered in determining the initial public offering price were our future prospects and the prospects of our industry in general, our revenue, net income and certain other financial and operating information in recent periods, and the financial ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to ours. However, we cannot assure you that following this offering our common stock and warrants will trade at a price equal to or greater than the initial public offering price.

 

In addition, the CBOE maintains rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or de-listing from the CBOE, would make it more difficult for stockholders to dispose of our shares of common stock and more difficult to obtain accurate price quotations on our shares of common stock and warrants. This could have an adverse effect on the price of our common stock and warrants. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock and/or other securities are not traded on a national securities exchange.

 

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If research analysts do not publish research about our business or if they issue unfavorable commentary or downgrade our common stock or warrants, the price of our common stock and warrants and trading volume could decline.

 

The trading market for our shares of common stock and warrants may depend in part on the research and reports that research analysts publish about us and our business. If we do not maintain adequate research coverage, or if any of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, the price of our common stock and warrants could decline. If one or more of our research analysts ceases to cover our business or fails to publish reports on us regularly, demand for our common stock and warrants could decrease, which could cause the price of our common stock and warrants or trading volume to decline.

 

Neither we nor the Selling Shareholders have authorized any other party to provide you with information concerning us or this offering.

 

You should carefully evaluate all of the information in this prospectus and the registration statement of which this prospectus forms a part, including the documents incorporated by reference herein. We may receive media coverage regarding our Company, including coverage that is not directly attributable to statements made by our officers, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees. Neither we nor the Selling Shareholders have authorized any other party to provide you with information concerning us or this offering, and such recipients should not rely on this information.

 

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our common stock.

 

FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock. 

 

We may issue additional shares of common stock or other equity securities, or engage in other transactions that could dilute our book value or relative rights of our common stock, which may adversely affect the market price of our common stock and further dilute existing shareholders.

 

We may determine, from time to time, that we need to raise additional capital by issuing additional shares of our common stock or other securities. Except as otherwise described in this prospectus, we will not be restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, shares of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings, or the prices at which such offerings may be affected. Additional equity offerings may dilute the holdings of existing stockholders or reduce the market price of our common stock, or all of them. Holders of our securities are not entitled to pre-emptive rights or other protections against dilution. New investors also may have rights, preferences and privileges that are senior to, and that adversely affect, then-current holders of our securities. Additionally, if we raise additional capital by making offerings of debt or preferred stock, upon our liquidation, holders of our debt securities and preferred stock, and lenders with respect to other borrowings, may receive distributions of its available assets before the holders of our common stock.

 

The ability of a stockholder to recover all or any portion of such stockholder’s investment in the event of a dissolution or termination may be limited.

 

In the event of a dissolution or termination of our Company, the proceeds realized from the liquidation of the assets of our Company, or our subsidiaries will be distributed among the common stockholders, but only after the satisfaction of the claims of third-party creditors of our Company. The ability of a common stockholder to recover all or any portion of such stockholder’s investment under such circumstances will, accordingly, depend on the amount of net proceeds realized from such liquidation and the amount of claims to be satisfied therefrom. There can be no assurance that our Company will recognize gains on such liquidation, nor is there any assurance that common stockholders will receive a distribution in such a case.

 

We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as such, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

 

We do not anticipate paying any cash dividends on our common stock for the foreseeable future. Our Company has never declared any cash dividends on its common stock.

 

In addition, and any future loan arrangements we enter into may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

 

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We are an “emerging growth company” and are able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, pursuant to Section 107 of the JOBS Act, as an “emerging growth company” we have elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.

 

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. 

 

Financial reporting obligations of being a public company are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.

 

As a publicly traded company, we will incur significant additional legal, accounting and other expenses that we did not incur as a privately company. The obligations of being a public company require significant expenditures and will place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the listing requirements of the stock exchange on which our common stock is listed. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly after we are no longer an “emerging growth company.” In addition, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.

 

If we fail to comply with the rules under Sarbanes-Oxley related to accounting controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.

 

Section 404 of Sarbanes-Oxley requires annual management assessments of the effectiveness of our internal control over financial reporting. If we fail to comply with the rules under Sarbanes-Oxley related to disclosure controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieve and maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of Sarbanes-Oxley. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.

 

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We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.

 

As a public company, we will be subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems and resources.

 

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting.

 

We do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our management has deemed certain conditions to be material weaknesses and significant deficiencies in our internal controls. For example, we failed to employ a sufficient number of staff to maintain optimal segregation of duties and to provide optimal levels of oversight and we rely upon a third-party accounting firm to assist us with generally accepted in the United States of America (“GAAP”) compliance. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

 

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including increased complexity resulting from our international expansion. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our common stock.

 

We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.

 

Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in the market price of our common stock.

 

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Future sales of a substantial number of our common stock or warrants by our existing stockholders could cause our stock price to decline.

 

We will have a significant number of restricted common stock that will become eligible for sale shortly after this registration statement is declared effective. Prior to the consummation of this offering, we will have 4,234,746 shares of our common stock outstanding. Upon consummation of this offering, we will have issued 1,400,000 shares of our common stock (or 1,610,000 shares if the underwriters exercise in full their over-allotment option to purchase 210,000 additional Option Securities at the initial public offering price) based on an initial public offering price of $4.2500 per Unit, assuming no exercise of the Representative’s Warrant and no exercise of the IPO Warrants. All of the securities sold in this offering will be eligible for sale immediately upon effectiveness of this registration statement.

 

We cannot predict what effect, if any, future sales of our securities, or the availability of securities for future sale, will have on the market price of our securities. Sales of substantial amounts of our securities in the public market, or the perception that such sales could occur, could materially adversely affect the market price of our securities and may make it more difficult for you to sell your securities at a time and price which you deem appropriate.

 

In addition, sales of common stock by the Selling Shareholders could cause the price of our common stock to decline. The Selling Shareholders may have acquired their Selling Shareholders Securities at a price that is significantly below the initial public offering price. As a result, some or all of the Selling Shareholders may sell their shares in the public market for a price that may be below the initial public offering price. Any such sales by the Selling Shareholders could have an immediate adverse effect on the price of our common stock.

 

Future sales and issuances of our common stock or warrants or rights to purchase common stock or warrants, including pursuant to an equity incentive plan could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

 

We expect that significant additional capital may be needed in the future to continue our planned operations, including acquiring additional companies, marketing activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock, including shares of common stock sold in this offering.

 

Potential comprehensive tax reform bills could adversely affect our business and financial condition.

 

The U.S. government may enact comprehensive federal income tax legislation that could include significant changes to the taxation of business entities. These changes include, among others, a permanent increase to the corporate income tax rate. The overall impact of this potential tax reform is uncertain, and our business and financial condition could be adversely affected. This prospectus does not discuss any such tax legislation or the manner in which it might affect purchasers of our common stock. We urge our stockholders to consult with their legal and tax advisors with respect to any such legislation and the potential tax consequences of investing in our common stock. 

 

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

 

Our directors, executive officers and each of our stockholders who owned greater than 5% of our outstanding common stock beneficially, as of the date of this prospectus, own approximately 47.7% of our common stock outstanding immediately before this offering and 24.3% of our common stock outstanding immediately after this offering, assuming the exercise in full of the over-allotment option and the Representative’s Warrant. Accordingly, these stockholders have and will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, a merger, the consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. The interests of these stockholders may not be the same as or may even conflict with our other investors’ interests. For example, these stockholders could delay or prevent a change in control of us, even if such a change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our Company or our assets. The significant concentration of stock ownership may negatively impact the value of our common stock due to potential investors’ perception that conflicts of interest may exist or arise.

 

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Our common stock may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”

 

Our common stock may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per share price below $5.00) in the future. While our common stock will not be considered a “penny stock” following this offering since they will be listed on the CBOE, if we are unable to maintain that listing and our common stock is no longer listed on the CBOE, unless we maintain a per share price above $5.00, our common stock will become a “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

 

Legal remedies available to an investor in “penny stocks” may include the following:

 

If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.

 

If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.

 

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

 

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

 

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock will not be classified as a “penny stock” in the future.

 

We will likely be considered a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.

 

Rule 12b-2 of the Exchange Act, defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

 

had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or

 

in the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated initial public offering price of the shares; or

 

in the case of an issuer whose public float was zero, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.

 

As a smaller reporting company, we would not be required and may not include a Compensation Discussion and Analysis section in our proxy statements; we would provide only two years of financial statements; and we would not need to provide the table of selected financial data. We also would have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, and also could make it more difficult for our stockholders to sell their shares.

 

Changes in accounting principles and guidance, or their interpretation, could result in unfavorable accounting changes or effects, including changes to our previously filed financial statements, which could cause our stock price to decline.

 

We prepare our financial statements in accordance with GAAP. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant effect on our reported results and retroactively affect previously reported results. 

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements. These forward-looking statements contain information about our expectations, beliefs or intentions regarding our product development and commercialization efforts, business, financial condition, results of operations, strategies or prospects, and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” and other words of similar meaning.

 

These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this prospectus, in any related prospectus supplement and in any related free writing prospectus.

 

Any forward-looking statement in this prospectus, in any related prospectus supplement and in any related free writing prospectus reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus, any related prospectus supplement and any related free writing prospectus and the documents that we reference herein and therein and have filed as exhibits hereto and thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

 

This prospectus, any related prospectus supplement and any related free writing prospectus also contain or may contain estimates, projections and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

 

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USE OF PROCEEDS

 

We estimate that the net proceeds from the sale of the IPO Units will be approximately $5,406,900, or approximately $6,118,000 if the underwriter exercises in full its over-allotment option, based on an initial public offering price of $4.2500 per Unit, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and assuming no exercise of any Representative’s Warrant. We will not receive any of the proceeds from the sale of the Selling Shareholders Securities contemplated by the Selling Shareholders named in this prospectus. All proceeds from the sale of the Selling Shareholders Securities will belong to the Selling Shareholders identified in this prospectus under “Selling Shareholders.”

 

We intend to use the net proceeds from this offering for acquisition of websites, technologies, or other assets, building an improved switch, for expanding product offering from other digital channels, sales and marketing, working capital and general other corporate purposes. The expected use of net proceeds of this offering represents our current intentions based upon our present plan and business conditions. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. The amounts and timing of our actual use of net proceeds will vary depending on numerous factors. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.

 

We currently estimate that we will allocate our use of the net proceeds from this offering as follows: $500,000 for acquisitions of websites, technologies, or other assets (as of the date of this prospectus, we have no agreements in place to make any acquisitions); $1,500,000 for research and development projects; and $2,350,000 for sales and marketing, working capital and general corporate purposes. We have presumed that we will receive aggregate gross proceeds of approximately $5,000,000, assuming no exercise of the underwriter’s over-allotment option, and will pay approximately $750,000 in fees, which include offering costs, commissions and expenses.

 

We do not anticipate using any proceeds from this initial public offering to repay debt or retire any existing liabilities. The repayment of any existing debt, including notes, and other liabilities would come only from our regular budget and operations.

 

The use of the proceeds represents our management’s estimates based upon current business and economic conditions. We reserve the right to use the net proceeds we receive in the offering in any manner we consider to be appropriate. Although the Company does not contemplate changes in the proposed use of proceeds, to the extent we find that adjustment is required for other uses by reason of existing business conditions, the use of proceeds may be adjusted. The actual use of the proceeds of this offering could differ materially from those outlined above as a result of several factors including those set forth under “Risk Factors” and elsewhere in this prospectus.

 

Pending the use of the net proceeds of this offering, we intend to invest the net proceeds in short-term investment-grade, interest-bearing securities.

 

We estimate that we may use up to $750,000 from the gross proceeds raised from this offering to pay the total fees, commissions, expenses and other costs associated with this offering (including, but not limited, to the: underwriting fees and commissions, SEC registration fee, FINRA filing fee, CBOE initial listing fee, accounting fees and expenses, legal fees and expenses, printing fees and expenses, and other miscellaneous fees).

 

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DIVIDEND POLICY

 

We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant.

 

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CAPITALIZATION

 

The following table sets forth our cash and capitalization as of September 30, 2023 on:

 

  an actual basis;

 

  on a pro forma as adjusted basis to reflect the following events: (1) the increase of $2,018,780 in penalties and additional accrued interest related to the 2022 and 2023 Convertible Notes, the Notes Extension and Increased Conversion Shares, (2) 1,801,880 shares of our Common Stock issuable under the approximately $4,470,233 in original issue discount principal and interest amount of the 2022 Convertible Notes and the approximately $736,778 in original issue discount principal and interest amount of 2023 Convertible Notes, including 876,658 Increased Conversion Shares, (3) the issuance of 69,019 shares of Common Stock from the exercise of Exchange Listing, LLC’s anti-dilution protection to maintain two percent of the Company’s issued and outstanding shares, (4) the issuance of 1,055 shares of Series B Preferred Stock at a price of $1,000 per share and the subsequent issuance of 381,900 shares of Common Stock upon conversion of such 1,055 shares of Series B Preferred Stock upon the closing of this offering, (5) the issuance of 327,602 shares of Common Stock from the conversion of 905 shares of Series B Preferred Stock, and (6) the issuance of 120,000 RSUs from the 2022 Equity Plan, which represent 120,000 shares of Common Stock at a price $1.53 to the CFO; (7) the recognition of $4,013,333 in deferred offering costs incurred as a result of the IPO; and (8) assuming no exercise of the underwriter’s option to cover over-allotments and no exercise of the Representative’s Warrant; and

 

  on a pro forma as further adjusted basis to reflect, as if they had occurred on September 30, 2023, the sale by us of 1,400,000 shares of common stock in this offering, based on an offering price of $4.2500, after deducting the underwriting discounts and commissions and estimated offering costs payable by us, assuming no exercise of the underwriter’s option to cover over-allotments and assuming no exercise of the IPO Warrants issued in this offering.

 

The pro forma as adjusted and pro forma as further adjusted information in this table is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with the information contained in “Use of Proceeds,” “Summary Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” as well as the financial statements and the notes included elsewhere in this prospectus.

 

   As of
September 30,
2023
   As of
September 30,
2023
   As of
September 30,
2023
 
   Actual
(unaudited)
   Pro Forma
As Adjusted
   Pro Forma
As Further Adjusted
 
Cash and cash equivalents  $31,533   $1,036,533   $5,703,227 
                
2022 and 2023 Convertible notes, accrued interest and derivative liability   6,392,925    1,008,235    - 
                
Stockholders’ equity (deficit):               
Preferred stock, Series A, $0.0001 par value   400    400    400 
Preferred stock, Series B, $0.0001 par value   -    -    - 
Common stock, $0.0001 par value   411    693    833 
Additional paid-in capital   86,409,189    94,630,435    96,241,600 
Accumulated deficit   (88,945,907)   (91,264,127)   (91,314,348)
Total stockholders’ equity (deficit)   (2,535,907)   3,367,401    4,928,485 
Total capitalization  $2,983,602   $4,275,193   $4,928,485 

 

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The number of common shares that will be outstanding after this offering set forth above is based on shares of our common stock outstanding as of September 30, 2023.

 

The completion of this offering is considered a “Liquidity Event” under the terms of the approximately $5,875,074 in the 2022 Convertible Notes and the approximately $1,910,000 in Series B Preferred Stock convertible into shares of common stock. In connection with the issuance of the 2022 Convertible Notes, the Company also issued Investors’ Warrants to the holders of the 2022 Convertible Notes.

 

Effective as of January 25, 2024, we have entered into the Note Extension with the holders of the 2022 Convertible Notes and the 2023 Convertible Notes to extend the maturity dates of each of the 2022 Convertible Notes and the 2023 Convertible Notes to February 14, 2024, in exchange for the Increased Conversion Shares. Subsequently, the Company and certain holders of the Investors Warrants have mutually agreed that such holders would receive Series C Warrants in this offering in lieu of the Investors’ Warrants, which would be cancelled. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants will not be registered with the SEC under the Securities Act and will not be listed on any stock exchange.

 

On April 24, 2023, the Company issued to two lenders the 15% Secured Convertible Notes in the original principal amount of $294,117.65 for each lender. On February 15, 2024, the Company entered into Forbearance Agreements with each of such lenders whereby such lenders have agreed to forbear from exercising their rights and remedies against the Company under the 15% Secured Convertible Notes commencing on February 14, 2024 and ending on February 28, 2024, provided that (i) there is no new event of default that occurs, or becomes known to the lenders, and (ii) on or before February 28, 2024, the Company pays each of the lenders $36,989.37 in cash in respect of amounts outstanding under the 15% Secured Convertible Notes, and (iii) on the date of the consummation of the liquidity event represented by this offering, the Company pays each lender an additional $147,059 in cash.

 

Unless specifically stated otherwise, all information in this Capitalization section: (i) assumes the conversion of the 2022 and 2023 Convertible Notes into up to 1,801,880 common shares at a conversion price of 65% of the IPO price with a 45% premium; and (ii) excludes the common stock issuable upon exercise of outstanding  the Series A Warrants and the Series B Warrants to be issued in this offering and the Series C Warrant to be issued to the holders of the Investors’ Warrants.

 

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DILUTION

 

If you invest in our Units in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share in this offering and the as adjusted net tangible book value per share immediately after this offering. We calculate net tangible book value per share by dividing our net tangible book value, which is tangible assets less total liabilities, by the number of our outstanding common stock as of September 30, 2023. Our historical net tangible book value as of September 30, 2023, was approximately ($6,526,535) or ($1.59) per share based upon shares of common stock outstanding on such date.

 

Pro forma net tangible book value per share represents the amount of our total tangible assets as adjusted to take into account: on a pro forma as adjusted basis to reflect the following events: (1) the increase of $2,018,780 in penalties and additional accrued interest related to the 2022 and 2023 Convertible Notes, the Notes Extension and Increased Conversion Shares, (2) 1,801,880 shares of our Common Stock issuable under the approximately $4,470,233 in original issue discount principal and interest amount of 2022 Convertible Notes and the approximately $736,778 in original issue discount principal and interest amount of the 2023 Convertible Notes, including 876,658 Increased Conversion Shares due to extension of the 2022 and 2023 Convertible Notes, (3) the issuance of 69,019 shares of Common Stock from the exercise of Exchange Listing, LLC’s anti-dilution protection to maintain two percent of the Company’s issued and outstanding shares, (4) the issuance of 1,005 shares of Series B Preferred Stock at a price of $1,000 per share and the subsequent issuance of 363,801 shares of Common Stock upon conversion of such 1,005 shares of Series B Preferred Stock upon the closing of this offering, (5) the issuance of 327,602 shares of Common Stock from the conversion of 905 shares of Series B Preferred Stock, and (6) the issuance of 120,000 RSUs from the 2022 Equity Plan, which represent 120,000 shares of Common Stock at a price $1.53 to the CFO; (7) the recognition of $4,013,333 in deferred offering costs incurred as a result of the IPO; and (8) assuming no exercise of the underwriter’s option to cover over-allotments and no exercise of the Representative’s Warrant, assuming an initial public offering price of $4.2500 per Unit. After giving effect to such transactions, our pro forma net tangible book value per share as of September 30, 2023 would have been approximately ($0.13) per share.

 

After giving effect to the sale of an 1,400,000 Units in this offering at an initial public offering price of $4.2500, and after deducting the underwriting discounts and commissions and estimated offering costs payable by us, our pro forma as adjusted net tangible book value (deficit) as of September 30, 2023, would have been approximately $0.57 per common share. This represents an immediate increase in pro forma as adjusted net tangible book value of $2.16 per share to existing stockholders and an immediate dilution of $3.68 per share to investors purchasing our common shares in this offering at the initial public offering price. 

 

The following table illustrates per share dilution as of September 30, 2023:

 

Initial public offering price per Unit  $4.25 
Net tangible book value per share of common stock as of September 30, 2023  $(1.59)
Pro forma net tangible book value (deficit) per share of common stock  $(0.13)
Pro forma as adjusted net tangible book value (deficit) per share of common stock after giving effect to the offering of Units  $0.57 
Dilution in pro forma as adjusted net tangible book value per share of common stock to investors participating in this offering  $3.68 

 

43

 

 

The discussion and table above assume no exercise of the Series A Warrants or Series B Warrants sold in this offering to purchase up to a stated aggregate of 2,800,000 shares (or 1,400,000 shares underlying each of the Series A Warrants and the Series B Warrants) of common stock and no exercise of the Series C Warrants to be issued to the holders of the Investors’ Warrants. The Series A Warrants have a stated exercise price of 130% of the issuance price of the Units, which will be reduced on each trading day commencing on the third trading day immediately following the closing date of this offering until the 40th trading day following the closing date of this offering (each a “Reset Date”) to a new exercise price equal to the lower of (i) the then exercise price, taking into account any prior reductions to the exercise price, and (ii) a price equal to 105% of the lowest per share volume weighted average price (VWAPs) of the common stock on Nasdaq during the period from the closing date of this offering to such Reset Date. Any reduction to the exercise price of the Series A Warrants shall also result in an increase in the number of shares of common stock issuable upon exercise of the Series A Warrants such that the aggregate exercise price on any unexercised Series A Warrants immediately following the adjustment equals the aggregate exercise price of such unexercised Series A Warrants on the closing date of this offering. The Series B Warrants have a stated exercise price of 200% of the issuance price of the Units. The holders of the Series A Warrants and the Series B Warrants have a cashless exercise option that provides the holders the ability to obtain shares for no cash consideration in the event there is not an effective registration statement relating to the shares issuable upon the exercise of those warrants. The holders of Series B Warrants also have an “alternative cashless exercise” option at any time in which a holder shall be entitled to receive, without the payment of additional consideration, a number of shares of common stock issuable upon exercise that will equal the product of (a) the number of shares of common stock that would be issuable upon exercise of such warrant in accordance with the terms of such warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (b) the quotient obtained by dividing (i) the exercise price minus the lowest VWAP during the ten trading days immediately prior to the applicable exercise date by (ii) 50% of the lowest VWAP during the ten trading days immediately prior to the applicable exercise date. The Series B Warrants may not be exercised on an alternative cashless exercise basis by using a VWAP in the calculation of such exercise that is below twenty percent (20%) of the public offering price of the common stock in this offering (the “Floor Price”) until such lower VWAP is approved by our stockholders. However, in the Series B Warrants, we will agree to obtain majority stockholder consent to remove the Floor Price by filing an information statement with the SEC within 15 days of the closing of this offering that will become effective 20 days after filing. We are not currently able to determine the maximum number of shares of our common stock that may be issuable upon exercise of these warrants. The issuance and accounting for these warrants could have a material adverse effect to our dilution and earnings, the amounts of which cannot currently be quantified.

 

The foregoing discussion and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding options or warrants, none of which have a per share exercise price less than the combined public offering price per share of common stock and accompanying warrants sold in this offering. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

 

44

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this prospectus. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “forward-looking statements” and “risk factors” and those included elsewhere in this prospectus.

 

Overview

 

Vocodia Holdings Corp (“VHC”) was incorporated in the State of Wyoming on April 27, 2021 and is a conversational AI technology provider. Vocodia’s technology is designed to drive better sales and services for its customers. Clients turn to Vocodia for their product and service needs.

 

Business Summary

 

We are an AI software company that builds practical AI functions and makes them easily obtainable for businesses on cloud-based platform solutions at low costs and scalable to multiagent vast enterprise solutions.

 

Our operations include three wholly owned subsidiaries: (1) Vocodia FL, which was incorporated in the State of Florida on June 2, 2021 and manages all of VHC’s human resources and payroll functions, (2) Vocodia JV, which was incorporated in the State of Delaware on October 7, 2021 and was formed with the intention to conduct any and all joint ventures or acquisitions for VHC, which do not exist as of the date of this prospectus, and (3) Click Fish Media, Inc. (“CFM”), which was incorporated in the State of Florida on November 26, 2019 and is an IT services provider. CFM was formerly owned by James Sposato, who is an officer and director of the Company. CFM was wholly acquired by the Company from Mr. Sposato per the Contribution Agreement. CFM was formerly owned by James Sposato, who is an officer and director of the Company. CFM was acquired by us from Mr. Sposato per the Contribution Agreement, dated August 1, 2022. In the Contribution Agreement, Mr. Sposato (“Contributor”), has contributed, assigned, transferred and delivered to us, the outstanding capital stock of CFM and we have accepted the contributed shares from the Contributor. As full consideration for the contribution, we have paid the Contributor consideration in the amount of $10.

 

An illustration of our organizational structure is provided below:

 

 

We aim to offer corporate clients scalable enterprise AI sales and customer service solutions intended to rapidly increase sales and service, while lowering employment costs.

 

45

 

 

We seek to enhance rapport and relationship building for customers, which is as necessary component to sales. We believe that there is a positive correlation between AI which sounds similar to a human voice over the phone and better customer rapport and customer service benefits. With our advanced AI, we believe that it will be difficult for customers to distinguish between speaking to a human sales representative and to an AI bot. We believe we can increase customer satisfaction and maximize potential service efficiency for our clients. Our goal is to provide quick training and deployment, potentially unlimited scalability, easy integration with existing corporate platforms and other benefits to our customers from AI’s efficiency. We strive to help our customers manage budgets and perform better than the high costs of existing sales and service personnel.

 

Results of Operations

 

Comparison of the Year Ended December 31, 2022 to the period ended December 31, 2021

 

The following table provides certain selected financial information for the periods presented:

 

          From Inception              
    Year Ended     (April 27,
2021) to
             
    December 31,     December 31,              
    2022     2021     Change     %  
Revenues   $ 658,875     $ 14,950     $ 643,925       4307 %
Cost of revenue     804,404       61,905       742,499       1199 %
Gross profit (loss)     (145,529 )     (46,955 )     (98,574 )     210 %
                                 
Operating costs and expenses:                                
Operating expense     20,257,332       59,817,918       (39,560,586 )     -66 %
                                 
Other income (expenses)     (352,358 )     (1,176,875 )     824,517       70 %
                                 
Net loss   $ (20,755,219 )   $ (61,041,748 )   $ 40,286,529       -66 %

 

Revenue

 

The increase in revenue of 4,307%, for the year ended December 31, 2022 to $658,875 as compared to $14,950 for the period ended December 31, 2021 was driven by an increase in customers purchasing our DISA’s. For the year ended December 31, 2022, we had 6 paying clients who subscribed to a total of 66 DISAs at an average selling price of $795 per DISA for a total of $44,153 in revenue. Additionally, we earned $14,723 in integration and setup fees and $600,000 from lead generation services, resulting in total revenue of $658,875. For the period ended December 31, 2021, we had 1 paying client who subscribed to 10 DISAs for one month at a cost of $1,495 per DISA for a total of $14,950 in revenue.

 

Cost of Revenue

 

Cost of revenue increased to $804,404 for the year ended December 31, 2022 from $61,905 for the period ended December 31, 2021, due to the Company’s inception in April 2021 resulted in the period ended December 31, 2021 being comprised of 8 months as compared to 12 months in the year ended December 31, 2022. The increase in costs is also associated with the growth in service revenue described above.

 

46

 

 

Gross Profit (Loss)

 

The increase in our gross loss of $98,574 to $145,529 for the year ended December 31, 2022 from $46,955 for the period ended December 31, 2021 is primarily attributable to a larger increase in our cost of revenues as compared to the increase in our revenues.

 

Operating Expenses

 

         From Inception            
    Year Ended    (April 27,
2021) to
           
    December 31,    December 31,            
    2022    2021    Change    %  
Operating Expenses                     
General and administrative expenses   $ 2,456,758     $ 1,459,392       997,366       68 %
Salaries and wages     3,540,007       41,552,434       (38,012,427 )     -92 %
Research and development     14,260,567       16,806,092       (2,545,525 )     -15 %
Total Operating Expenses   $ 20,257,332     $ 59,817,918       (39,560,586 )     -66 %

 

Operating expense decreased by $39,560,586 or 66% to $20,257,332 during the year ended December 31, 2022 from $59,817,918 during the period ended December 31, 2021. The decrease is primarily due to a reduction in our research and development expense related to software development.

 

General and Administrative Expenses increased by $997,366 or 68% to $2,456,758 during the year ended December 31, 2022 from $1,459,392 during the period ended December 31, 2021. Since operations commenced in May, 2021, part of the increase is solely due to an unequal number of operating months in each year subject to comparison. The increase is primarily due to an increase in fees paid for marketing, dues and subscriptions for technology, legal costs, and rent expense.

 

Salaries and wages decreased by $38,012,427 or approximately 92% to $3,540,007 from $41,552,434 during the year ended December 31, 2022 and the period ended December 31, 2021, respectively. During the year ended December 31, 2022, salaries and wages decreased primarily due to a reduction in the issuance of stock-based employee compensation.

 

Research and development and other service providers decreased by $2,545,525 or 15% to $14,260,567 from $16,806,092, for the year ended December 31, 2022 and the period ended December 31, 2021 respectively, which was primarily due to a reduction in stock-based compensation.

 

Total other income (expense)

 

During the year ended December 31, 2022, we had other expense of $352,358, which consisted of a one-time fee paid to the Company of $5,000, an increase in fair value of derivative liabilities of $25,706 and interest expense of $383,064.

 

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Comparison of the nine months ended September 30, 2023 to the nine months ended September 30, 2022

 

The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenues for each of the periods indicated:

 

    Nine months Ended              
    September 30,              
    2023     2022     Change     %  
Revenues   $ 252,820     $ 150,475     $ 102,345       68 %
Cost of revenue     200,289       306,104       (105,815 )     -35 %
Gross profit (loss)     52,531       (155,629 )     208,160       134 %
                                 
Operating costs and expenses:                                
Operating expense     4,676,396       17,940,185       (13,263,789 )     -74 %
                                 
Other income (expenses)     (2,525,075 )     (56,980 )     2,468,095       4332 %
                                 
Net loss   $ (7,148,940 )   $ (18,152,794 )   $ (11,003,854 )     -61 %

 

Revenue

 

The increase in revenue of 68%, or $102,345, for the nine months ended September 30, 2023 to $252,820 as compared to $150,475 for the nine months ended September 30, 2022 was primarily driven by lead generation income derived by the deployment of our DISA’s. For the nine months ended September 30, 2023, we had 1 paying client who subscribed to 10 DISAs at a selling price of $795 per DISA for one month and another paying client who subscribed to 10 DISAs at a selling price of $800 per DISA for one month for total revenue of $15,950 for the period. Additionally, we earned $236,870 in integration, lead generation, and setup fees, resulting in total revenue of $252,820. For the nine months ended September 30, 2022, we had 2 paying clients who subscribed to 10 DISAs at a selling price of $795 per DISA for two and a half months and 2 paying clients who subscribed to 10 DISAs at a selling price of $795 per DISA for one month, resulting in total revenue of $28,253 for the period. Additionally, we earned $122,223 in integration, lead generation, and setup fees, resulting in total revenue of $150,745.

 

Cost of Revenue

 

Cost of revenue decreased by $105,815, or 35%, to $200,289 for the nine months ended September 30, 2023 from $306,104 for the nine months ended September 30, 2022, primarily due to the reduction of costs related to the deployment of our DISAs and timing difference between revenue recognized in a prior period and a cost recognized in the current period.

 

Gross profit (loss)

 

The increase in our gross profit of $208,168 to $52,531 for the nine months ended September 30, 2023 from a gross loss of $155,629 for the nine months ended September 30, 2022 is primarily attributable to the recognition of prepaid revenue from a prior period without an offsetting cost of revenue and to an increase in our revenues as compared to the decrease in our cost of revenues.

 

Operating Expenses

 

    Nine months Ended              
    September 30,              
    2023     2022     Change     %  
Operating Expense                        
General and administrative expenses   $ 1,155,262     $ 1,955,613     $ (800,351 )     -41 %
Salaries and wages     2,324,214       3,198,085       (873,871 )     -27 %
Research and development     1,196,920       12,786,487       (11,589,567 )     -91 %
Total Operating Expenses   $ 4,676,396     $ 17,940,185     $ (13,263,789 )     -74 %

 

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Operating expense decreased by $13,263,789 or 74% to $4,676,396 during the nine months ended September 30, 2023 from $17,940,185 during the nine months ended September 30, 2022 primarily due to the decrease in stock based compensation paid to employees and service providers.

 

General and Administrative Expenses decreased by $800,351 or 41% to $1,155,262 during the nine months ended September 30, 2023 from $1,955,613 during the nine months ended September 30, 2022. The decrease is a result of the Company issuing fewer shares as compensation expense as compared to the prior period.

 

Salaries and wages expense decreased by $873,871, or 27%, to $2,324,214 for the nine months ended September 30, 2023 from $3,198,085 for the nine months ended September 30, 2022, due to a reduction in staff in 2023.

 

Research and development and other service providers expense decreased by $11,589,567, or 91%, to $1,196,920 for the nine months ended September 30, 2023 from $12,786,487 for the nine months ended September 30, 2022, due to decreased services in the form of non-employee stock compensation expense.

 

Total other income (expense)

 

During the nine months ended September 30, 2023, we had other expense of $2,525,075, which consisted of a decrease in fair value of derivative liabilities of $157,395 and interest expense of $2,367,680.

 

Liquidity and Capital Resources

 

The following table provides selected financial data about us as of September 30, 2023 and December 31, 2022

 

    September 30,     December 31,              
    2023     2022     Change     %  
Current assets   $ 92,061     $ 872,083     $ (780,022 )     (89 )%
Current liabilities   $ 6,766,133     $ 2,934,182     $ 3,831,951       131 %
Working capital deficiency   $ (6,674,072 )   $ (2,062,099 )   $ (4,611,973 )     224 %

 

Current assets decreased by $780,022, or 89%, to $92,061 as of September 30, 2023 from $872,083 as of December 31, 2022. The decrease is primarily attributable to a decrease in cash due to increased expenses related to preparation for our public offering.

 

Current liabilities increased by $3,831,951, or 131%, to $6,766,133 as of September 30, 2023 from $2,934,182 as of December 31, 2022. The increase was primarily attributable to the issuance of approximately $2,401,188 in original discount senior secured notes, the recognition of the current portion of previously issued convertible notes, an increase in accounts payable of $810,355, an increase in related party payables of $154,010, an increase in derivative liability of $662,622 and a reduction in contract liabilities of $203,000.

 

The following table provides selected financial data about us as of December 31, 2022 and 2021

 

    December 31,     December 31,              
    2022     2021     Change     %  
Current assets   $ 872,083     $ 694,601     $ 177,482       26 %
Current liabilities   $ 2,934,182     $ 243,598     $ 2,690,584       1,105 %
Working capital (deficiency)   $ (2,062,099 )   $ 451,003     $ (2,513,102 )     (557 )%

 

Current assets increased by $177,482, or 26%, to $872,083 as of December 31, 2022 from $694,601 as of December 31, 2021. The increase is primarily attributable to the issuance of issuance of approximately $2,427,059 in original discount senior secured notes and expenditures related to preparation for our initial public offering.

 

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Current liabilities increased by $2,690,584, or 1,105%, to $2,934,182 as of December 31, 2022 from $243,598 as of December 31, 2021. The increase was primarily attributable to the issuance of approximately $2,427,059 in original discount senior secured notes.

 

Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements and otherwise operate on an ongoing basis. We have insufficient cash flows generated from operations, so we are currently dependent on debt financing and sale of equity to fund operations.

 

We had an accumulated deficit of $81,796,967 and negative working capital of approximately $2,100,000 as of December 31, 2022. As of December 31, 2022, we had $697,626 of cash.

 

Cash Flow

 

   Nine months Ended     
   September 30,     
   2023   2022   Change 
Cash used in operating activities  $(2,271,260)  $(4,169,192)  $1,897,932 
Cash used in investing activities  $-   $(931)  $931 
Cash provided by financing activities  $1,605,167   $4,384,603   $(2,779,436)
Cash on hand  $31,533   $853,121   $(821,588)

 

    Years Ended        
    December 31,        
    2022     2021     Change  
Cash used in operating activities   $ (5,156,591 )   $ (3,108,956 )   $ (2,047,635 )
Cash used in investing activities   $ (931 )   $ (35,229 )   $ 34,298  
Cash provided by financing activities   $ 5,216,507     $ 3,782,826     $ 1,433,681  
Cash on hand   $ 697,626     $ 638,641     $ 58,985

 

Cash Flow from Operating Activities

 

Nine months ended September 30, 2023 and 2022

 

For the nine months ended September 30, 2023 and 2022, we did not generate positive cash flows from operating activities. For the nine months ended September 30, 2023, net cash flows used in operating activities was $2,271,260 compared to $4,169,192 during the nine months ended September 30, 2022.

 

Cash flows used in operating activities for the nine months ended September 30, 2023 was comprised of a net loss of $7,148,940, which was reduced by non-cash expenses of $4,006,006 for stock-based compensation, depreciation and amortization, convertible notes default penalties, and change in fair value of derivative liabilities, and net change in working capital of $871,674.

 

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For the nine months ended September 30, 2022, net cash flows used in operating activities was approximately $4,200,000. During the nine months ended September 30, 2022, we had a net loss of $18,152,794, which was reduced by non-cash expenses of $13,881,358 for stock-based compensation and $4,369 in depreciation, amortization of debt issuance costs of $4,369 and increased by a net change in working capital of $97,875.

 

Year ended December 31, 2022 and 2021

 

For the years ended December 31, 2022 and 2021, we did not generate positive cash flows from operating activities. For the year ended December 31, 202, net cash flows used in operating activities was $5,156,591 compared to $3,108,956 during the period ended December 31, 2021.

 

Cash flows used in operating activities for the year ended December 31, 2022 was comprised of a net loss of $20,755,219, which was reduced by non-cash expenses of $15,326,224 for stock-based compensation, depreciation and amortization, convertible notes default penalties, and change in fair value of derivative liabilities, and net change in working capital of $272,404.

 

For the period ended December 31, 2021, net cash flows used in operating activities was $3,108,956. During the period ended December 31, 2021, we had a net loss of $61,041,748, which was reduced by non-cash expenses of $57,851,538 for stock-based compensation, depreciation and amortization, convertible notes default penalties, and change in fair value of derivative liabilities, and net change in working capital of $76,202.

 

Cash Flows from Investing Activities

 

During the nine months ended September 30, 2023 and 2022, we purchased property and equipment in the amount of $0 and $931, respectively.

 

During the year ended December 31, 2022 and the period ended December 31, 2021, we purchased property and equipment in the amount of $931 and $35,229, respectively.

 

Cash Flows from Financing Activities

 

During the nine months ended September 30, 2023, cash provided by financing activities of $1,605,167 included $905,000 from the sale of 905 Preferred B shares, proceeds from our principal shareholder of $0, and $800,000 from the issuance of convertible notes payable, and was offset by deferred offering costs of $49,833 and the payment of debt issuance costs of $50,000. During the nine months ended September 30, 2022, net cash provided by financing activities of $4.4 million included proceeds of $2,342,153 of common stock, the issuance of $1,422,450 of convertible notes payable and $650,000 from the issuance of warrants and was offset by deferred offering costs of $42,000.

 

During the year ended December 31, 2022, net cash provided by financing activities of $5,216,507 included proceeds of $2,792,116 from the sale of common stock units, $649,873 from the sale of warrants and proceeds of $2,067,00 from the issuance of convertible notes and was offset by the repayment of notes payable to related parties of $48,000, deferred offering costs of $70,000, and payment of debt issuance costs of $175,050. During the period from Inception (April 27, 2021) to December 31, 2021, net cash provided by financing activities of $3,782,826 included proceeds from the sale of common stock units of $4,959,701 offset by our investment in Vocodia International Sale Agency of $1,176,875.

 

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Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities. 

 

Going Concern

 

Management has concluded that there is a substantial doubt about the Company’s ability to continue as a going concern. Our independent auditors concurred with our management’s assessment that raises substantial doubt as to our ability to continue as a going concern. If the Company is unable to generate sufficient profits or raise additional debt or equity capital in amounts needed to fund its operations, it could have a negative impact on the Company’s business plans and ability to conduct its operations.

 

Internal Control Over Financial Reporting

 

We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We will be required to make our first assessment of our internal control over financial reporting and to comply with the management certification requirements of Section 404 in our annual report on Form 10-K for the year following our first annual report that is filed with the SEC (subject to any change in applicable SEC rules).

 

Further, our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting and will not be required to do so for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act. See “Summary-Implications of Being an Emerging Growth Company and Smaller Reporting Company.”

 

Currently, we do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our management has deemed certain conditions to be material weaknesses and significant deficiencies in our internal controls. For example, we failed to employ a sufficient number of staff to maintain optimal segregation of duties and to provide optimal levels of oversight and we rely upon a third-party accounting firm to assist us with generally accepted in the GAAP compliance. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

 

Summary of Significant Accounting Policies

 

The following are the Company’s significant accounting policies: 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Vocodia and CFM which are consolidated as they are under common management with certain stockholders of Vocodia. All intercompany balances and transactions have been eliminated in consolidation.

 

Vocodia acquired 100% ownership in CFM effective on August 1, 2022. Vocodia paid $10.00 in exchange for all of the outstanding capital stock of CFM. In 2021, the transaction was not accounted for. It will be accounted for in 2022. The retrospective presentation of Vocodia and CFM are presented on a consolidated basis in our 2021 financials. The companies were consolidated by removing all intercompany activity as if they were effectively consolidated in 2021.

 

While Mr. Sposato owned 100% of CFM, Vocodia’s founder and Chief Executive Officer has been a co-manager of CFM from 2019 to 2022, where he was responsible for sales, marketing and strategy. The transaction between CFM and Vocodia was accounted for according to ASC 810-10-20, which allows financial statements of a consolidated group to be presented as those of a single entity if they are commonly controlled or commonly managed. As such, the financial statements are presented as consolidated because both entities were commonly managed.

 

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Restatement

 

In June 2023, the management of Vocodia concluded that Vocodia’s previously issued audited consolidated financial statements as of and for the fiscal years ended December 31, 2022 and 2021 should no longer be relied upon. As a result of the errors identified, the Company restated the consolidated statements of operations, balance sheets, stockholders’ equity and cash flows for each of the periods presented. In addition, the Company made substantial updates to the footnote disclosures as a result of the restatement and made other enhancements to certain disclosures to ensure they are in conformity with GAAP.

 

In accordance with ASC 250, Accounting Changes and Error Corrections, the Company evaluated the materiality of the adjustments, considering both quantitative and qualitative factors, and determined that the related aggregate impact was material to its consolidated financial statements as of and for the year ended December 31, 2022 and the period from inception to December 31, 2021 (see Note 12).

 

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 disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain expenses during the reporting period. Actual results could differ from these good faith estimates and judgments Significant estimates are contained in the accompanying financial statements for the valuation of derivatives, the valuation allowance on deferred tax assets, share-based compensation, useful lives for depreciation and amortization of long-lived assets, and the incremental borrowing rate used on right-of-use asset.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. At September 30, 2023, December 31, 2022 and December 31, 2021, the Company did not have any cash equivalents.

 

Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2023 and 2022 was approximately $0 and $578,546 respectively. The amount in excess of the FDIC insurance as of December 31, 2022 and 2021 was approximately $423,000 and $277,019, respectively. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

 

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Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Expenditures for major betterments and additions are charged to the property and equipment accounts, while replacements, maintenance, and repairs, which do not improve or extend the lives of the respective assets, are charged to expense. The carrying amounts of assets that are sold or retired and their related accumulated depreciation are removed from the accounts in the year of disposal, and any resulting gain or loss is reflected in income. Depreciation is calculated on straight-line basis with estimated useful lives as follows:

 

Furniture and fixtures 7 years  
Computer equipment 5 years  

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which requires the Company to recognize revenue in an amount that reflects the consideration to which it expects to be entitled in exchange for the transfer of promised goods or services to customers. ASC 606, as amended, defines a five-step process to achieve this core principle: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

 

The Company’s revenues are derived from three sources: (1) implementation fees, (2) offering its software as a service on a recurring monthly basis, and (3) generation and verification of leads. Implementation fees are charged for setting up or calibrating its software so that the AI can be used by the customer for its particular use case, and are usually a one-time cost. The Company’s contracts with customers are structured with stated prices per service performed, which are not subject to uncertainty or probability of significant reversal; thus do not represent variable consideration. The recurring monthly fees are charged for the ongoing use of the AI to continue to call/prospect for the Company’s customers, and are charged on a monthly recurring basis. The Company award discounts to its customers on a discretionary basis. Contract liabilities, amounting to $203,000 as of December 31, 2022, pertains to customer deposits for future services, which are expected to be performed and earned during the year ended December 31, 2023. The Company had no contract liabilities as of December 31, 2021.

 

Research and Development and Software Development Costs

 

Research and development costs are expensed as incurred. In accordance with Financial Accounting Standards Board (“FASB”) ASC 350-40, Internal Use Software, the Company capitalizes certain internal use software development costs associated with creating and enhancing internally developed software related to its platforms. Software development activities generally consist of three stages (i) the research and planning stage, (ii) the application and development stage, and (iii) the post-implementation stage. Costs incurred in the planning and postimplementation stages of software development, or other maintenance and development expenses that do not meet the qualification for capitalization are expensed as incurred. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized. These costs include personnel expenses for employees or consultants who are directly associated with and who devote time to software projects, and external direct costs of materials obtained in developing the software. These software developments and acquired technology costs will be amortized on a straight-line basis over the estimated useful life upon the “go-live” date. The Company did not capitalize any of its costs associated with the development of its software as technological feasibility was established within a short time frame from the software’s general availability.

 

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Fair Value of Financial Instruments

 

The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

 

  Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.
     
  Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.
     
  Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation.

 

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

 

The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities and convertible debt approximate fair value due to the short-term maturities of these instruments.

 

Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of December 31, 2022 (none for December 31, 2021):

 

December 31, 2022   Level 1     Level 2     Level 3     Carrying
Value
 
Liabilities                        
Derivative Liability - Warrants   $ -     $ -     $ 1,185,374     $ 1,185,374  
Derivative Liability – Conversion feature     -       -       45,984       45,984  
Total Liabilities   $ -     $ -     $ 1,231,358     $ 1,231,358  

 

Long-Lived Assets

 

The Company reviews its long-lived assets for possible impairment at least annually, and more frequently if circumstances warrant. Impairment is determined to exist when estimated amounts recoverable through future cash flows from operations on an undiscounted basis, are less than long-lived assets carrying value. If a long-lived asset is determined to be impaired, it is written down to its estimated fair value to the extent that the carrying amount exceeds the fair value of the long-lived asset. The Company did not recognize any impairment losses on long-lived assets during the year ended December 31, 2022 and the period from inception to December 31, 2021.

 

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Deferred Offering Costs

 

Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. Deferred offering costs consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to the proposed public offering. Should the proposed public offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be expensed.

 

As at December 31, 2022 and 2021, deferred offering costs consisted of the following:

 

    2022     2021  
General and administrative expenses   $ 70,000     $ -  
Share-based equity compensation     3,511,000         -  
    $ 3,581,000     $ -  

 

Advertising

 

The Company expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2022 and the period from inception to December 31, 2021 were $319,474 and $280,022, respectively.

 

Share-Based Compensation

 

The Company accounts for employee and non-employee stock awards under ASC 718, Compensation - Stock Compensation, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to nonemployees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Equity grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Further information regarding share-based compensation can be found in Notes 7 and 8.

 

Income Taxes

 

The Company accounts for income tax under the provisions of ASC 740, Income Taxes. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. At December 31, 2022 and 2021, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The Company’s tax years subject to examination by tax authorities generally remain open for three (3) years from the date of filing.

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Deferred tax assets are required to be reduced by a valuation allowance to the extent that, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized.

 

Leases

 

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets. The Company did not utilize any financing that required recognition of finance leases during the year ended December 31, 2022 and the period from inception to December 31, 2021.

 

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ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

Leases with a lease term of 12 months or less at inception are not recorded on our balance sheet and are expensed on a straight-line basis over the lease term in our statement of operations. We have elected not to separate lease and non-lease components for any class of underlying asset.

 

The Company determines the present value of minimum future lease payments for operating leases by estimating a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments and a similar economic environment (the “incremental borrowing rate” or “IBR”).

 

The Company determines the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the seven-year mortgage interest rate.

 

Convertible Notes

 

The Company bifurcates conversion options from their host instruments and accounts for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For our derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.

 

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Warrants

 

The Company account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants was estimated using a Black-Scholes pricing model.

 

Loss on Investments

 

During the period from inception to December 31, 2021, the Company invested $1,176,875 in Vocodia International Sales Agency (“VISA”), an international sales company dedicated to providing sales lead from overseas sources for a 16.67% ownership interest. The transaction was accounted for using the equity method. As of December 31, 2021, VISA had ceased operations, and accordingly, the Company recorded a loss on investment of $1,176,875 for the period ended December 31, 2021.

 

Net Income (Loss) Per Share of Common Stock

 

Net loss per share of common stock requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, warrants unless the result would be antidilutive.

 

The dilutive effect of restricted stock units subject to vesting and other share-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented.

 

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For the year ended December 31, 2022 and the period from inception to December 31, 2021, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

 

    2022     2021  
Warrants     361,500       210,250  
Convertible notes payable     580,094       -  

 

Segments

 

The Company operates as a single operating segment, being a provider of conversational artificial intelligence technology. The Company’s chief operating decision maker, its Chief Executive Officer, reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating financial performance. The Company’s primary operations are in the United States and it has derived substantially all of its revenue from sales to customers in this jurisdiction.

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. ASC 326 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses as well as the credit quality and underwriting standards of a company’s portfolio. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities the Company does not intend to sell or believes that it is more likely than not they will be required to sell. The ASU can be adopted no later than January 1, 2020 for SEC filers and January 1, 2023 for private companies and smaller reporting companies. The Company has not yet adopted this ASU as it qualifies as a smaller reporting company. The adoption of this ASU will not have a material impact on its consolidated financial statements.

 

Recently Adopted Accounting Pronouncements

 

The Company on January 1, 2022, we adopted the provisions of ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity). The modified retrospective adoption of the new accounting principle did not have a material effect on the Company’s financial statements. As a result of the adoption of this new accounting principle, the Company did not have to separate any embedded conversion feature in the Company newly issued convertible debt.

 

The Company on January 1, 2022, we early adopted ASU 2021-04: Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) on a prospective basis. The new standard was issued in April 2021 with one aspect being the intent of standardizing the application of accounting for modification of warrants. The adoption of this ASU did not have material impact on the Company financial statements.

 

The Company on January 1, 2022, we adopted the provisions of ASU 2021-07Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards, which provides private companies the option to elect a practical expedient to determine the current price input of equity-classified share-based awards issued as compensation using the reasonable application of a reasonable valuation method. The characteristics of this method are the same as the characteristics used in the regulations of the U.S. Department of the Treasury related to Section 409A of the U.S. Internal Revenue Code (the Treasury Regulations) to describe the reasonable application of a reasonable valuation method for income tax purposes. The adoption of this ASU did not have material impact on the Company’s financial statements.

 

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Commitments and Contingencies

 

Commercial Matters

 

From time to time, the Company may become subject to threatened and/or asserted claims arising in the ordinary course of business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

 

Issuance of Convertible Notes

 

2022 Convertible Notes

 

From July 8, 2022 through December 31, 2022, the Company issued 2022 Convertible Notes of $2,427,059. The 2022 Convertible Notes bear interest at an annualized rate of 15%, with no interest for the first six months. The 2022 Convertible Notes mature nine (9) months after the original issue date of the 2022 Convertible Notes, whereupon all outstanding principal and accrued interest is due to the holders of the 2022 Convertible Notes.

 

The 2022 Convertible Notes include a conversion feature, whereupon a successful IPO (the “Liquidity Event”), the 2022 Convertible Notes may be payable to the holders by the Company delivering to the holders shares of common stock equal to the payment amount due at the date of the Liquidity Event divided by the conversion price. As defined in the agreement, the conversion price is the product of the offering price per share of common stock paid in a Liquidity Event and a 35% discount.

 

In connection with the issuance of the 2022 Convertible Notes, the Company issued common stock purchase warrants to the holders of the 2022 Convertible Notes (the “2022 Warrants”). The 2022 Warrants give the holders the right, but not the obligation, to purchase shares of common stock of the Company obtained by dividing 50% of the original principal amount of the 2022 Convertible Notes by the offering price per share of common stock paid in a Liquidity Event. The exercise price of the 2022 Warrants are equal to the product of the conversion price of the 2022 Convertible Notes and 120%. The 2022 Warrants expire five (5) years from the consummation of the first Liquidity Event.

 

The conversion feature of the 2022 Convertible Notes and 2022 Warrants have been accounted for as a derivative liability, in accordance with ASC 815.

 

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2023 Notes

 

During the nine months ended September 30, 2023, the Company issued 2023 Convertible Notes of approximately $941,177. The 2023 Convertible Notes bear interest at an annualized rate of 15%, with no interest for the first six months. The 2023 Convertible Notes mature nine months after the original issue date of the 2023 Convertible Notes, whereupon all outstanding principal and accrued interest is due to the holders of the notes.

 

The 2023 Convertible Notes include a conversion feature, whereupon a successful initial public offering (the “Liquidity Event”), the 2023 Convertible Notes may be payable to the holders by the Company delivering to the holders shares of common stock equal to the payment amount due at the date of the Liquidity Event divided by the conversion price. As defined in the 2023 Convertible Notes, the conversion price is the product of the offering price per share of common stock paid in a Liquidity Event and a 35% discount.

 

In connection with the issuance of the 2023 Convertible Notes, the Company issued common stock purchase warrants to the holders of the 2023 Convertible Notes (the “2023 Warrants”). The 2023 Warrants give the holders the right, but not the obligation, to purchase shares of common stock of the Company obtained by dividing 50% of the original principal amount of the 2023 Convertible Notes by the offering price per share of common stock paid in a Liquidity Event. The exercise price of the 2023Warrants is equal to the product of the conversion price of the 2023 Convertible Notes and 120%. The 2023 Warrants expire five (5) years from the consummation of the first Liquidity Event.

 

The conversion feature of the 2023 Convertible Notes and 2023 Warrants have been accounted for as a derivative liability, in accordance with ASC 815.

 

For the nine months ended September 30, 2023, none of the 2023 Convertible Notes have been converted and no warrants have been exercised.

 

2023 Convertible Notes, net consisted of the following:

 

    Maturities
(calendar year)
    Stated
Interest
Rate
    Effective
Interest
Rate
    September 30,
2023
    December 31,
2022
 
August 2022 issuances   2023       20 %     195 %   $ 614,118     $ 511,765  
September 2022 issuances   2023       15%-20 %     201 %     1,598,824       1,332,353  
November 2022 issuances   2023       15 %     212 %     423,529       352,941  
December 2022 issuances   2023       15 %     155 %     276,000       230,000  
April 2023 issuances   2024       15 %     215 %     588,235       -  
May 2023 issuances   2024       15 %     172 %     58,824       -  
June 2023 issuances   2024       15 %     170 %     294,118       -  
Total face value                           3,853,648       2,427,059  
Unamortized debt discount and issuance costs                           (436,078 )     (1,410,677 )
Total convertible notes                           3,417,570       1,016,382  
Current portion of convertible notes                           (3,417,570 )     (1,016,382 )
Long-term convertible notes                         $ -     $ -  

 

The 2022 Convertible Notes issued in August through December 2022, totaling $2,427,059, are currently in default. The Company recorded a default penalty of $485,412, for the nine months ended September 30, 2023.

 

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During the nine months ended September 30, 2023 and 2022, the Company recorded interest expense of $2,365,004 and $60,096, respectively, which included amortization of debt discount of $1,671,003 and $60,096, respectively, default penalty of $485,412 and $0, respectively and accrued interest of $208,589 and $0, respectively. As of September 30, 2023 and December 31, 2022, accrued interest was $208,589 and $0, respectively.

 

As of January 23, 2024, the Company has entered into the Note Extension with the holders of the 2022 Convertible Notes and the 2023 Convertible Notes to extend the maturity dates of each of the 2022 Convertible Notes and the 2023 Convertible Notes to February 14, 2024, in exchange for the Increased Conversion Shares. Subsequently, the Company and certain holders of the Investors Warrants have mutually agreed that such holders would receive Series C Warrants in this offering in lieu of the Investors’ Warrants, which would be cancelled. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants will not be registered with the SEC under the Securities Act and will not be listed on any stock exchange.

 

The Series B Preferred Stock

 

During the nine months ended September 30, 2023, the Company issued 905 shares of Series B Preferred Stock. The Series B Preferred Stock shall be subordinated to all Company debt, junior to any senior equity securities of the Company and pari passu with the common stock. The shares of the Series B Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or as provided by applicable law.

 

Each share of the Series B Preferred Stock will automatically convert upon a liquidity event into shares of the Company’s common stock at a conversion price equal to the quotient of the total dollar amount invested in the Series B Preferred Stock divided by the actual initial public offering price per Unit multiplied by 65%.

 

As of the date of this prospectus, none of the Series B Preferred Stock has been converted. We expect that all Series B Preferred Stock will be converted into common stock at the closing of this offering.

 

Date of Management’s Review

 

Management has evaluated events and transactions occurring subsequent to the date of the consolidated financial statements for matters requiring recognition or disclosure in the consolidated financial statements. The accompanying consolidated financial statements consider events through the dates the consolidated financial statements were available to be issued.

 

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BUSINESS

 

Company Overview

 

Vocodia Holdings Corp (“VHC”) was incorporated in the State of Wyoming on April 27, 2021 and is a conversational AI technology provider. Our technology is designed to drive better sales and services for its customers. Clients turn to us for their product and service needs.

 

Business Summary

 

We are an AI software company that build practical AI functions and makes them easily obtainable for businesses on cloud-based platform solutions at low costs and scalable to multiagent vast enterprise solutions.

 

Our operations include three wholly owned subsidiaries: (1) Vocodia FL, LLC, which was incorporated in the State of Florida on June 2, 2021 and manages all of VHC’s human resources and payroll functions, (2) Vocodia JV, LLC, which was incorporated in the State of Delaware on October 7, 2021 and was formed with the intention to conduct any and all joint ventures or acquisitions for VHC, which do not exist as of the date of this prospectus, and (3) CFM, which was incorporated in the State of Florida on November 26, 2019 and is an IT services provider. CFM was formerly owned by James Sposato, who is an officer and director of the Company. CFM was wholly acquired by the Company from Mr. Sposato per the Contribution Agreement dated August 1, 2022. CFM was formerly owned by James Sposato, who is an officer and director of the Company. CFM was acquired by the Company from Mr. Sposato per the Contribution Agreement, dated August 1, 2022. In the Contribution Agreement, Mr. Sposato, as Contributor, has contributed, assigned, transferred and delivered to us, the outstanding capital stock of CFM and we have accepted the contributed shares from the Contributor. As full consideration for the Contribution, we have paid the Contributor consideration in the amount of $10.

 

An illustration of our organizational structure is provided below:

 

 

 

We aim to offer corporate clients scalable enterprise AI sales and customer service solutions intended to rapidly increase sales and service, while lowering employment costs.

 

We seek to enhance rapport and relationship building for customers, which is as necessary component to sales. We believe that there is a positive correlation between AI which sounds similar to a human voice over the phone and better customer rapport and customer service benefits. With our advanced AI, we believe that it will be difficult for customers to distinguish between speaking to a human sales representative and to an AI bot. We believe we can increase customer satisfaction and maximize potential service efficiency for its clients. Our goal is to provide quick training and deployment, potentially unlimited scalability, easy integration with existing corporate platforms and other benefits to our customers from AI’s efficiency.

 

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We strive to help our customers manage budgets and perform better than the high costs of existing sales and service personnel.

 

Our Mission

 

We are a conversational AI software developer and provider. Our mission is to maximize value in communications between organizations and their consumer bases from “hello” to “goodbye” - the goal is to be the conversational leader in corporate and organizational, agenda driven communications, to drive convenience, scale, and empowerment, while reducing operational costs and risk.

 

We offer corporate clients scalable enterprise-level AI sales and customer service solutions which allow for AI sales representatives to reduce human labor costs and responsibilities while increasing the reach and efficacy of human-led, purposeful, agenda driven and conversational communications. We deliver our patent pending conversational AI software in the form of Digital Intelligent Sales Agents, which we refer to as DISAs. The DISAs are designed to perform business tasks that require humans to converse with one another effectively. This is due to Vocodia’s belief that the DISAs are built with AI software programmed to sound and feel human, with the goal of providing the best representation for each of our customers’ businesses.

 

Our DISAs have been programmed to provide the marketplace with an alternative to human sales representatives in the function of (1) sales; (2) customer service; (3) supportive agency; (4) intermediary communications; and (5) alerts with automated transfers and queuing. The DISAs are tailored to serve the specific requirements of each of our customers and are delivered via our proprietary platform.

 

We view our DISAs as the total solution for those in need of sales and customer service automation, which provides the marketplace alternative to a role that has primarily been serviced by humans in the sales and customer service departments, in part or in whole, to increase our clients’ revenues and lower costs, providing them with the ability to produce campaigns fast and scale them up or down as necessary.

 

Our software is intended to provide a solution for operational costs and efficiency deficits by improving business automation and reducing the inefficiencies caused by human limitations. Our motto is to “Go Beyond Human”, with AI replacement of human salespeople and customer service representatives. We aim to lower costs associated with sales campaigns that rely on humans and provide scalability of agent quantity, style, mission, and other personalization at varying levels for each organization’s needs.

 

Market Opportunity

 

The AI Market

 

 

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AI Reduces Labor Spending

 

Growth for most businesses means increasing sales and services. However, growth is often limited by available resources, such as customers and employees. Planning, recruiting, training and retaining employees to focus on growth (sales), and retaining such employees (attrition), is typically expensive and costs can be prohibitive. Further, labor costs can be a considerable percentage of overall costs for running the business as they include, without limitation, employee wages, benefits, payroll or other related taxes. There may be no relief for businesses faced with the necessary employment costs of sales agents and customer service personnel.

 

Key Highlights 

 

  Voice Quality: we provide AI with high-level voice quality and seeks to deliver superior service in the marketplace.
     
  Quality Sales: we use the following sales and marketing strategy: Prospects – Qualifies – Closes – Processes Orders – Upsells. In this registration statement, we discuss how we generate more leads and more transfers to clients so they can sell or upsell their new leads and transfers on their products. Our customers can become more efficient by hiring DISA “fronters”, rather than traditional “fronters”. These traditional human “fronters” have served as the driving force in call centers making 150 or so calls daily to qualify potential clients. Once qualified, they then transfer the call to another department of the call center which handles the final transactional element of the sales call. The fronter position is the high turnover, low pay, very hard to hire, part for call centers that are the costliest and least productive. We automate this part of the process using AI to make these calls and AI only has to be trained once. AI never takes vacation, can call 24/7, could cost less than human fronters. Thereby, corporate clients receive the same level of sales expected from their top 85% of employees. We deliver effective, dependable, scalable to the hour, low variance sales and customer service solutions.
     
  Affordability: AI sales agents (also known as AI bots) cost less than one-third of human sales agents without human issues that tend to affect the processes, human resources and bottom line.
     
  Scalability: Our software is cloud-based and Application Programming Interface (“API”)-friendly, which is interoperable with third-party platforms. We offer companies scalable enterprise-level AI sales and customer service solutions which reduce human labor costs and responsibilities while increasing the reach and efficacy of human led, purposeful, agenda driven and conversational communications.
     
  Compliance: DISAs parameters are set by our clients’ needs and uploaded data. These inputs can include, but are not limited to, recordings, scripts and rebuttals supplied by a respective client. We use our clients’ data and trains their respective DISAs to converse with prospective customers, qualify them, and then transfer the call to a “closer” to sell to the customer. The AI/DISA can only say what they are trained and programmed to say. We believe this will lead to higher level of compliance, due to impromptu human error not being a factor for our DISAs.
     
  Speedy Training: The AI can be trained in 3 days with: recordings of existing sales calls; and sales script for baseline and target goals. AI bots also continue to learn on the job from call interactions, thus machine learning progressively improves over time.

 

Our Competitive Advantages

 

We have created software that is intended to replicate the functions of human sales representatives, such as calling prospects by telephone, announcing the purpose of a call and reason for the call, and identifying interest in a conversational manner. The AI/platform can be programmed for each client to provide scalable solutions which can reduce sales inefficiencies and improve customer service results. We commoditize and standardize our AI solution to improve traditional sales and customer service support operations in order to meet our clients’ sales and service goals.

 

Our proprietary software allows us to adjust our approach to the market, to either offer sales or customer service as a call center at competitive rates. On an hour-to-hour basis we can replace human sales and customer service agents in a cost-effective manner.

 

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Market rates for sales and customer service agents can range from $5.00 dollars per hour to $55 dollars per hour. Our platform allows us to control the cost to market rates of sales and customer service agents because machine accuracy and programming allow for significant reduction of costs across standard corporate departments such as human resources, legal, management, customer relations management software, compliance, commissions, real estate, equipment, supporting software, telecommunications and more.

 

We offer our platform to individual sales agents, customer service agents and small businesses, providing enterprise-level agent services for market tiers of all sizes and scope. Our software allows small, single-owner businesses the equivalent sales and service platform used by enterprise-level clients. We believe that the platform can equalize the opportunities available for smaller businesses and larger organizations.

 

DISAs

 

 

Additional Opportunities

 

We plan on pursuing opportunities beyond our present goals of delivering sales and customer service software agents. We believe there may be other uses of our conversational AI software and platform, such as in the areas of education, including the areas of philosophy, and religion. In the long run, we envision a world in which businesses and consumers have conversational AIs, such as our DISAs, performing the tasks of humans-all the while-maximizing efficiencies in many fields and improving timing, quality, budget, and convenience, using automated tools. In short, Vocodia aims to make the world a better place by using our proprietary AI to improve current processes.

 

Our Strategy

 

Technology

  

We believe that hawse have built, and will continue to build, AI conversational systems that sound virtually the same as humans. Proprietary software and systems have been developed in-house from scratch with streamlined integration and a growing number of CRMs and platforms all over the world. Our software use Artificial Intelligence, Augmented Intelligence, Natural Language Processing and Machine Learning to provide a robust, continuously learning engine which can perform multiagent functions simultaneously. Our software is cloud-based, permitting easy API integration with most systems and platforms commonly used by businesses today.

 

Products

 

We have developed and released its first software product and platform, which we refer to as “DISA” which is a humanized conversational AI technology DISA sales agent that can complete each stage of the conversational aspect of the sales process, business-to-business (“B2B”) and business-to-consumer (“B2C”).

 

Our prospects for direct software sales are any enterprise clients who are in the phone and call center markets. The initial sales targets were call centers who needed to replace poor performing staff in the pre-Covid-19 era. Now, our sales targets have shifted to filling empty seats in the call centers. Our technology consists of a virtual agent, the DISA. In the current marketplace, we consider any corporate client with a 50-seat call center at a telephony location a potential sales client. These potential clients span many industry verticals, including but not limited to, health, solar, employee retention credit, insurance, recruiting and real estate, automotive, cruise lines and hospitality and lodging.

 

Our AI sales agents not only sell and serve prospects and customers, but also gather and report robust intelligence from customers and the marketplace. Vocodia’s DISAs are programmed to instantly answer customer service calls and to upsell and provide personalized customer care.

 

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Development Strategy

 

We plan three phases of development to become the largest and most profitable AI service provider, globally, in the next five years:

 

  Integrate AI sales agents and customer service offerings directly into existing enterprises and then via CRM applications;
     
  Increase sales of AI-assisted workflow to more enterprises in a variety of functions and industries (e.g., food ordering, administration, accounting, bookkeeping and human resources). Grow revenue streams, including based upon market pricing where our DISAs can perform at advantageous margins such as notable efficiencies or less operational costs to achieve the same function to the satisfaction of the end customer (acquisitions may become a significant part of our growth strategy, but at this time we have not identified any specific candidates that meet our objectives); and
     
  Integrate personal AI assistants to individuals for overall life assistance, integrated with existing sales and other AI bots, to serve members of the community.

 

Acquisition Strategy

 

Our strategy includes seeking to selectively pursue acquisitions, including companies with revenue streams where our DISAs can perform at advantageous margins such as noticeable efficiency or less operational costs to achieve the same function. We will concentrate on several important priorities in evaluating potential acquisition candidates, including the key considerations and objectives we hope to achieve, which are listed below:

 

  acquiring beneficial technology or use;
     
  accelerating market share;
     
  increasing revenue;
     
  enhancing efficiencies in product and service delivery;
     
  identifying and addressing possible threats to our organization;
     
  acquiring access to targeted and specified client base;
     
  reducing client acquisition costs by reducing our demands on resources and time (opportunity costs);
     
  acquiring client bases from companies who have service relationships with consumers and acquisitions of companies with or without offerings of similar services;
     
  reducing our client acquisition costs, preserving going rates of such services, and extending our wrapped services to such client base; and
     
  maintaining our dynamic pricing thereby potentially creating greater value opportunities and allows us to minimize market price arbitrage to maximize profit potential.

 

Management and Operating Strategy

 

Our management is market-receptive: as a new technology company, we seek to continuously identify new markets as well as industries where Vocodia’s services would be beneficial to potential customers. We believe that our technologies offer businesses and consumers significant advantages, but our technology is not yet generally recognized. We remain open to discovering new opportunities to offer our technology solutions.

 

We believe that the Company has an attractive operating model due to the scalability of our AI platform, the recurring nature of our revenue (Software-as-a Service (“SaaS”)) and the potentially high operating margins in our business.

 

Vocodia relies on conversions to generate increased free cash flow. Conversions happen for us when our clients use our services to sell their products/services to their customers. Our operational structure and AI focus allow us to convert enterprise clients in their call center environments (allowing Vocodia to rapidly convert clients in a cost-effective manner).  

 

Given the fixed-cost nature of our technology, DISAs allow us to scale our solutions quickly with low marginal costs. These DISAs can pitch and close, as well as manage full customer service operations, in high data interactive demand-based industries, all while providing a full human conversation experience to human customers. We anticipate offering our customers a contract term of 12 months, with a monthly fee of $1,495 per DISA per month. Additionally, we offer custom setup for a fee to begin building a DISA for a client (i.e., one-time setup fee for each client campaign). We believe that our recurring revenue, combined with our robust sales pipeline and enterprise customer base, will continue to contribute to our long-term growth and strong operating margins, giving us flexibility to allocate capital for our continued success.

 

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Growth Strategy

 

We believe that the Company is well positioned for continued growth across the various markets in the call center space. Our strategy for achieving growth includes the following:

 

Build upon our extensive client relationships

 

We have a diversified pipeline. Current clients include health insurance providers, health insurance recruiting new agents, employee retention credits, solar, real estate recruitment and real estate new clients. Through the development of our proprietary switch and technical team, we have the ability to scale our DISAs over time. We also intend to scale our client base by strategically adding new sales development personnel and customer service and support team members. We believe that we are in the early stages of penetrating this expanding market with our DISA technology platform.  Key elements of this strategy include:

 

  widely commercializing this new humanized conversational AI platform in the marketplace;
     
  increasing the enterprise client usage by increasing the number of DISAs per client;
     
  adding multi-channel capabilities to our platform in the form of text message, voicemail, social media (such as LinkedIn), etc. to increase connection rates; and
     
  acquiring new strategic partners who bring enhanced complimentary technology and revenue to help us increase market share.

 

We are in formal negotiations with SEDENA - Secretaría de la Defensa Nacional (The National Defense Department of Mexico) to provide services of AI driven information and emergency services. We anticipate initiation of services, pricing, and finalization by the first quarter of 2024. We have initiated a Spanish library creation of SEDENA’s AI conversation engine to fulfill this potential arrangement. We believe that the launch of our services with SEDENA will exemplify case use of citizen warnings, alerts and intelligence gathering for other government agencies and municipalities. The negotiations with SEDENA are ongoing and we cannot assure you that we will be able to reach definitive agreement.

  

We have also recently completed the approved build-out of a sales DISA for Vertical Merchant Solutions (“VMS”), a large merchant services credit card processing provider. VMS is a pre-release client under agency capacity and is preparing to expand its operations with our technology in 2024. VMS has indicated interest in exclusive software licensing for the merchant services industry.

 

Continue to innovate

 

We believe a significant opportunity exists to enhance our technology platform and analytics using our vast database. We intend to expand our technology services offerings to capitalize on the evolving call center and customer service environment. Our investments in human capital, technology and services capabilities position us to continue to pursue rapid innovation. Examples of our recent innovations include upgrading our own proprietary switch. Our platform depends on phone switch capability (generally voice over internet protocol switches) to generate the actual connection from AI to the customer on the outside. Thus, we are dependent on outside telecom switches and infrastructure to manage the speed of our connection pace. This dynamic creates operational risk, due to the reliance of each switch provider’s technology and infrastructure limits. The bulk of our challenges come from switch uncertainty. Therefore, our goal is to improve our own company-controlled switch, which is critical to our economic health, growth and can facilitate easier delivery of services provided in each software sale. We believe this development would provide us with switch independence, allowing us to obtain more control, efficiency and certainty of delivery while lowering internal costs and managing traffic to external, non-company managed switches. The benefits of building our own switch allows us to scale faster in: the quantity of software licenses; variety of industries and verticals served; and the independent scale of service utilized by each individual software licensee (end user); and quantity of connections made by the hour.

 

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The Mega Switch

 

We have achieved a new milestone. Our telephonic switch, connecting our conversational AI to the world via telephone, can now manage and connect a single DISA to 20,000 simultaneous unique telephone conversations (unique customers), or Clusters.

 

We can add new Clusters in 4 to 5 minutes, and to date, we have not identified a limit of Clusters managing simultaneous conversations. Using VOIP and our proprietary switch, customers can dial in on 20,000 lines and be answered by our AI representatives, as well as dial out and initiate full sales and customer service functions. The advantage of this technology is that organizations may now manage surges of interest, customer service, or emergencies, without backlog or hold times.

 

We believe this scale of ‘telephone switch clusters’ is a unique service in the world, providing benefit to organizations in unanticipated surges of customer services, sales and information exchange demand.

 

Expand portfolio through strategic acquisitions

 

We have developed an internal capability to source, evaluate and integrate acquisitions that have created value for our stockholders. We plan to target strategic acquisitions subsequent to the closing of this initial public offering, but we have not currently entered into any agreements for the acquisition of significant assets, businesses or companies. While there is no guarantee that any acquisition will be completed, successful acquisitions may bring a collection of complimentary technology and existing revenue to us.  We also plan to continue to pursue strategic acquisitions to grow our platform and enhance our ability to provide more services to our clients. We also expect to seek favorable commercial opportunities, primarily in the areas of technological platforms, data suppliers and consulting services providers.

 

Our Organizational Structure

 

As of the date of this prospectus, we employ 13 personnel: 5 full-time employees, 4 part-time employees and 4 contractors in connection with its business operations. Our organizational structure currently consists of four executive officers (the Chief Executive Officer, the Chief Financial Officer, and Chief Technology Officer), we have four personnel in operations who work directly with the Chief Executive Officer, a software engineer and database engineer who work directly with the Chief Technology Officer, and a bookkeeper and part-time advisor in the finance and accounting department. The current structure of the Company is illustrated below.

 

Reverse Stock Split

 

A 1-for-20 Reverse Stock Split of our common stock became effective on January 27, 2023. Pursuant to the Reverse Stock Split, every twenty (20) shares of common stock issued and outstanding upon the effectiveness of the Reverse Stock Split was combined and converted into one (1) share of common stock. No fractional shares were issued in connection with the Reverse Stock Split but was rounded up to the nearest whole number. The Reverse Stock Split had no effect on the authorized amount or par value of the common stock, preferred stock, or the currently issued and outstanding series of preferred stock and presently issued and outstanding preferred stock. 

 

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Competition

 

 

We operate in a competitive market with many competitors. The artificial intelligence and customer service market opportunity is large, and many companies compete in these sectors.

 

We are in the humanized conversational AI market. We are specifically in the call center market, changing the way call centers do business. We help fill the empty seats in call centers.

 

We are unique in the AI sector in that it has client service systems which allow for quicker delivery than competitors of partial or full replacement humans in conversation-dependent job functions. We use our proprietary augmented and AI software to match, duplicate or reimagine specific conversation-dependent job functions. We create a unique system of individual agents for each customer. We also have a proprietary deployment platform which allows for agenda-driven conversations to be connected from ‘computer’ to humans over telephonic networks. Further, each conversation is recorded and timestamped, creating a deliverable recording and transcript of each exchange between computer and human client. Our greatest differentiator is the ability to scale up or down the quantity of human equivalent agents to meet client demands. Our platform permits speedy delivery, cost effective alternatives to traditional sales, marketing and market intelligence. We use agenda-driven, consumer-targeted engagement campaigns. We believe that our software and platform provides significant benefits to call centers, both commercial exchange services and independent internal call centers, regardless of their size.

 

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We currently offer conversational software which initiates and manages communications. We provide DISAs, our patent pending AI technology, a proprietary database, proprietary switch, dialer and STT/TTS (speech to text/text to speech). While we rely on a third-party to provide STT/TTS capability, we use it as a crucial element of our service and it has become a part of our proprietary package. To our knowledge, no other competitor provides this solution. We currently have one outstanding patent application with the U.S. Patent and Trademark Office on our technology and processes.

 

There are many potential competitors and new entrants may choose to enter the market at any time. Our goal is to get to market first with our total end-to-end solution and to gain a leading position in its sector.

 

 

Our conversational AI software is a ready-to-market software-as-a-service model, requiring nothing more than permission, leads and script to deliver a full human-level automated sales agent, conducting all actions necessary to close sales with consumers, stands completely apart from all competition, as the service and function are turn-key and immediate.

 

Many of the competitors shown in graph 2 are from companies in the conversational AI space which are focused more on environment-level service providers, such as Microsoft Azure. Further, companies such as Five9 and 8x8 are agent service providers in terms of assisting human dependent services by providing VOIP and wrapped communications tools to clients serving customers.

 

Additional indications that many companies placed in the competitor class are not actually so as company focus is the greatest differentiator, leaning market share potential in our favor. Many companies in our field of competition are more suited to be 1) resellers, direct and white label of our DISAs; 2) our acquisition candidates, or; 3) strategic partners in market consumption. Many of the companies listed in this competitive analysis have been or are in discussion with us to cooperate in at least one of the capacities listed, but as of the date of this prospectus there are no plans to cooperate in any capacity with any of our competitors.

 

Intellectual Property

 

We regard some aspects of our internal operations, software, and documentation as proprietary. We rely primarily on a combination of contract and trade secret laws to protect our proprietary information. We believe, because of the rapid pace of technological change in the computer software industry, trade secret and copyright protections are less significant than factors such as the knowledge, ability, and experience of our employees, frequent software product enhancements, and the timeliness and quality of our support services. The source code for our proprietary software is protected as a trade secret. We enter into confidentiality or license agreements with our employees, consultants, and clients, and control access to and distribution of our software, documentation, and other proprietary information. We cannot guarantee that these protections will be adequate or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology.

 

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We do not believe our software products or other proprietary rights infringe on the property rights of third parties. However, we cannot guarantee that third parties will not assert infringement claims against us with respect to current or future software products or that any such assertion may not require us to enter into royalty arrangements or result in costly litigation.

 

Our systems for transitioning telephony-based conversational sales and servicing interactions to and from an artificial intelligence engine, with decision processing, recording, and distribution completing a listen and response cycle in under 10 milliseconds.

 

Our system permits dynamic conversational exchange from a human (outside) through telephony (any, outside) to and from the system which controls the machine side of a conversation. Beginning with system telephony, operated by proprietary code (webhooks and API) for exchange of transmission between system telephony (middleware) and outside telephony network (existing outside infrastructure). The process inside the Vocodia system permitting artificial intelligence conversation is processed by an artificial intelligence engine (DISA) serving the function of multiple processes transacting in milliseconds to produce the machine-side conversation function. These processes include initiating made or received calls and other text type communications, connecting calls and other text type communications, listening to calls, listening, receiving voice transmission and text, driven by an AI engine (proprietary code), telephony switch driven by proprietary code, receiving voice transmission from outside consumer (human) (proprietary code), determination of intent (proprietary code), accessing intent libraries for most appropriate response (NLP. Proprietary code), processing response via neural voice or recording (proprietary code), and delivery of speech via system (proprietary code) to middleware and voice emission over telephony (proprietary code). Further, we utilize sent to speech so text engine (non-proprietary) and CDR updater for continuation of conversation and reporting of all statements on voice transmission or text in text based transmission.

 

Assignment of Certain Intellectual Property to the Company

 

On August 1, 2022, Mr. Podolak and Mr. Sposato, each an officer and director of the Company, assigned to the Company (the “Parties”) significant intellectual property pursuant to a Bill of Sale and Assignment entered into by the Parties (“Bill of Sale and Assignment”). The consideration for the assignment was 300,000 shares of the Company’s common stock issued on January 5, 2023. Mr. Podolak and Mr. Sposato each received 150,000 shares, respectively. The intellectual property consists of various systems, software and other core technology used in our business and operations.

 

Government Regulation

 

We are subject to a variety of domestic and foreign laws and regulations in the United States and abroad involving matters that are important to (or may otherwise impact) our various websites, such as broadband internet access, online commerce, privacy and data security, advertising, intermediary liability, consumer protection, taxation, worker classification and securities compliance. These domestic and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are continually evolving and can be subject to significant change. As a result, the application, interpretation and enforcement of these laws and regulations (and any amended, proposed or new laws and regulations) are often uncertain, particularly in the Internet industry, and may vary from jurisdiction to jurisdiction and over time, which could result in conflicts with the current policies and practices of our websites.

 

Because we conduct substantially all of our business on the Internet, we are particularly sensitive to laws and regulations that could adversely impact the popularity or growth in use of the Internet and/or online products and services generally, restrict or otherwise unfavorably impact whether or how we may provide our products and services, regulate the practices of third parties upon which we rely to provide our products and services and/or undermine an open and neutrally administered Internet access. For example, in December 2017, the U.S. Federal Communications Commission adopted the Restoring Internet Freedom Order. This order, which was released in January 2018 and took effect in June 2018, reversed net neutrality protections in the United States that had been in place since 2015, including the repeal of specific rules against blocking, throttling or “paid prioritization” of content or services by Internet service providers. Also, Section 230 of the Communications Decency Act of 1996 (“Section 230”), which generally provides immunity for website publishers from liability for third party content appearing on their platforms and the good faith removal of third party content from their platforms that they may deem obscene or offensive (even if constitutionally protected speech), since its adoption has been (and continues to be) subject to a number of challenges. The immunities conferred by Section 230 could also be narrowed or eliminated through amendment, regulatory action or judicial interpretation. In 2018, the U.S. Congress amended Section 230 to remove certain immunities and most recently, in 2020, various members of the U.S. Congress introduced bills to further limit Section 230, and a petition was filed by a Department of Commerce entity with the Federal Communications Commission to commence a rulemaking to further limit Section 230. Any future adverse changes to Section 230 could result in additional compliance costs for us and/or exposure for additional liabilities.

 

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Because we receive, store and use a substantial amount of information received from or generated by our users and subscribers, we are also impacted by laws and regulations governing privacy, the storage, sharing, use, processing, disclosure and protection of personal data and data security, primarily in the case of our operations in the United States and the European Union and the handling of personal data of users located in the United States and the European Union. Recent examples of comprehensive regulatory initiatives in the area of privacy and data security include a comprehensive European Union privacy and data protection reform, the GDPR, which became effective in May 2018. The GDPR, which applies to certain companies that are organized in the European Union or otherwise provide services to (or monitor) consumers who reside in the European Union, imposes significant penalties (monetary and otherwise) for non-compliance, as well as provides a private right of action for individual claimants. The GDPR will continue to be interpreted by European Union data protection regulators, which may require us to make changes to our business practices and could generate additional risks and liabilities. The European Union is also considering an update to its Privacy and Electronic Communications Directive to impose stricter rules regarding the use of cookies.

 

In addition, in October 2015, the European Court of Justice (“ECJ”) invalidated the U.S.-EU Safe Harbor framework that had been in place since 2000 for the transfer of personal data from the European Economic Area (the “EEA”) to the United States, and on July 16, 2020, the ECJ invalidated the EU-U.S. Privacy Shield as an adequate safeguard when transferring personal data from the EEA to the U.S. These regulations continue to evolve and may ultimately require us to devote resources towards compliance and/or make changes to our business practices to ensure compliance, all of which could be costly. Also, the exit from the European Union by the United Kingdom could result in the application of new and conflicting data privacy and protection laws and standards to our operations in the United Kingdom and our handling of personal data of users located in the United Kingdom. At the same time, many jurisdictions abroad in which we do business have already or are currently considering adopting privacy and data protection laws and regulations.

 

Moreover, while multiple legislative proposals concerning privacy and the protection of user information are being considered by the U.S. Congress and various U.S. state legislatures, certain U.S. state legislatures have already enacted privacy legislation, one of the strictest and most comprehensive of which is the California Consumer Privacy Act of 2018, which became effective on January 1, 2020 (the “CCPA”). The CCPA provides new data privacy rights for California consumers, and restricts the ability of certain of our websites to use personal California user and subscriber information in connection with their various products, services and operations. The CCPA also provides consumers with a private right of action for security breaches, as well as provides for statutory damages. In addition, on November 3, 2020, California voters approved Proposition 24, which amends certain provisions of the CCPA and becomes effects January 1, 2023, will further restrict the ability of certain of our websites to use personal California user and subscriber information in connection with their various products, services and operations and/or impose additional operational requirements on such websites. Lastly, the U.S. Federal Trade Commission has also increased its focus on privacy and data security practices, as evidenced by the first-of-its-kind, $5 billion dollar fine against a social media platform for privacy violations in 2019. As a result, we could be subject to various private and governmental claims and actions in this area.

 

As a provider of certain subscription-based products and services, we are also impacted by laws or regulations affecting whether and how our websites may periodically charge users for membership or subscription renewals. For example, the European Union Payment Services Directive, which became effective in 2018, could impact the ability of certain of our websites to process auto-renewal payments for, as well as offer promotional or differentiated pricing to, users who reside in the European Union. Similar laws exist in the U.S., including the federal Restore Online Shoppers Confidence Act and various U.S. state laws, and legislative and regulatory enactments or amendments are under consideration in a number of U.S. states.

 

We are also sensitive to the adoption of new tax laws. The European Commission and several European countries have recently adopted (or intend to adopt) proposals that would change various aspects of the current tax framework under which certain of our European websites are taxed, including proposals to change or impose new types of non-income taxes (including taxes based on a percentage of revenue). 

 

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We are also subject to laws, rules and regulations governing the marketing and advertising activities of our various websites conducted by or through telephone, email, mobile digital devices and the Internet, including the Telephone Consumer Protection Act of 1991, the Telemarketing Sales Rule, the CAN-SPAM act and similar state laws, rules and regulations, as well as local laws, rules and regulations and relevant agency guidelines governing background screening.

 

Further, all of our websites could subject to the Americans with Disabilities Act (the “ADA”). The ADA does not explicitly address online compliance. With no specific coverage under the law, it usually falls to the courts to determine how ADA standards apply to websites-or whether they do at all.

  

Non-Government Regulation

 

From a non-Governmental standpoint, we also need to comply with policies and terms of service on various platforms, including but not limited to: Facebook, Facebook Ads, Instagram, Pinterest, Google Ads, Google Search, Twitter, TikTok, and YouTube.

 

Properties and Facilities

 

We are the lessee in a 5-year and 4-month commercial lease agreement that commenced on August 1, 2021 and will expire on November 20, 2026, unless otherwise terminated by Vocodia or the lessor. The leased property is office space located at 6401 Congress Avenue, Suite #160, Boca Raton, Florida. The lessor to the agreement is Catexor Limited Partnership-I, a Florida limited partnership.

  

Legal Proceedings

 

From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business.

 

The Company received a letter dated August 28, 2023, from an attorney hired on behalf of a former employee of the Company. This former employee offered her resignation, which was accepted on July 12, 2023. This letter contains allegations that the former employee was sexually harassed and terminated wrongfully by the Company. The Company is of the opinion that allegations in this letter lack merit. The former employee recently filed a charge with the Equal Employment Opportunity Commission and the Fair Employment Practices Agencies (EEOC/FEPA) alleging discrimination based on sex and retaliation, among other specific allegations including disparate impact/intent and/or treatment and discrimination/harassment/retaliation based on being a female. She also claims she was subjected to a sexually hostile environment. The Company has reported this matter to its insurance carrier and outside counsel has been engaged. The Company denies liability and intends to continue to vigorously defend any action, although the probability of a favorable or unfavorable outcome is difficult to estimate as of this date. The result or impact of such allegations are uncertain, including whether or not they could result in damages and/or awards of attorneys’ fees or expenses.

 

Employees

 

As of the date of this prospectus, we employ 13 personnel: 5 full time employees, 4 part time employees, and 4 contractors in connection with its business operations.

 

On October 25, 2023, Richard Shuster resigned as Chief Financial Officer of the Company. Mr. Shuster’s resignation as Chief Financial Officer was not as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices, including accounting principles and practices.

 

On November 2, 2023, the Company entered into a consulting agreement with EverAsia Financial Group, Inc, as amended, whereby its President, Scott Silverman, has agreed to serve as the Company’s Chief Financial Officer, effective November 1, 2023.

 

Corporate History and Information

 

We were incorporated under the laws of the State of Wyoming on April 27, 2021.

 

Our principal executive office is located at 6401 Congress Avenue, Suite #160 Boca Raton, FL 33487. Our telephone number is (561) 484-5234. Our website address is https://vocodia.com/ and our general email is sales@vocodia.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our common stock) contained on, or that can be accessed through, our website as part of this prospectus.

 

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MANAGEMENT

 

The following table and biographical summaries set forth information, including principal occupation and business experience, about our executive officers and directors as of the date of this prospectus:

 

Name   Age   Positions
Brian Podolak   50   Chief Executive Officer and Director
James Sposato   56   Chief Technology Officer and Director
Scott J. Silverman   54   Chief Financial Officer
Lourdes Felix   55   Independent Director
Randall Miles   67   Independent Director
Ned L. Siegel   71   Independent Director

 

Biographies

 

Brian Podolak, Chief Executive Officer and Director Brian Podolak is the co-founder of the Company and has served as the Chief Executive Officer and as director of the Company since its inception in 2021. An entrepreneur and IT engineer, his career has largely focused on sales and software for businesses globally. Brian Podolak has achieved $70M+ annual revenues in his past businesses, as well as developing enterprise sales, marketing platforms and enterprise call centers for b2b and b2c customers. Prior to founding the Company Brian Podolak served multiple roles at Arise Bioscience, including as Vice President of Sales and Marketing from 2019 to 2020 and Vice President of Sales from 2017 to 2019. Born in Yonkers, New York, Brian Podolak spent over 17 years in Costa Rica, and ran call centers of thousands of agents, handling enterprise clients. It is this experience, that led to his being the leader in humanized conversational AI. During this period, he and James Sposato developed advanced technology, which is the basis for Vocodia today. Brian Podolak holds an engineering degree from ATI, an electronics engineering technical school from which he graduated in 1992. He began his career at Inacom, gaining experience in marketing and sales management in the telecommunications field and call centers.

 

James Sposato, Chief Technology Officer and Director – James Sposato is the co-founder of the Company and has served as the CTO and as a director of the Company since its inception. An expert in software technology development and implementation, James Sposato has a keen understanding of how to create code to solve complex problems where no solution exists. He is responsible for creating and solidifying Vocodia’s software and platforms. James Sposato developed the first software-based UPS manifest system – ShipFast and widely used banking and telecom software with easy operating end-user functionality. Before Vocodia, James Sposato was a Senior Software Developer for Arise BioScience from 2019 to 2021, and prior to that, he was CTO from 2017 to 2019 with X 989. Inc. James Sposato brings strong team building and management skills to develop and implement easily operated SaaS platforms. Born in Hollywood, Florida, James Sposato attended the University of Florida where he majored in Computer Science and Engineering. He began his professional career while still a student, writing assembler code solutions for local cable advertising companies. During this period, ShipFast was created and an entrepreneurial mindset was set in motion. James Sposato has gone on to write software for countless industries, manage many projects that rely on enterprise class solutions built to withstand high volume transactional loads, and built and sold several internet companies involving automated advertising and affiliate marketing and tracking.

 

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Scott Silverman, Chief Financial Officer – Scott Silverman has served as the Chief Financial Officer of the Company since November 2023. Mr. Silverman has over 30 years of business success on national and international levels, with a highly diverse knowledge of financial, legal and operations management; public company management, accounting and SEC regulations. Mr. Silverman specializes in establishing and streamlining back-office policies and procedures and implementing sound financial management and internal controls necessary for enterprise growth and scalability. Mr. Silverman is currently a member of the Board of Directors of Bit Origin, Ltd and a director nominee of Muliang Viagoo Technology, Inc. and Li Bang International Corp, Inc. Mr. Silverman is one of the founders, and serves as President and CEO, of EverAsia Financial Group, which grew into a multi-national corporate financial management and advisory firm serving clients in the United States and Asia, and JJL Capital Management, a private equity firm that focuses its investments in the hospitality, construction, real estate and healthcare sectors. He also serves as the CFO of Healthsnap, Inc. a healthcare Software as a Service (SaaS) platform on the cutting edge of remote patient monitoring and chronic care management. He is also the CFO of Droneify Holdings, Inc., a pre-IPO company that has developed multiple drone-enabled technologies. Additionally, he serves as the CFO of Ludwig Enterprises, a biotech company that develops mRNA genomics technologies and PanGIA Biotech, a biotechnology company that has developed liquid biopsy technologies. Previously, he served as the CFO of Sidus Space, Inc., a publicly traded Space-as-a-Service company in which capacity he oversaw its IPO, and Riverside Miami, LLC, a mixed-use restaurant and entertainment project in Miami, Florida. He has a bachelor’s degree in finance from George Washington University and a Master’s degree in accounting from NOVA Southeastern University.

 

Lourdes Felix, Director Lourdes Felix is a female Hispanic entrepreneur and corporate finance executive with 30 years of combined experience in capital markets, public accounting and in the private sector. She presently serves as Chief Executive Officer, Chief Financial Officer and Director of BioCorRx Inc. (OTCQB: BICX), a leader in addiction treatment solutions and related disorders. She has been with BioCorRx since October 2012. Lourdes is one of the founders and President of BioCorRx Pharmaceuticals Inc., a majority owned subsidiary of BioCorRx Inc. She has been instrumental in capital procurement, completing multi-million dollar equity financing and accomplished in structuring and negotiating transactions and favorable terms with investment banks. Along with other executives of the company, rebranded the Company and restructured and expanded the business model to position it for long term growth in the addiction treatment space and drug development. Extensive experience with clinic operations management. Prior to joining BioCorRx her experience was in the private sector, public accounting including audit and public company experience. She has expertise in finance, accounting, budgeting and internal control principals including GAAP, SEC, and SOX Compliance. Thorough knowledge of federal and state regulations. Successfully managed and produced SEC regulatory filings. She has extensive experience in developing and managing financial operations. Lourdes has provided treasury and cash management functions. Excellent leader with a track record of documented contributions leading to improved financial performance, heightened productivity, and enhanced internal controls. Led corporate relationships with various major accounting firms and attorneys in preparing SEC filings and audited financial statements. Lourdes is very active in the Hispanic community and speaks fluent Spanish. Lourdes holds a Bachelor of Science degree in Accounting from University of Phoenix. She is an MBA candidate at D’Amore-McKim School of Business, Northeastern University.

 

Randall Miles, Director – For over 30 years, Mr. Miles has held senior executive leadership positions in global financial services, fintech and investment banking companies. His extensive investment banking experience advising companies on strategic and financial needs is complimented by leadership of high growth publicly traded and private equity backed companies. Mr. Miles has served as the Managing Partner of SCM Capital Group LLC, a global transaction and strategic advisory firm since January 2000, Vice Chairman of the board of directors of eXp World Holdings, Inc. (NASDAQ: EXPI) since 2016, a board member of RESAAS Services, Inc. (OTCQB: RSASF) (TSX: RSS) since November 2021 and Chairman of the board of Troika Media Group, Inc. (NAASDAQ: TRKA) since July 2022. Mr. Miles holds a Bachelor of Business Administration from University of Washington and FINRA licenses Series 7, 24, 63 and 79.

 

Ambassador Ned L. Siegel, Director – Ambassador Ned L. Siegel is the President of The Siegel Group, a multi-disciplined international business management advisory firm he founded in 1997 in Boca Raton, Florida, specializing in real estate, energy, utilities, infrastructure, financial services, oil and gas and cyber and secure technology. Ambassador Siegel has served since 2013 as Of Counsel to the law firm of Wildes & Weinberg, P.C. From October 2007 until January 2009, he served as the United States Ambassador to the Commonwealth of The Bahamas. Prior to his Ambassadorship, in 2006, he served with Ambassador John R. Bolton at the United Nations in New York, as the Senior Advisor to the U.S. Mission and as the United States Representative to the 61st Session of the United Nations General Assembly. From 2003 to 2007, ambassador Siegel served on the board of Directors of the Overseas Private Investment Corporation (“OPIC”), which was established to help U.S. businesses invest overseas, fostering economic development in new and emerging markets, complementing the private sector in managing the risk associated with foreign direct investment and supporting U.S. foreign policy. Appointed by Governor Jeb Bush, Ambassador Siegel served as a Member of the Board of Directors of Enterprise Florida, Inc. (“EFI”) from 1999-2004. EFI is the state of Florida’s primary organization promoting statewide economic development through its public-private partnership Ambassador Siegel presently serves on the Board of Directors of the following companies: CIM City, U.S. Medical Glove Company, Global Supply Team, Moveo, LLC and the Caribbean Israel Leadership Coalition, Caribbean Israel Venture Services, Inc. He also presently serves on the following Advisory Boards: Usecrypt, Brand Labs International, Elminda Ltd., Findings, and Sol Chip Ltd and Maridose, LLC. Ambassador Siegel received a B.A. from the University of Connecticut in 1973 and a J.D. from the Dickinson School of Law in 1976. In December 2014, he received an honorary degree of Doctor of Business Administration from the University of South Carolina. We believe that Ambassador Siegel’s vast professional experience, education, and professional credentials qualify him to serve as a member of the Company’s Board of Directors, and as an independent member of the Board of Director’s committees.

 

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Director Terms; Qualifications

 

Members of our Board serve until the next annual meeting of stockholders, or until their successors have been duly elected.

 

When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board to satisfy its oversight responsibilities effectively in light of our Company’s business and structure, the Board focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director.

 

Director or Officer Involvement in Certain Legal Proceedings

 

There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries.

 

Directors and Officers Liability Insurance

 

The Company has obtained directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures our Company against losses, which it may incur in indemnifying its officers and directors. In addition, officers and directors also have indemnification rights under applicable laws, and our Company’s articles of incorporation and bylaws. We have also entered into customary separate indemnification agreements with our directors and officers.

 

Family Relationships

 

There are no family relationships between any director, executive officer or person nominated to become a director or executive officer.

 

Director Independence

 

The listing rules of the CBOE require that independent directors must comprise a majority of a listed company’s Board. In addition, the rules of the CBOE require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under the rules of the CBOE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The CBOE listing rules provide that a director cannot be considered independent if:

 

  the director is, or at any time during the past three (3) years was, an employee of the company;

 

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  the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12) consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);
     
  the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s combined gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);
     
  the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3) years, any of the executive officers of the company served on the compensation committee of such other entity; or
     
  the director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during the past three (3) years was a partner or employee of the Company’s outside auditor, and who worked on the company’s audit.

 

Our Board has undertaken a review of the independence of our directors and considered whether any director has a material relationship with it that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, the Board believes that, Lourdes Felix, Randall Miles, and Ned L. Siegel will be “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of the CBOE. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our Company’s capital stock by each non-employee director, and any transactions involving them described in the section captioned “Certain Relationships And Related Transactions” in this prospectus.

 

Board Committees

 

Our Board has formed three standing committees: Audit, Compensation, and Nominating and Corporate Governance. Each of the committees operates pursuant to its charter. The responsibilities of each committee are described in more detail below.

 

The CBOE permits a phase-in period of up to one year for an issuer registering securities in an initial public offering to meet the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee independence requirements. Under the initial public offering phase-in period, only one member of each committee is required to satisfy the heightened independence requirements at the time our registration statement becomes effective, a majority of the members of each committee must satisfy the heightened independence requirements within 90 days following the effectiveness of our registration statement, and all members of each committee must satisfy the heightened independence requirements within one year from the effectiveness of our registration statement.

 

Audit Committee

 

The Audit Committee’s purpose and powers are, to the extent permitted by law, to (a) retain, oversee and terminate, as necessary, the auditors of our Company, (b) oversee our Company’s accounting and financial reporting processes and the audit and preparation of our Company’s financial statements, (c) exercise such other powers and authority as are set forth in the charter of the Audit Committee of the Board, and (d) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board. The Audit Committee also has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.

 

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The Board has affirmatively determined that each member who serves on the Audit Committee meets the additional independence criteria applicable to Audit Committee members under SEC rules and the CBOE listing rules. Our Board has adopted a written charter setting forth the authority and responsibilities of the Audit Committee consistent with the purposes and powers set forth above, which is available on our principal corporate website located at www.vocodia.com concurrently with the consummation of this offering. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our shares of common stock) contained on, or that can be accessed through, our website as part of this prospectus. The Board has affirmatively determined that Lourdes Felix shall serve as chair and each member of the Audit Committee is financially literate, which also includes Randall Miles and Ned L. Siegel. All three members meet the qualifications of an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act. We believe that the functioning of the Audit Committee complies with the applicable requirements of the rules and regulations of the CBOE listing rules and the SEC.

 

Compensation Committee

 

The Compensation Committee’s purpose and powers are, to the extent permitted by law, to (a) review and approve the compensation of the Chief Executive Officer of our Company and such other employees of our Company as are assigned thereto by the Board and to make recommendations to the Board with respect to standards for setting compensation levels, (b) exercise such other powers and authority as are set forth in a charter of the Compensation Committee of the Board, and (c) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board.

 

The Compensation Committee also has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.

 

Our Board has adopted a written charter setting forth the authority and responsibilities of the Compensation Committee consistent with the purposes and powers set forth above, which is available on our principal corporate website at www.vocodia.com concurrently with the consummation of this offering.

 

The Compensation Committee consists of Lourdes Felix, Randall Miles and Ned L. Siegel. Ned L. Siegel serves as chairman of the Compensation Committee. The Board has affirmatively determined that each member of the Compensation Committee meets the independence criteria applicable to Compensation Committee members under SEC rules and the CBOE listing rules. The Company believes that the composition of the Compensation Committee meets the requirements for independence under, and the functioning of such Compensation Committee complies with, any applicable requirements of the rules and regulations of the CBOE listing rules and the SEC.

 

Nominating and Corporate Governance Committee 

 

The Nominating and Corporate Governance Committee’s purpose and powers are, to the extent permitted by law, to: (a) identify potential qualified nominees for director and recommend to the Board for nomination candidates for the Board, (b) develop our Company’s corporate governance guidelines and additional corporate governance policies, (c) exercise such other powers and authority as are set forth in a charter of the Nominating and Corporate Governance Committee of the Board, and (d) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board.

 

The Nominating and Corporate Governance Committee also has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.

 

The Nominating and Corporate Governance Committee consists of Lourdes Felix, Randall Miles and Ned L. Siegel, Randall Miles serves as chairman of the Nominating and Corporate Governance Committee. Our Board has adopted a written charter setting forth the authority and responsibilities of the Nominating and Corporate Governance Committee consistent with the purposes and powers set forth above, which is available on our principal corporate website located at www.vocodia.com concurrently with the consummation of this offering.

 

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The Nominating and Corporate Governance Committee consists of Ned L. Siegel, Lourdes Felix and Randall Miles, Ned L. Siegel serves as chairperson. The Board has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the independent director guidelines of the CBOE listing rules.

 

Compensation Committee Interlocks and Insider Participation

 

None of our Company’s executive officers serves, or in the past has served, as a member of the Board or its compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our Board or its Compensation Committee. None of the members of our Compensation Committee is, or has ever been, an officer or employee of our Company.

 

Code of Conduct

 

Our Board has adopted a new Code of Conduct applicable to our employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of the CBEO. The Code of Conduct is available on our principal corporate website located at www.vocodia.com concurrently with the consummation of this offering. Any substantive amendments or waivers of the Code of Conduct or any similar code(s) subsequently adopted for senior financial officers may be made only by our Board and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the CBEO. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our shares of common stock) contained on, or that can be accessed through, our website as part of this prospectus.

 

Board Leadership Structure and Risk Oversight

 

Our Board has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our Board to understand our risk identification, risk management, and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, cybersecurity, strategic, and reputational risk.

 

Corporate Governance Guidelines

 

Effective upon the completion of this offering, our Board will adopt corporate governance guidelines in accordance with the corporate governance rules of the CBOE, which is available on our principal corporate website located at www.vocodia.com concurrently with the consummation of this offering. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our shares of common stock) contained on, or that can be accessed through, our website as part of this prospectus.

 

Director Compensation

 

During the nine months ended September 30, 2023 and the years ended December 31, 2022 and 2021, we did not compensate our independent directors for their service to our Company.

 

Additionally, our independent directors, which include Lourdes Felix, Randall Miles and Ned L. Siegel, have entered into Board of Directors Agreements by and between the Company and each of the independent directors (the “Board of Director Agreements”), pursuant to which each independent director will be compensated as follows:

 

Lourdes Felix

 

For the year 2024, Lourdes Felix will be compensated in cash in the amount of $44,000. Lourdes Felix will also receive a quarterly fee of an additional $3,750 for her service as audit committee chair. Additionally, Lourdes Felix will receive 20,000 RSUs. The RSUs vest with respect to twenty five percent (25%) of the total number of RSUs (5,000) on the effective date of the registration statement of which this prospectus forms a part (the “Effective Date”), and shall vest twenty-five (25%) thereafter every three (3) month anniversary of the Effective Date, subject to Ms. Felix’s continuous service to the Company through the applicable vesting date.

 

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Randall Miles

 

For the year 2024, Randall Miles will be compensated in the amount of $120,000. Randall Miles will also receive a quarterly fee of an additional $3,000 for his service as compensation committee chair. Additionally, Randall Miles will receive 150,000 RSUs. The RSUs vest with respect to eight point thirty-three percent (8.33%) of the total number of RSUs (12,500) on the Effective Date and shall vest eight point three-three (8.33%) thereafter every three (3) month anniversary of the Effective Date until fully vested on the third (3rd) anniversary of the Effective Date, subject to Mr. Miles’ continuous service to the Company through the applicable vesting date.

 

Ned L. Siegel

 

For the year 2024, Ned L. Siegel will be compensated in the amount of $44,000. Ned L. Siegel will also receive a quarterly fee of an additional $3,000 for his service as nominating and corporate governance committee chair. Additionally, Lourdes Felix will receive 20,000 RSUs. The RSUs vest with respect to twenty five percent (25%) of the total number of RSUs (5,000) on the Effective Date, and shall vest twenty-five (25%) thereafter every three (3) month anniversary of the Effective Date, subject to Mr. Siegel’s continuous service to the Company through the applicable vesting date.

 

Compensation of Non-Employee Directors

 

Compensation for our directors is discretionary and is reviewed from time to time by our Board. Any determinations with respect to Board compensation are made by our Board. As of the date of this prospectus, we have not compensated our non-employee directors for their service to our Company and do not intend to do so upon the consummation of this offering.

 

Controlled Company Status

 

As of the date of this prospectus, our Chief Executive Officer, Mr. Brian Podolak is entitled to vote 35.8%, and our Chief Technology Officer, Mr. James Sposato, is entitled to vote 35.7% of our total shares outstanding. This percentage accounts for all of Mr. Podolak’s and Mr. Sposato’s common stock and Series A Preferred Stock. Initially, holders of Series A Preferred Stock would have the right to vote with 1,000 votes per share on any matters brought before the stockholders of the Company. The CBOE defines a Controlled Company as a company with more than 50% of the voting power for the election of directors held by an individual, a group or another company. Under these rules we are not a Controlled Company. On April 17, 2023, our Board passed a resolution, in accordance with the laws of the State of Wyoming which, when the SEC declares our registration statement effective, shall require the Company to amend the rights of all authorized, issued, outstanding, and forthcoming Series A Preferred Stock, so that the holders of the Series A Preferred Stock have no right to vote on any matters brought before the stockholders of the Company. We have made all necessary filings and certifications with the Secretary of State of the State of Wyoming to effectuate the Board’s resolution.

 

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EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth the compensation paid to, or accrued by, our named executive officers during the periods indicated.

 

Name and Principal Position   Year     Salary
($)(1)
    Stock awards
($)(2)
    Total
($)
 
Brian Podolak,   2023     $ 223,400     $ 0     $ 223,400  
Chief Executive Officer   2022     $ 150,000     $ 0     $ 150,000  
James Sposato,   2023     $ 125,000     $ 0     $ 125,000  
Chief Technology Officer(3)   2022     $ 150,000     $ 0     $ 150,000  
Mark Terrill,    2023     $ 65,625     $ 0     $ 65,625  
Chief Operating Officer(4)   2022     $ 175,000     $ 0     $ 175,000  
Richard Shuster,   2023     $ 135,425     $ 0     $ 135,425  
Former Chief Financial Officer(5)   2022     $ 175,000     $ 0     $ 175,000  
Scott Silverman,
Chief Financial Officer(6)
  2023     $ 40,000     $ 183,600     $ 223,600  

 

(1) Salary amounts shown above are based on accrual of stock-based and annual compensation, where applicable.
(2) The aggregate grant date fair value of the stock award was computed in accordance with FASB ASC Topic 718.
(3) An additional stipend was granted to this executive for a car allowance. However, car allowance stipends granted to each executive did not, individually, exceed $10,000 per annum; thus, such stipends are excluded in the table above.
(4) Mr. Terrill joined Vocodia in 2021 and served as the Company’s Chief Operating Officer until his departure on May 12, 2023.
(5) Mr. Shuster joined Vocodia in December of 2021 and served as the Company’s Chief Financial Officer until his departure on October 31, 2023.
(6) Mr. Silverman joined Vocodia as the Company’s Chief Financial Officer in November 2023.

 

For the nine months ended September 30, 2023, our Chief Executive Officer (Brian Podolak), our Chief Technology Officer (James Sposato), our Chief Operating Officer (Mark Terrill), our former Chief Financial Officer (Richard Shuster) and our Chief Financial Officer (Scott Silverman) received $223,500, $125,000, $65,625, $110,423 and 223,600, respectively.

 

2022 Equity Incentive Plan

 

Our 2022 Equity Incentive Plan (the “Plan”) governs equity awards to our employees, directors, consultants and other eligible participants. The Plan reserves a total of 2,840,000 shares of common stock (giving effect to our reverse stock split at a ratio of 1-for-1,000, which was effective on October 21, 2022, but not the proposed stock split for incentive awards). The maximum number of shares that are subject to awards under the Plan is subject to an annual increase on the first day of each fiscal year, in an amount equal to 8,500,000 or a number of shares of our common stock equal to 4% of the prior year’s maximum number. Incentive awards generally may be issued to officers, key employees, consultants, and directors and include the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units.

 

Employment Agreements

 

On January 1, 2022, the Company and Mr. Terrill entered into an Executive Employment Agreement, which, among other things, employs the Executive as Chief Operations Officer of the Company. Mr. Terrill shall be paid an initial salary of $175,000, plus an annual bonus in the amount of one percent (1%) of the net profits after tax of the Company.

 

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On January 2, 2023, the Company and Mr. Podolak entered into an Executive Employment Agreement, which, among other things, employs the Mr. Podolak as Chief Executive Officer of the Company. Mr. Podolak shall be paid an initial salary of $365,000, plus an annual bonus of 50% of the base salary for such fiscal year and shall be payable to the extend the applicable performance goals are achieved. Further, on the Effective Date, Mr. Podolak shall be awarded 150,000 shares of the Company’s common stock issued upon execution of this Agreement. In addition, Mr. Podolak will be awarded an additional 200,000 stock options with an exercise price equal to the price of the Company’s common stock as set forth in the final registration statement for the offering, vesting biannually (every 6 months) over twenty-four (24) months with the first installment vesting six (6) months after the closing of the Company’s currently contemplated firm commitment underwritten public offering. Additionally, Mr. Podolak shall be awarded certain equity awards based on achieving the following milestones:

 

  100,000 shares of Company common stock upon the closing of each acquisition post the company’s offering;

 

  250,000 shares of Company common stock upon the Company achieving a first time total market valuation of $100 Million or more;

 

  250,000 shares of Company common stock upon the Company achieving a first time total market valuation of $250 Million or more;

 

  100,000 shares of Company common stock upon the Company achieving a positive earnings before interest, taxes depreciation and amortization (“EBITDA”) for the first time in any full calendar year; and

 

  250,000 shares of Company common stock upon the Company achieving a positive EBITDA of $10 million for the first time in any calendar year.

 

On January 2, 2023, the Company and Mr. Sposato entered into an Executive Employment Agreement, which, among other things, employs Mr. Sposato as Chief Technology Officer of the Company. Mr. Sposato will be paid an initial salary of $365,000, plus an annual bonus of 50% of the base salary for such fiscal year and shall be payable to the extent the applicable performance goals are achieved. Further, on the Effective Date, Mr. Sposato will be awarded 150,000 shares of the Company’s common stock issued upon execution of this Agreement. In addition, Mr. Sposato will be awarded an additional 200,000 stock options with an exercise price equal to the price of the Company’s common stock as set forth in the final registration statement for the offering, vesting biannually (every 6 months) over twenty-four (24) months with the first instalment vesting six (6) months after the closing of the Company’s currently contemplated firm commitment underwritten public offering. Additionally, Mr. Sposato will be awarded certain equity awards based on achieving the following milestones:

 

  100,000 shares of Company common stock upon the closing of each acquisition post the Company’s offering;

 

  250,000 shares of Company common stock upon the Company achieving a first time total market valuation of $100 million or more;

 

  250,000 shares of Company common stock upon the Company achieving a first time total market valuation of $250 million or more;

 

  100,000 shares of Company common stock upon the Company achieving a positive EBITDA for the first time in any full calendar year; and

 

  250,000 shares of Company common stock upon the Company achieving a positive EBITDA of $10 million for the first time in any calendar year.

 

On March 3, 2023, the Company approved and effectuated an amendment to each of Mr. Podolak’s and Mr. Sposato’s employment agreements, respectively, to clearly delineate the equity rights, protections and other terms and conditions that the Company has agreed to with Messrs. Podolak and Sposato pursuant to their Executive Employment Agreement. These amendments delineated that the Reverse Stock Split effective on January 27, 2023 did not apply to the grant of equity awards in the form of Series A Preferred Stock.

 

On November 2, 2023, the Company entered into a consulting agreement with EverAsia Financial Group, as amended, whereby Mr. Silverman has agreed to act as the Company’s Chief Financial Officer on a part-time basis and provide services that are customary of the position, effective November 1, 2023. The term of the contract is for one year from signing and expiring on November 2, 2024, at which time the contract will automatically be renewed on three-month terms until either the Company or EverAsia Financial Group terminates the agreement. In the event the Company were to terminate without cause (as defined in such consulting agreement), EverAsia Financial Group will be subject to an early termination fee, however, in the event of termination for cause, the Company shall immediately deliver payment for all expenses and fees up until the termination date.

 

The Company shall pay EverAsia Financial Group $20,000 a month for the initial term and any renewal terms that follow. Additionally, the Company shall issue 120,000 restricted stock units to EverAsia Financial Group, or its assigns. These shares shall be subject to a vesting schedule of 10,000 shares per month until the conclusion of the term of the contract, without consideration of any renewal terms.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information with respect to the beneficial ownership of our common and preferred stock, as of the date of this prospectus, by each of our directors, each of our executive officers, all of our current directors and executive officers as a group, and each person, or group of affiliated persons, who beneficially owned more than 5% of our common or preferred stock.

 

The number of shares of our common stock and preferred beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock and preferred held by that person. The percentage of shares beneficially owned is computed on the basis of 4,234,746 shares of our common stock outstanding as of the date of this prospectus (this does not include 495,076 shares of common stock upon the exercise of the Series C Warrants; none of our officers or directors hold any of these outstanding warrants).

  

Shares of our common and preferred stock that a person has the right to acquire within 60 days of the date of this prospectus, are generally deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group.

 

    Shares
Beneficially Owned Prior to the IPO
 
Name   Common
Stock
    Percentage of
Outstanding
Common
Stock
    Total
Preferred
Shares
    Percentage of
Outstanding
Preferred
Shares
    Percentage of
Total
Capital
Stock
    Percentage of Voting
Power
 
Directors and Executive Officers                                    
Brian Podolak (1)(2)     947,583       22.4 %     2,000,000 Series A       50% Series A       35.8 %     35.8 %
James Sposato (1)(3)     938,404       22.2 %     2,000,000 Series A       50% Series A       35.7 %     35.7 %
Scott Silverman(1)(4)     130,625       3.1 %     -       -       1.6 %     1.6 %
Randall Miles(6)     -       - %     -       -       - %     - %
Lourdes Felix(7)     -       - %     -       -       - %     - %
Ned Siegel(8)     -       -       -       -       - %     - %
Total for Directors and Executive Officers:     2,016,612       47.7 %     4,000,000 Series A       100% Series A       73.1 %     73.1 %

 

    Shares
Beneficially Owned After the IPO
 
Name   Common
Stock
    Percentage of
Outstanding
Common
Stock
    Percentage of Voting
Power(*)
 
Directors and Executive Officers                  
Brian Podolak (1)(2)     947,583       11.4 %     11.4 %
James Sposato (1)(3)     938,404       11.3 %     11.3 %
Scott Silverman(1)(4)     130,625       1.6 %     1.6 %
Randall Miles(6)     -       -       -  
Lourdes Felix(7)     -       -       -  
Ned Siegel(8)     -       -       -  
Total for Directors and Executive Officers:     2,016,612       24.3 %     24.3 %

 

(*)Holders of the Series A Preferred Stock have no right to vote on any matters brought before the stockholders of the Company upon the effectiveness of the registration statement of which this prospectus forms a part.

 

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(1)

The addresses for Brian Podolak, James Sposato, Scott Silverman, Randall Miles, Lourdes Felix, Ned Siegel, Sposato Family Revocable Trust, The Brian Podolak Irrevocable Trust f/b/o Gage Podolak, The Brian Podolak Irrevocable Trust f/b/o Maria Fernanda Redondo Barahona, and The Brian Podolak Irrevocable Trust f/b/o Ty Podolak, for the purposes of this disclosure is 6401 Congress Ave, Suite #160, Boca Raton, FL 33487.

 

(2)Brian Podolak directly owns 797,583 shares of our common stock and 150,000 shares as beneficiary of The Brian Podolak Irrevocable Trust.
  
(3)James Sposato directly owns 784,404 shares of our common stock and 150,000 as beneficiary of The Sposato Family Revocable Trust.

 

(4) On November 2, 2023, the Company issued 120,000 RSUs representing 120,000 shares of common stock to JJL Capital Management, LLC, a company majority owned by the Chief Financial Officer. RSUs issued in connection with the 2022 Plan shall be subject to a twelve-month vesting period, whereas 10,000 shares shall vest upon the first of every month. However, should the Company successfully complete an initial public offering of its common shares on any stock exchange in the United States of America, including, but not limited to, the New York Stock Exchange, Nasdaq Stock Exchange, or CBOE, 100% of the then unvested RSU’s shall immediately vest upon the completion of the IPO.

  

(6) Randall Miles is a director whose service as an independent director commenced upon the effectiveness of the registration statement of which this prospectus forms a part. Pursuant to his Board of Directors Agreement, Mr. Randall Miles received an award of 150,000 RSUs on the Effective Date. The RSUs vest with respect to 8.33% of the total number of RSUs on the closing of this offering and after 8.33% thereafter every three (3) month anniversary of the Effective Date until fully vested on the 3rd anniversary of the Effective Date, his continuous service to the Company through the applicable vesting date.

 

(7) Lourdes Felix is a director whose service as an independent director commenced upon the effectiveness of the registration statement of which this prospectus forms a part. Pursuant to her Board of Directors Agreement, Mrs. Lourdes Felix received an award of 20,000 RSUs on the Effective Date. The RSUs vest with respect to 25% of the total number of RSUs on the Effective Date and after 25% thereafter every three (3) month anniversary of the Effective Date until fully vested on the 3rd anniversary of the Effective Date, her continuous service to the Company through the applicable vesting date.

 

(8) Ned Siegel is a director whose service as an independent director commenced upon the effectiveness of the registration statement of which this prospectus forms a part. Pursuant to his Board of Directors Agreement, Mr. Ned Siegel received an award of 20,000 RSUs upon the Effective Date. The RSUs vest with respect to 25% of the total number of RSUs on the Effective Date and after 25% thereafter every three (3) month anniversary of the Effective Date until fully vested on the 3rd anniversary of the Effective Date, her continuous service to the Company through the applicable vesting date.

 

The table above excludes the following shares as of the date of this prospectus:

 

up to 1,186,479 shares of common stock issuable upon exercise of outstanding Series C Warrants issued to the holders of the Investors’ Warrants and conversion of the Series B Preferred Stock as of such date;

 

up to 210,000 Option Securities issuable upon the exercise of the underwriters’ option to cover over-allotments, if any;

 

  up to 42,000 shares of common stock issuable upon exercise of the Representative’s Warrant to be issued to the underwriters in connection with this offering;
     
  up to 1,801,880 common shares issuable upon the conversion of the 2022 Convertible Notes at a conversion price consisting of the price per share in this offering multiplied by 0.65, which is the conversion price set forth in the 2022 Convertible Notes, plus a 45% conversion premium; and
     
  up to 69,019 shares of common stock from the exercise of Exchange Listing, LLC’s anti-dilution protection to maintain two percent of the Company’s issued and outstanding shares.

 

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS 

 

Share of Common Stock Held by Legal Counsel

 

Carmel, Milazzo & Feil LLP (“CMF”), former counsel to the Company that, on October 2, 2023, combined with Sichenzia Ross Ference LLP to become, Sichenzia Ross Ference Carmel LLP, current counsel to the Company, owns 281,000 shares of our common stock. These shares were acquired on March 31, 2022 and September 14, 2023, pursuant to CMF’s retainer for legal representation for the restructuring and bridge offering for 6,000 shares of common stock due and earned upon execution the retainer. On February 28, 2023, our Board authorized and issued CMF’s 25,000 additional shares of common stock related to services rendered for Series B Preferred Stock bridge financing. On September 14, 2023, our Board authorized and issued CMF 250,000 additional shares of common stock related to legal services in the amount of $1,138,312.50.

 

Transactions with Related Persons

 

Except as described below and except for employment arrangements which are described under the section entitled “Executive Compensation” and “Recent Sales Of Unregistered Securities,” since our inception, there has not been, nor is there currently proposed, any transaction in which we are or were a participant, the amount involved exceeds the lesser of $120,000 or 1% of the average of the total assets at December 31, 2021 and 2020, and any of our directors, executive officers, holders of more than 5% of our common stock or any immediate family member of any of the foregoing had or will have a direct or indirect material interest.

 

Bill of Sale

 

On August 1, 2022, Brian Podolak and James Sposato, each an officer and director of the Company, assigned to the Company (the “Parties”) significant intellectual property pursuant to a Bill of Sale and Assignment entered into by the Parties (“Bill of Sale and Assignment”). The consideration for the assignment was 300,000 shares of the Company’s common stock. Mr. Podolak and Mr. Sposato each received 150,000 shares, respectively. The intellectual property consists of various systems, software and other core technology used in the Company’s business and operations.

 

Contribution Agreement

 

CFM was formerly owned by James Sposato, who is an officer and director of the Company. CFM was acquired by the Company from Mr. Sposato per the Contribution Agreement, dated August 1, 2022. In the Contribution Agreement, Mr. Sposato, as a Contributor, has contributed, assigned, transferred and delivered to Vocodia, the outstanding capital stock of CFM and Vocodia has accepted the contributed shares from the Contributor. As full consideration for the Contribution, Vocodia has paid the Contributor consideration in the amount of $10.

 

Related Person Transaction Policy

 

Prior to this offering, we have not had a formal policy regarding approval of transactions with related parties. We expect to adopt a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. The policy will become effective immediately upon the consummation of this offering. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds the lesser of $120,000 or one percent of our total assets at year-end for our last two completed fiscal years. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.

 

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Under the policy, if a transaction has been identified as a related party transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our audit committee, or, if audit committee approval would be inappropriate, to another independent body of our Board, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our code of conduct, officers and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our Board, will take into account the relevant available facts and circumstances including, but not limited to:

 

  the risks, costs and benefits to us;

 

  the impact on a director’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

 

  the availability of other sources for comparable services or products; and

 

  the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.

 

The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our Board, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit committee, or other independent body of our Board, determines in the good faith exercise of its discretion.

 

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SELLING SHAREHOLDERS

 

This prospectus also relates to the possible sale or other disposition of (i) 1,801,880 shares of our Common Stock issuable under the approximately $4,470,233 in original issue discount principal and interest amount of the 2022 Convertible Notes and the approximately $736,778 in original issue discount principal and interest amount of the 2023 Convertible Notes, including 876,658 Increased Conversion Shares due to extension of the 2022 and 2023 Convertible Notes (ii) 495,076 shares of our Common Stock issuable pursuant to the Series C Warrants to certain holders of the Investors’ Warrants upon the exercise of such Series C Warrants, and their donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a Selling Shareholder as a gift, pledge, partnership distribution or other transfer.

 

A total of up to 2,296,956 shares of common stock being registered hereby will be offered and may be sold by the Selling Shareholders. In connection with the offering of the Selling Shareholders Securities, the Selling Shareholders have agreed that, and have provided a representation to the Company to the effect that, immediately after the date of this prospectus, they will consider selling some portion (or even all) of their shares of common stock as requested by the underwriters in order to create an orderly, liquid market for the common stock.

 

The table below sets forth information as of the date of this prospectus should the Selling Shareholders elect to sell, to our knowledge, the Selling Shareholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of the shares of common stock held by the Selling Shareholders. The second column lists the number of shares of common stock and percentage beneficially owned by the Selling Shareholders, as of the date of this prospectus. The third column lists the maximum number of shares of common stock that may be sold or otherwise disposed of by the Selling Shareholders pursuant to the registration statement of which this prospectus forms a part. The Selling Shareholders may sell or otherwise dispose of some, all or none of their shares. Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares of our common stock as to which a stockholder has sole or shared voting power or investment power, and also any shares of our common stock which the stockholder has the right to acquire within 60 days. Except as indicated below, the Selling Shareholders are not the beneficial owners of any additional shares of common stock or other equity securities issued by the Company or any securities convertible into, or exercisable or exchangeable for, the Company’s equity securities. The percentage of beneficial ownership for the Selling Shareholders is based on shares of common stock outstanding as of the date of this prospectus. Except as described below, to our knowledge, none of the Selling Shareholders have had any material relationship with us within the past three years. Our knowledge is based on information provided by the Selling Shareholders in registration statement questionnaires. None of the Selling Shareholders are members of FINRA, or affiliates of such members, except as noted below this table.

 

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The shares of common stock that may being covered hereby may be sold or otherwise disposed of from time to time during the period the registration statement of which this prospectus is a part remains effective, by or for the account of the Selling Shareholders. After the date of effectiveness, the Selling Shareholders may have sold or transferred, in transactions covered by this prospectus, some or all of their common stock.

 

Information about the Selling Shareholders may change over time. Any changed information will be set forth in an amendment to the registration statement or supplement to this prospectus, to the extent required by law. The Company may require the Selling Shareholders to suspend the sales of common stock offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that requires the changing of statements in these documents in order to make statements in those documents not misleading.

 

   Shares of Common Stock
Beneficially
Owned Prior to the
Offering of the Selling
Shareholders Shares(*)
   Maximum
Number of
Shares
To Be Sold in
the Offering
of the Selling
Shareholders(**)
   Shares of Common
Stock Beneficially
Owned After the
Offering of the Selling
Shareholders Shares(**)
 
Name of Selling Shareholders  Number   Percentage   Shares   Number   Percentage 
1. Dr. Vincent Lanteri (1) +   52,498    1.2397%   52,498    0    0%
2. Gail Baughman Dare Trust (2) +   26,505    0.6259%   26,505    0    0%
3. Bernece B. Davis (3)+   42,408    1.0014%   42,408    0    0%
4. Charles Kirkland (4) +   106,019    2.5036%   106,019    0    0%
5. 108 Sussex, LLC (5) +   311,988    7.3673%   311,988    0    0%
6. Roland and Nancy Hodges (6) +   53,010    1.2518%   53,010    0    0%
7. Edward J. Borkowski (7) +   104,995    2.4794%   104,995    0    0%
8. Clifford E. Leach (8) +   26,249    0.6198%   26,249    0    0%
9. Imad Aboukheir (9) +   26,249    0.6198%   26,249    0    0%
10. David Edelstein (10) +   26,249    0.6198%   26,249    0    0%
11. Sanford Ehrlich (11) +   26,249    0.6198%   26,249    0    0%
12. Gregory P. Hayden (12) +   26,249    0.6198%   26,249    0    0%
13. Dr. Mark S Boland (13) +   26,087    0.6160%   26,087    0    0%
14. Kelly Gaskins (14) +   207,152    4.8917%   207,152    0    0%
15. Stacy L. Giunta Revocable Trust (15) +   78,246    1.8477%   78,246    0    0%
16. Richard K. Blundell (16) +   26,088    0.6160%   26,088    0    0%
17. Daniel Proscia (17) +   104,995    2.4794%   104,995    0    0%
18. James W. Dean (18) +   52,174    1.2320%   52,174    0    0%
19. Raymond & Catherine Marzulli (19) +   99,134    2.3410%   99,134    0    0%
20. J. Evan Robertson (20) +   206,503    4.8764%   206,503    0    0%
21. Mill City Ventures III Ltd (21) +   129,731    3.0635%   129,731    0    0%
22. Stephan Kuppenheimer(22) +   102,157    2.4124%   102,157    0    0%
23. Emmis Capital II (23)    34,500    0.8147%   34,500    0    0%
24. Cavalry Investment Fund LP (24)    118,634    2.8014%   118,634    0    0%
25. Evergreen Capital Management LLC (25)    118,634    2.8014%   118,634    0    0%
26. Hecht Holdings LLC (26)    27,708    0.6543%   27,708    0    0%
27. Proof Positive LLC (27)    136,545    3.2244%   136,545    0    0%
Total   2,296,956    54.241%   2,296,956    0    0%

 

(*) Assumes conversion in full of the 2022 Convertible Notes and exercise in full of the Series C Warrants issued to the holders of the Investors’ Warrants, except for Cavalry Investment Fund LP, Evergreen Capital Management LLC and Mill City Ventures III Ltd., that have advised the Company that they intend to convert 50% of the OID investment in their 2022 Convertible Notes.

 

(**)The Company does not have the ability to control how many, if any, of the shares of common stock will be sold by the Selling Shareholders listed above. The table above assumes that the Selling Shareholders will sell all of the shares of common stock offered herein for purposes of determining how many shares of common stock each such Selling Shareholder will own after the offering of the shares of common stock and their applicable beneficial ownership percentage following the offering of the shares of common stock.

 

+ Consists of the shares issuable under the Series C Warrants.

  

(1) The address of Dr. Vincent Lanteri is 6 Red Oak Drive, Spring Lake, NJ 07762.
   
(2) The address of Gail Baughman Dare Trust is PO Box 1115, O’Fallon, IL 62269.

 

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(3) The address of Bernece B. Davis is 44 County Road 228, Oxford, MS 38655.
   
(4) The address of Charles Kirkland is 111 E Dunlap Ave #1-293, Phoenix, AZ 85020.
   
(5) The address of 108 Sussex, LLC is 304 South Euclid Ave, Westfield, NJ 07090.
   
(6) The address of Roland and Nancy Hodges is 202 SW 38th Place, Cape Coral, FL 33991.
   
(7)

The address of Edward J. Borkowski is 527 N. Mallory Circle, Delray Beach, FL 33486.

 

(8) The address of Clifford E. Leech is 1950 19th Street, SW Paris, TX 75460.
   
(9) The address of Imad Aboukheir is 13171 Huntmaster Lane, Lemont, IL 60439.
   
(10) The address of David Edelstein is 41 Springwood Drive, Monroe Township, NJ 08831.
   
(11) The address of is Sanford Ehrlich 20 Hoffman Avenue, Rochelle Park, NJ 07662.
   
(12) The address of Gregory P. Hayden is 169 Western Highway West Nyack, NY 10994.
   
(13) The address of is Dr. Mark S Boland 4736 Rock Ledge Drive, Harrisburg, PA 17110.

 

(14) The address of Kelly Gaskins is 6250 County Road 21, Shamrock, TX 79079.

 

(15) The address of Stacy L. Giunta Revocable Trust is 65 Edgewood Place, Fairfield, CT 06825.

 

(16) The address of Richard K. Blundell is 4502 West 5TH Street, Greeley, CO 80634.

 

(17) The address of Daniel Proscia is 5 Yarmouth Rd Chatman, NJ 07982.

 

(18) The address of James W. Dean is 3106 Chalkstone Drive, Rowlett, TX 75088.

  

(19) The address of Raymond & Catherine Marzulli is 21 Afton Terrace, East Hanover, NJ 07936.
   
(20) The address of J. Evan Robertson is P.O. Box 1906, Twin Falls, Idaho 83303.
   
(21) The address of Mill City Ventures III Ltd is 1907 Wazyata Blvd. #205, Wayzata, MN 55391.
   
(22) The address of Stephan Kuppenheimer is 316 Lafayette Ave, Chatham, NJ 07928.
   
(23) The address of Emmis Capital II is 151 N. Nob Hill Road, Ste. 321, Fort Lauderdale Florida 33324.

   
(24) The address of Cavalry Investment Fund LP is 82 E. Allendale Rd., Ste 5B, Saddle River, NJ 07458.
   
(25) The address of Evergreen Capital Management LLC is 156 W. Saddle River Road, Saddle River, NJ 07458.
   
(26) The address of Hecht Holdings LLC is 10 Notch Hill Drive, Livingston, NJ 07039.
   
(27) The address of Proof Positive LLC is 1309 Coffeen Avenue, Suite 1200, Sheridan, WY 82801.

 

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Plan of Distribution

 

The Selling Shareholders have advised us that they intend to offer and sell, from time to time, any or all of their respective Selling Shareholders Securities. In connection with the Company’s registration of the Selling Shareholders Securities, the Selling Shareholders have agreed that, and have provided a representation to the Company to the effect that, they will immediately consider selling some portion (or even all) of their respective Selling Shareholders Securities if requested by the underwriters for the offering of common stock in order to create an orderly, liquid market for the common stock. The Selling Shareholders, however, will not be required to sell their respective Selling Shareholders Securities even if requested to do so by such underwriters, or, conversely, the Selling Shareholders may choose to sell their respective Selling Shareholders Securities on their own initiative.

 

We will not receive any proceeds from any sale by the Selling Shareholders of the Selling Shareholders Securities. See “Use of Proceeds.” We will not receive any of the proceeds from the sale of the Selling Shareholders Securities. We will bear all fees and expenses incident to the registration of the Selling Shareholders Securities in the registration statement of which this prospectus forms a part.

 

The Selling Shareholders may sell all or a portion of the Selling Shareholders Securities beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the Selling Shareholders Securities are sold through underwriters or broker-dealers, the Selling Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. These sales may be effected in transactions, which may involve crosses or block transactions.

 

The Selling Shareholders, and any of their respective pledgees, assignees and successors-in-interest may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. The Selling Shareholders may use any one or more of the following methods when selling the Selling Shareholder Shares:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the shares of common stock as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  settlement of short sales;
     
  in transactions through broker-dealers may agree with the Selling Shareholders to sell a specified number of such shares of common stock at a stipulated price per share of common stock;
     
  a combination of any such methods of sale; and
     
  any other method permitted pursuant to applicable law.

 

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The Selling Shareholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with the FINRA Rule 2121 and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.

 

In connection with the sale of the Selling Shareholders Securities covered hereby, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Selling Shareholders Securities in the course of hedging the positions they assume. The Selling Shareholders may also sell Selling Shareholders Securities short and deliver these Selling Shareholders Securities to close out their short positions, or loan or pledge the Selling Shareholders Securities to broker-dealers that in turn may sell these Selling Shareholders Securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of the Selling Shareholders Securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Shareholders may enter into derivative transactions with third parties or sell their respective Selling Shareholders Securities to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell the Selling Shareholders Securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use Selling Shareholders Securities pledged by a Selling Shareholder or borrowed from a Selling Shareholder or others to settle those sales or to close out any related open borrowings of stock and may use such Selling Shareholders Securities received from such Selling Shareholder in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified in the applicable prospectus supplement (or a post-effective amendment).

 

The Selling Shareholders and any broker-dealers or agents that are involved in selling the Selling Shareholders Securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Selling Shareholders Securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are requesting that each Selling Shareholders inform us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Selling Shareholders Securities. We will pay certain fees and expenses incurred by us incident to the registration of the Selling Shareholders Securities.

 

Because the Selling Shareholders may be deemed to be an “underwriter” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any Selling Shareholders Securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. We are requesting that each Selling Shareholder confirm that there is no underwriter or coordinating broker acting in connection with the proposed resale of the Selling Shareholders Securities by the Selling Shareholder.

 

We intend to keep this prospectus effective until the earlier of (i) the date on which the Selling Shareholders Securities may be resold by the Selling Shareholder without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information requirement under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the Selling Shareholders Securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The Selling Shareholders Securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the Selling Shareholders Securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale of the Selling Shareholders Securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of our common stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and are informing the Selling Shareholders of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

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Once sold under the registration statement, of which this prospectus forms a part, the Selling Shareholders Securities will be freely tradeable in the hands of persons other than our affiliates.

 

In connection with the offering of the Selling Shareholders Securities, underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by underwriters of a greater number of shares than they are required to purchase in connection with the offering of the Selling Shareholders Securities. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares of common stock from the Selling Shareholders in the offering of the Selling Shareholders Securities. Such underwriters may close out any covered short position by either exercising their option to purchase additional shares of common stock or purchasing shares of common stock in the open market. In determining the source of shares of common stock to close out the covered short position, such underwriters will consider, among other things, the price of shares of common stock available for purchase in the open market as compared to the price at which they may purchase shares of common stock through an over-allotment option, if any. “Naked” short sales are any sales in excess of such option. Such underwriters must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase shares of common stock in the offering of the Selling Shareholders Securities. Stabilizing transactions consist of various bids for or purchases of common stock made by such underwriters in the open market prior to the completion of the offering of the Selling Shareholders Securities.

 

Such underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to other underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares of common stock sold by or for the account of such underwriter in stabilizing or short covering transactions.

 

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of the common stock and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time.

 

Certain underwriters, agents or dealers or their affiliates may have provided from time to time, and may provide in the future, investment, commercial banking, derivatives and financial advisory services to the Company, the Selling Shareholders and their respective affiliates in the ordinary course of business, for which they have received or may receive customary fees and commissions.

 

In addition, a Selling Shareholder that is an entity may elect to make a pro rata in-kind distribution of securities to its members, partners or stockholders pursuant to the registration statement of which this prospectus forms a part by delivering a prospectus. Such members, partners or stockholders would thereby receive freely tradeable shares of common stock pursuant to the distribution through such registration statement. To the extent a distributee is an affiliate of ours (or to the extent otherwise required by law), we may file a prospectus supplement in order to permit the distributees to use such prospectus to resell such shares of common stock acquired in such distribution.

 

The Selling Shareholders Securities covered by this prospectus may also be sold in private transactions or under Rule 144 under the Securities Act rather than pursuant to such prospectus.

 

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DESCRIPTION OF SECURITIES

 

Authorized and Outstanding Capital Stock

 

The following description of our Company’s capital stock and provisions of our articles of incorporation, as amended (“articles of incorporation”) and bylaws are summaries and are qualified by reference to our Company’s articles of incorporation and bylaws which are filed as exhibits to the registration statement of which this prospectus forms a part.

 

We are incorporated in the State of Wyoming. The rights of our shareholders are generally covered by Wyoming law and our articles of incorporation and bylaws. The terms of our capital stock are therefore subject to Wyoming law, including applicable Wyoming Statues and the Constitution of the State of Wyoming.

 

As of the date of this prospectus, the total number of shares of all classes of capital stock that our Company is authorized to issue is 500,000,000 shares, consisting of (i) 476,000,000 shares of common stock, par value $0.0001 per share, and (ii) 24,000,000 shares of preferred stock, par value $0.0001 per share, of which (a) 23,997,000 are designated Series A Preferred Stock and (b) 3,000 shares are designated Series B Preferred Stock.

 

As of the date of this prospectus, our Company had outstanding 4,521,268 shares of common stock held by approximately 83 stockholders of record, 4,000,000 shares of Series A Preferred Stock outstanding held by approximately 2 stockholders of record and 1,910 shares of Series B Preferred Stock outstanding held by approximately 13 stockholders of record. The foregoing does not include 461,500 shares of common stock underlying various warrants.

 

Common Stock

 

As of the date of this prospectus, the Company has authorized the issuance of 476,000,000 shares of common stock par value $0.0001 per share, of which 4,521,268 shares are issued and outstanding. The holders of common stock are entitled to one vote per share on each matter submitted to a vote at any meeting of stockholders. Each share of our common stock is entitled to one vote per share. In the event of our liquidation, the shares of common stock are entitled to share equally in corporate assets after satisfaction of all liabilities.

 

Holders of common stock are entitled to receive such dividends as the board of directors may, from time to time, declare out of funds legally available for the payment of dividends. We seek growth and expansion of our business through the reinvestment of profits, if any, and do not anticipate that we will pay any dividends in the foreseeable future.

 

Units

 

We are offering Units at the initial public offering price of $4.2500 per Unit. Each Unit consists of one IPO Share, one Series A Warrant and one Series B Warrant. Each Series A Warrant is exercisable at an exercise price of $5.5250 per share (130% of the offering price per Unit), subject to reset as described herein, and each Series B Warrant is exercisable at an exercise price of $8.5000 per share (200% of the offering price per Unit). The IPO Shares and the IPO Warrants may be transferred separately immediately upon issuance.

 

IPO Warrants

 

Series A Warrants and Series B Warrants

 

The following summary of certain terms and provisions of the Series A Warrants and Series B Warrants offered hereby (which we refer to collectively in this summary as the “warrants”) is not complete and is subject to, and qualified in its entirety by, the provisions of the Series A Warrants and the Series B Warrants, the forms of which have been filed as exhibits to the registration statement of which this prospectus is a part. Prospective investors should carefully review the terms and provisions of the forms of warrants for a complete description of the terms and conditions of the warrants.

 

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Form. The warrants will be issued as individual warrant agreements to the investors.

 

Exercisability. The warrants are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance. The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common stock underlying the Series A Warrants or Series B Warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may, in its sole discretion, elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the Series A Warrants or Series B Warrants. No fractional shares of common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.

 

Exercise Limitation. A holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after such election.

 

Exercise Price. The Series A Warrants will have an exercise price of 130% of the public offering price per Unit in this offering), and the exercise price of the Series B Warrants will be 200% of the public offering price per Unit in this offering, assuming an offering price of $4.2500 per Unit as set forth on the cover page of this prospectus. The exercise price of the Series A Warrants will be reduced on each trading day commencing on the third trading day immediately following the closing date of this offering until the 40th trading day following the closing date of this offering (each a “Reset Date”) to a new exercise price equal to the lower of (i) the then existing exercise price, taking into account any prior reductions to the exercise price, and (ii) a price equal to 105% of the lowest per share volume weighted average price (VWAPs) of the common stock on CBOE during the period from the closing date of this offering to such Reset Date. Any reduction to the exercise price of the Series A Warrants shall also result in an increase in the number of shares of common stock issuable upon exercise of the Series A Warrants such that the aggregate exercise price of any unexercised Series A Warrants immediately following the adjustment equals the aggregate exercise price of such unexercised Series A Warrants on the closing date of this offering. 

 

If we pay a stock dividend or make a distribution in common stock or subdivide our outstanding common stock into a larger number of shares or combine our outstanding common stock (including a reverse stock split) into a smaller number of shares (each a “Stock Combination Event”), the number of shares issuable upon exercise of the Series A Warrants shall be proportionately adjusted such that the aggregate exercise price shall remain unchanged. In addition, following such Stock Combination Event, the exercise price of the Series A Warrants will be reduced on each trading day commencing on the second trading day immediately following such Stock Combination Event until the 40th trading day following such Stock Combination Event (each a “Stock Combination Reset Date”) to a new exercise price equal to the lower of (i) the then exercise price, taking into account any prior reductions to the exercise price, and (ii) a price equal to 100% of the lowest VWAP of the common stock on CBOE during the period from the date of such Stock Combination Date to such Stock Combination Reset Date. Any such reduction to the exercise price of the Series A Warrants shall also result in an increase in the number of shares of common stock issuable upon exercise of the Series A Warrants such that the aggregate exercise price on any unexercised Series A Warrants immediately following the adjustment equals the aggregate exercise price of such unexercised Series A Warrants on the closing date of this offering. In the event of a reverse stock split, the exercise prices of the Series A Warrants and the Series B Warrants shall be proportionately increased and the number of shares of common stock issuable upon exercise of the Series A Warrants and the Series B Warrants shall be proportionately reduced. In the event the closing price of our common stock is below $.01 for five (5) consecutive trading days, we will promptly effect a reverse stock split of our common stock.

 

Cashless Exercise. The Series A Warrants and Series B Warrants shall be exercisable on a cashless basis in the event we do not have an effective registration statement under the Securities Act that includes the shares of common stock issuable upon exercise of the Series A Warrants and the Series B Warrants. In addition, the holders of a Series B Warrant may, at any time and in their sole discretion, exercise such Series B Warrants in whole or in part by means of an “alternative cashless exercise” in which a holder shall be entitled to receive, without the payment of additional consideration, a number of shares of common stock issuable upon exercise that will equal the product of (a) the number of shares of common stock that would be issuable upon exercise of such warrant in accordance with the terms of such warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (b) the quotient obtained by dividing (i) the exercise price minus the lowest VWAP during the ten trading days immediately prior to the applicable exercise date by (ii) 50% of the lowest VWAP during the ten trading days immediately prior to the applicable exercise date. Notwithstanding the foregoing, the Series B Warrants may not be exercised on an alternative cashless exercise basis by using a VWAP in the calculation of such exercise that is below twenty percent (20%) of the public offering price of the common stock in this offering (the “Floor Price”) until such lower VWAP is approved by our stockholders. In the Series B Warrants, we will agree to obtain majority stockholder consent to remove the Floor Price by filing an information statement with the SEC within 15 days of the closing of this offering that will become effective 20 days after filing.

 

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Transferability. Subject to applicable laws, the warrants may be offered for sale, sold, transferred or assigned without our consent.

 

Exchange Listing. Our common stock, the Series A Warrants and the Series B Warrants are listed on the CBOE under the symbols “VHAI,” “VHAI+A” and “VHAI+B,” respectively. There is no established trading market for the warrants and an active trading market for the warrants may not develop or be sustained.

 

Fundamental Transactions. If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the warrants with the same effect as if such successor entity had been named in the warrant itself. If holders of our common stock are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder shall be given the same choice as to the consideration it receives upon any exercise of the warrants following such fundamental transaction.

 

Rights as a Stockholder. Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holder of a warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the warrant.

 

Series C Warrants

 

Simultaneously to this offering, we are also issuing 495,076 Series C Warrants to certain holders of our the Investors’ Warrants. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants are not registered with the SEC under the Securities Act and are not listed on any stock exchange.

 

Preferred Stock

 

Series A Preferred Stock

 

The Series A Preferred Stock consists of 4,000,000 outstanding shares of Preferred Stock which were issued prior to the Series B Preferred Stock. As of the effective date of this registration statement of which this prospectus forms a part, the holders of the Series A Preferred Stock shall no right to vote on any matters brought before the stockholders of the Company for a vote except as may otherwise be required by Title 17 of the Wyoming Statutes or any successor to such laws.

 

During the Conversion Period, (as defined below) each holder of the Series A Preferred Stock shall have the right to convert all or any portion of their shares of Series A Preferred Stock into common stock at a ratio of 0.025 share of common stock for each share of Series A Preferred Stock (subject to adjustments relating to stock splits, distributions, mergers, consolidation, exchange of shares, recapitalization, reorganization, or other similar event) by submitting to the Company a notice of conversion by facsimile, e-mail or other reasonable means of communication. “Conversion Period” shall mean the period commencing on the earlier of (i) six months after the SEC declares the registration statement of which this prospectus forms a part effective and (ii) the first anniversary of the Series A Preferred Stock issuance date, and ending on the fifth anniversary of the Series A Preferred Stock issuance date.

 

Series B Preferred Stock

 

The Series B Preferred Stock consists of 1,910 outstanding shares as of the date of this prospectus. Each share of the Series B Preferred Stock will automatically convert into shares of the Company’s common stock at a conversion price of the quotient of the total dollar amount invested in the Series B Preferred Stock and 0.65 multiplied by the initial public offering price of the common stock, which represents a 35% discount to the price per share in this offering. No other special rights, privileges, preferences or powers have been granted to the Series B Preferred Stock. Holders of the Series B Preferred Stock have no right to vote on any matters brought before the stockholders of the Company for a vote except as may otherwise be required by Title 17 of the Wyoming Statutes or any successor to such laws. The Series B Preferred Stock is not redeemable by the Company. The Series B Preferred Stock has no preemptive, preferential or other similar right with respect to the issuance of any equity security of the Company, whether unissued, held in the treasury or hereafter created, or any warrants or obligations of the Company. The Series B Preferred Stock shall be subordinated to all Company debt, junior to any senior equity securities of the Company and pari passu with the common stock. The shares of the Series B Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or as provided by applicable law.

 

On March 3, 2023, we entered into a securities purchase agreement with four accredited investors. We issued 155 shares of Series B Preferred Stock. The shares of Series B Preferred Stock have a mandatory conversion feature, which is noted in paragraph IV of our Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock. Each share of the Series B Preferred Stock will automatically convert into shares of the Company’s common stock at a conversion price of the quotient of the total dollar amount invested in the Series B Preferred Stock and 0.65 multiplied by the IPO price of the common stock, which represents a 35% discount to the price per share in this IPO.

 

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Warrants

 

The Company has previously issued warrant securities in the following exempt private offerings: 

 

(1) Between May 1, 2021 and June 25, 2021, the Company offered up to 100,000 units at $10 per unit, consisting of 100,000 shares of the Company’s common stock and 100,000 warrants to purchase one share of the Company’s common stock at an exercise price of $20.00 per share. The Company sold 115,000 units for gross proceeds of $1,150,000. The warrants expire 24 months after the date of issue. During the year ended December 31, 2022, 32,500 warrants were exercised and the remaining 82,500 unexercised outstanding warrants were called by the Company at no cost. As of December 31, 2022, there were no issued and outstanding warrants related to this offering. As of September 30, 2022 and September 30, 2023, there were no issued and outstanding warrants related to this offering.

 

(2) Between July 9, 2021 and September 30, 2022, the Company offered up to 125,000 units at $40 per unit, consisting of 125,000 shares of the Company’s common stock and 125,000 warrants, to purchase one share of the Company’s common stock at an exercise price of $80.00 per share. The Company sold 148,054 units for gross proceeds of $5,922,150. The warrants expire 24 months after the date of issue. During the year ended December 31, 2022, no warrants were exercised and the remaining 148,054 unexercised outstanding warrants were called by the Company at no cost. As of December 31, 2022, there were no issued and outstanding warrants related to this offering. As of September 30, 2022 and September 30, 2023, there were no issued and outstanding warrants related to this offering.

 

(3) On March 21, 2022, the Company issued to a consultant, Exchange Listing, LLC, warrants to purchase 200,000 shares of common stock exercisable for five years with an exercise price of $2.00 per share, as partial compensation for services pursuant to a Capital Market Advisory Agreement.

 

(4) On December 23, 2022, the Company entered into an SPA with Emmis Capital II, LLC, an affiliate Emmis Capital, who is an affiliate of Exchange Listing, LLC. The aggregate discounted purchase price for the private placement was $200,000 for a principal amount of $230,000. This private placement facilitated the sale of fifteen percent (15%) original discount senior secured 2022 Convertible Notes. Upon the effective date, the 2022 Convertible Notes shall convert into 87,646 shares of our common stock effective immediately, assuming an initial public offering price of $4.2500 per Unit. We issued twenty-five (25) additional 2022 Convertible Notes with an original issue discount of 15% on the 2022 Convertible Notes which have converted into 1,801,880 shares of our common stock at an initial public offering price of $4.2500 per Unit. In addition to the 2022 Convertible Notes, we also sold two 2022 Warrants, each with a duration of three years, with an exercise price per share of the Company’s common stock under the warrants shall be 120% of the conversion price, which conversion price is equal to 65% of the public offering price per share of common stock in this offering, representing a 35% discount, as set forth in the 2022 Convertible Notes.

 

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Listing

 

Our common stock, Series A Warrants and Series B Warrants are listed on the CBOE under the symbols “VHAI,” “VHAI+A” and “VHAI+B, respectively.

 

Our Series C Warrants are not registered with the SEC under the Securities Act and are not listed on any stock exchange.

 

Transfer Agent

 

The Company’s transfer agent is Vstock Transfer, LLC, with an address of 18 Lafayette Place, Woodmere, NY 11598. The phone and fax numbers for the transfer agent are (212) 828-8436 and (646) 536-3179, respectively. The email address for the transfer agent is: info@vstocktransfer.com. Further information about the transfer agent is available at the website located at: https://www.vstocktransfer.com/

 

Indemnification of Directors and Officers

 

Each of our articles of incorporation and our bylaws provide for indemnification of our directors and officers. Our articles of incorporation and bylaws provide that we must indemnify our directors and officers to the fullest extent permitted by the Wyoming Business Corporation Act and must indemnify against all expenses, liability, and loss incurred in investigating, defending, or participating in such proceedings. We have also entered into separate indemnification agreements with our directors and officers.

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities under the Securities Act may be permitted to officers, directors or persons controlling our Company pursuant to the foregoing provisions, our Company has been informed that is it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in such Securities Act and is, therefore, unenforceable.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

 

The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the ownership and disposition of our common stock but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, (the “Internal Revenue Code”), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as in effect as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. No ruling on the U.S. federal, state, or local tax considerations relevant to our operations or to the purchase, ownership or disposition of our shares, has been or will be requested from the Internal Revenue Service (the “IRS”) or other tax authority. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.

 

This summary also does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation: 

 

banks, insurance companies or other financial institutions, regulated investment companies or real estate investment trusts;

 

persons subject to the alternative minimum tax or Medicare contribution tax on net investment income;

 

tax-exempt organizations or governmental organizations;

 

controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax;

 

brokers or dealers in securities or currencies;

 

traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

 

persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth below);

 

U.S. expatriates and certain former citizens or long-term residents of the United States;

 

partnerships or entities classified as partnerships for U.S. federal income tax purposes or other pass-through entities (and investors therein);

 

persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction or integrated investment;

 

persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;

 

persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code;

 

persons deemed to sell our common stock under the constructive sale provisions of the Internal Revenue Code;

 

tax-qualified retirement plans;

 

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Internal Revenue Code and entities all of the interests of which are held by qualified foreign pension funds; and

 

persons subject to U.S. federal income special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement.

 

In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.

 

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You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty. The information provided herein does not constitute tax advice.

 

Non-U.S. Holder Defined

 

For purposes of this discussion, you are a non-U.S. holder (other than a partnership) if you are any holder other than:

 

an individual citizen or resident of the United States (for U.S. federal income tax purposes);

 

  a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia, or other entity treated as such for U.S. federal income tax purposes;

 

an estate whose income is subject to U.S. federal income tax regardless of its source; or

 

a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more “U.S. persons” (within the meaning of Section 7701(a)(30) of the Internal Revenue Code) who have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a U.S. person.

 

Distributions

 

As described in the section entitled “Dividend Policy,” we have never declared or paid cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under “Gain on Disposition of Common Stock.”

 

Subject to the discussion below on effectively connected income, backup withholding and foreign accounts, any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. A non-U.S. holder of shares of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

 

Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, attributable to a permanent establishment maintained by you in the United States) are generally exempt from such withholding tax if certain certification and disclosure requirements are satisfied. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. You should consult your tax advisor regarding any applicable tax treaties that may provide for different rules.

 

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Gain on Disposition of Common Stock

 

Subject to the discussion below regarding backup withholding and foreign accounts, you generally will not be required to pay U.S. federal income tax on any gain recognized upon the sale or other disposition of our common stock unless:

 

the gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment maintained by you in the United States);

 

you are a non-resident alien individual who is present in the United States for a period or periods aggregating 183 days or more during the taxable year in which the sale or disposition occurs and certain other conditions are met; or

 

our common stock constitutes a United States real property interest by reason of our status as a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes at any time within the shorter of (i) the five-year period preceding your disposition of our common stock, or (ii) your holding period for our common stock.

 

We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more than five percent of such regularly traded common stock at any time during the shorter of the five-year period preceding your disposition of, or your holding period for, our common stock.

 

If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses for the year (provided you have timely filed U.S. federal income tax returns with respect to such losses). You should consult any applicable income tax or other treaties that may provide for different rules. 

 

Federal Estate Tax

 

Our common stock beneficially owned by an individual who is not a citizen or resident of the United States (as defined for U.S. federal estate tax purposes) at the time of their death will generally be includable in the decedent’s gross estate for U.S. federal estate tax purposes and therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise. Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. The test for whether an individual is a resident of the United States for U.S. federal estate tax purposes differs from the test used for U.S. federal income tax purposes. Some individuals, therefore, may be non-U.S. holders for U.S. federal income tax purposes, but not for U.S. federal estate tax purposes, and vice versa. The gross estate of a non-U.S. Holder domiciled outside the United States includes only property situated in the United States. Individual non-U.S. Holders should consult their tax advisors regarding the U.S. federal estate tax consequences of holding the securities at death.

 

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Backup Withholding and Information Reporting

 

Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.

 

Non-US holders generally are not subject to US information reporting or backup withholding. However, payments received in the United States or through US-related financial intermediaries of dividends or of proceeds on the disposition of stock made to you generally would be subject to information reporting and backup withholding at a current rate of 24% unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or another appropriate version of IRS Form W-8. Persons in doubt as to the necessity of furnishing any of these forms should consult their own tax advisors.

 

Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

 

Foreign Account Tax Compliance

 

The Foreign Account Tax Compliance Act (“FATCA”) imposes a U.S. federal income withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to “foreign financial institutions” (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to a “non-financial foreign entity” (as specially defined for purposes of these rules) unless such entity provides the withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. While withholding under FATCA would have applied to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their tax advisors regarding the possible implications of this legislation and any applicable intergovernmental agreements on their investment in our common stock.

 

Each prospective investor should consult its tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.

 

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SHARES ELIGIBLE FOR FUTURE SALE

 

Prior to this offering, there has been no public market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time to time, and could impair our ability to raise capital through sales of equity or equity-related securities.

 

Only a limited number of shares of our common stock will be available for sale in the public market for a period of several months after completion of this offering due to contractual and legal restrictions on resale described below. Nevertheless, sales of a substantial number of shares of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could materially and adversely affect the prevailing market price of our common stock. Although our common stock, Series A Warrants and Series B Warrants are listed on the CBOE, we cannot assure you that there will be an active market for our common stock, Series A Warrants and Series B Warrants.

 

Of the shares to be outstanding immediately after the completion of this offering, we expect that the shares to be sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, which generally includes officers, directors or 10% stockholders. These restricted securities may be sold in the public market only if registered or pursuant to an exemption from registration, such as Rule 144.

  

Lock-up Agreements

 

All of our directors and executive officers are subject to lock-up agreements that, subject to certain exceptions, prohibit them from directly or indirectly offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to purchase, granting any option, right or warrant to purchase or otherwise transferring or disposing of any shares of our common stock, options to acquire shares of our common stock or any securities convertible into or exercisable or exchangeable for common stock, whether now owned or hereafter acquired, or entering into any swap or any other agreement or any transaction that transfer, in whole or in part, directly or indirectly, the economic consequence of ownership, for a period of 180 days following the effective date of the registration statement for this offering, without the prior written consent of the Representative.

 

In addition, certain holders of Convertible Notes have agreed with the underwriters not to sell, transfer or dispose of any shares of common stock or similar securities issuable pursuant to such Convertible Notes for 30 days following the effective date of the registration statement for this offering without the prior written consent of the Representative.

 

These agreements are described in the section entitled “Underwriting.”

 

Rule 144

 

Affiliate Resales of Restricted Securities

 

Company affiliates must generally comply with Rule 144 if they wish to sell any shares of our common stock in the public market, whether or not those shares are “restricted securities.” “Restricted securities” are any securities acquired from us or one of our affiliates in a transaction not involving a public offering. All shares of our common stock issued prior to the closing of the offering made hereby, are considered to be restricted securities. The shares of our common stock sold in this offering are not considered to be restricted securities.

 

A person who has beneficially owned restricted shares of our common stock for at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale and is an affiliate of ours at such time would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:

 

1% of the number of shares of our common stock then outstanding; or

 

1% of the average weekly trading volume of our common stock during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale; provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.

 

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Non-Affiliate Resales of Restricted Securities

 

Any person or entity who is not an affiliate of ours and who has not been an affiliate of ours at any time during the three months preceding a sale is only required to comply with Rule 144 in connection with sales of restricted shares of our common stock.

  

Further, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time such person sells shares of our common stock, and has not been an affiliate of ours at any time during the three months preceding such sale, and who has beneficially owned such shares of our common stock, as applicable, for at least six months but less than a year, is entitled to sell such shares so long as there is adequate current public information, as defined in Rule 144, available about us.

 

Resales of restricted shares of our common stock by non-affiliates are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144, described above. As of the date of this prospectus, up to 1,932,071 shares of our common stock were held by non-affiliates of the Company for over one year and will be eligible to be immediately resold in reliance on Rule 144 at the time of our initial public offering. 

 

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UNDERWRITING

 

Alexander Capital, L.P. is acting as the sole book-running manager of the offering and as representative of the underwriters named below. Subject to the terms and conditions of the underwriting agreement dated the date of this prospectus, the underwriters named below, through the representative, have severally agreed to purchase, and we have agreed to sell to the underwriters, the following respective number of Units set forth opposite the underwriter’s name.

 

Underwriters   Number of
Units
 
Alexander Capital, L.P.     929,412  
Network 1 Financial Securities, Inc.   470,588 
Total     1,400,000  

 

We have entered into an underwriting agreement with the Representative in connection with this initial public offering. Subject to the terms and conditions of the underwriting agreement, the underwriters will buy all of the Units if they buy any of them. However, the underwriters are not required to take or pay for the Units covered by the underwriters’ overallotment option as described below. Our Units are offered subject to a number of conditions, including:

 

receipt and acceptance of our Units by the underwriters; and

 

the underwriters’ right to reject orders in whole or in part.

 

Over-allotment Option

 

If the underwriters sell more Units than the total number set forth in the table above, we have granted to the Representative an option, exercisable for 45 days from the date of this prospectus, to purchase up to 15% or approximately 210,000 additional Option Securities at the initial public offering price less the underwriting discount. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, in connection with this offering. Any Option Securities issued or sold under the option will be issued and sold on the same terms and conditions as the other securities that are the subject of this offering.

 

Underwriting Discount

 

Units sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any Units sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $0.2975 per Unit. If all of the Units are not sold at the initial offering price, the Representative may change the initial public offering price and the other selling terms. The underwriters have advised us that they do not intend to make sales to discretionary accounts.

 

The underwriting discount is equal to the initial public offering price per Unit, less the amount paid by the underwriters to us per Unit. The underwriting discount was determined through an arms’ length negotiation between us and the underwriters. We have agreed to sell the Units to the underwriters at the initial public offering price of $ 4.2500 per Unit, which represents the initial public offering price of our Units set forth on the cover page of this prospectus, which includes a seven percent (7%) underwriting discount. In the event any proceeds are received by the Company in the offering from investors identified and introduced by the Company, then the underwriting fee shall be reduced to four percent (4%) of the gross proceeds for those investors.

 

The following table shows the per Option Security and total underwriting discount we will pay to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase up to additional Option Securities.

 

   No
Exercise
   Full
Exercise
 
Per Option Security  $0.2975   $0.2975 
Total  $416,500   $478,975 

 

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We have agreed to pay the underwriters out-of-pocket accountable expenses, including fees and disbursements of their counsel, with respect to this offering, up to a maximum amount of $125,000, subject total actual accountable expenses up to $175,000. We have paid $25,000 to the Representative as an advance to be applied towards reasonable out-of-pocket expenses (the “Advance”). Any portion of the Advance shall be returned back to us to the extent not actually incurred. Additionally, one percent (1%) of the gross proceeds of the offering will be provided to the underwriters for non-accountable expenses.

 

We estimate that the total expenses of the offering payable by us, not including the underwriting discount, will be approximately $750,000. 

 

Determination of Initial Public Offering Price

 

Before this offering, there has been no public market for our Units, common stock or warrants. Accordingly, the initial public offering price for the Units was negotiated between us and the Representative. Among the factors considered in these negotiations were:

 

the information set forth in this prospectus and otherwise available to the underwriters;

 

the prospectus for our Company and the industry in which we operate;

 

an assessment of our management;

 

our past and present financial and operating performance;

 

our prospectus for future earnings;

 

financial and operating information and market valuations of publicly traded companies engaged in activities similar to ours;

 

the prevailing conditions of the United States securities markets at the time of this offering; and

 

other factors deemed relevant

 

Neither we nor the Representative can assure investors that an active trading market will develop for Units of our common stock, or that the Units will trade in the public market at or above the initial public offering price.

 

Representative’s Warrant

 

In addition, pursuant to the underwriting agreement with the Representative, we agreed to issue warrants to the Representative or its designees to purchase a number of shares of our common stock equal to three percent (3%) of the aggregate number of shares of our common stock sold in this offering (including shares of common stock sold to cover over-allotments, if any). The warrants shall be exercisable until the fifth anniversary of the effective date of this registration statement of which this prospectus forms a part and shall be exercisable at a price per share equal to one hundred and twenty percent (120%) of the initial public offering price of the shares of our common stock. We are registering hereby the issuance of Representative’s Warrant and the shares of common stock issuable upon exercise of such warrants. The Representative agrees that during the (1) year period following the effective date of the registration statement of which this prospectus forms a part, it will not transfer the Representative’s Warrant or the underlying shares of our common stock, except to the officers, partners or members of the Representative. In accordance with FINRA Rule 5110(e)(1)(A), neither the Representative’s Warrants nor any of the shares of common stock issued upon exercise of such warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days immediately following the commencement of sales of the shares of common stock registered on the registration statement of which this prospectus is a part, subject to certain exceptions. The Representative’s Warrant will not have more than one demand registration right at the issuer’s expense pursuant to FINRA Rule 5110(g)(8)(B), will not have a duration of more than five years from the commencement of sales of the offering pursuant to FINRA Rule 5110(g)(8)(C), and will not have piggyback registration rights with a duration of more than seven years from the commencement of sales of the offering pursuant to FINRA Rule 5110(g)(8)(D). The Representative’s Warrant contain standard terms and conditions, including, a cashless exercise provision, and customary anti-dilution and exercise provisions.

 

Series C Warrant

 

Simultaneously to this offering, we are also issuing 495,076 Series C Warrants to certain holders of our Investors Warrants. The Series C Warrants shall have the same terms and conditions of the Series B Warrants, except that the Series C Warrants are not registered with the SEC under the Securities Act and are not listed on any stock exchange.

 

Lock-Up Agreement

 

Our executive officers and directors have agreed with the underwriters not to sell, transfer or dispose of any common stock or similar securities for six months following the effective date of the registration statement for this offering without the prior written consent of the Representative. In addition, certain holders of Convertible Notes have agreed with the underwriters not to sell, transfer or dispose of any shares of common stock or similar securities issuable pursuant to such Convertible Notes for 30 days following the effective date of the registration statement for this offering without the prior written consent of the Representative.

 

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Right of First Refusal

 

For a period of twelve (12) months from the closing date of this offering, the Representative will have an irrevocable right of first refusal, in its sole discretion, to act as sole investment banker, sole book-runner, and/or sole placement agent for all future public and private equity and debt offerings, including all equity-linked financings, other than in connection with certain current offerings being made by us (each, a “Subject Transaction”) on terms and conditions customary to the Representative for such transactions. The Representative will have the sole right to determine whether or not any other broker-dealer will have the right to participate in any such offering and the economic terms of any such participation. The Company may not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction without the express written consent of the Representative.

 

Indemnification

 

We have agreed to indemnify the several underwriters against certain liabilities, including certain liabilities under the Securities Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities. 

 

Other Relationships

 

Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

 

On April 24, 2023, the Company issued 2023 Convertible Notes together with the 2023 Warrants. In connection with the issuance of the 2023 Convertible Notes and 2023 Warrants, the Representative received sales commissions of approximately $50,000.

 

No Public Market

 

Prior to this offering, there has not been a public market for our common stock in the U.S. and the public offering price for our common stock will be determined through negotiations between us and the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.

 

We offer no assurances that the initial public offering price will correspond to the price at which our common stock will trade in the public market subsequent to this offering or that an active trading market for our common stock will develop and continue after this offering.

 

Stock Exchange

 

Our common stock, our Series A Warrants and our Series B Warrants are listed on the CBOE under the symbols “VHAI,” “VHAI+A” and “VHAI+B”.

 

Electronic Distribution

 

A prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters of this offering, or by their affiliates. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors. The underwriters may agree to allocate a number of Units for sale to its online brokerage account holders.

 

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Price Stabilization, Short Positions, and Penalty Bids

 

In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock during and after this offering, including:

 

stabilizing transactions;

 

short sales;

 

over-allotment transactions;

 

purchases to cover positions created by short sales;

 

imposition of penalty bids; and

 

syndicate covering transactions.

 

These stabilizing transactions, over-allotment transactions, syndicate covering transactions, and penalty bids may have the effect of raising or maintaining the market price of the Common Stock or Warrants or preventing or retarding a decline in the market price of the Common Stock or Warrants. As a result, the price of the Common Stock or Warrants may be higher than the price that might otherwise exist in the open market. Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock or Warrants. In addition, neither we nor the underwriters make any representations that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

 

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Affiliations

 

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and their affiliates may from time to time in the future engage with us and perform services for us or in the ordinary course of their business for which they will receive customary fees and expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of us. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of these securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in these securities and instruments. 

 

Offer Restrictions Outside the United States

 

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the common stock offered by this prospectus in any jurisdiction where action for that purpose is required. The common stock offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

 

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LEGAL MATTERS

 

The validity of the issuance of the securities offered by us in this offering will be passed upon for us by Sichenzia Ross Ference Carmel LLP, New York, NY. Certain legal matters will be passed upon for the underwriters by Sullivan & Worcester LLP, New York, NY.

 

Interests of named experts and counsel

 

As of the date of this prospectus, Carmel Milazzo & Feil LLP, with merged into and with our counsel, Sichenzia Ross Ference Carmel LLP, owns 281,000 shares of our common stock.

 

EXPERTS

 

The audited consolidated financial statements of Vocodia Holdings Corp (including CFM) as of December 31, 2022 and December 31, 2021, respectively, have been included in this Registration Statement and have been so included in reliance on the report of Rosenberg Rich Baker Berman, P.A., an independent registered public accounting firm, such report including an explanatory paragraph regarding our ability to continue as a going concern, given on the authority of said firm as experts in auditing and accounting.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the Securities and Exchange Commission a Registration Statement on Form S-1 under the Securities Act with respect to the securities offered by this prospectus. This prospectus, which is part of the registration statement, omits certain information, exhibits, schedules and undertakings set forth in the registration statement. For further information pertaining to us and our securities, reference is made to the registration statement and the exhibits and schedules to the registration statement. Statements contained in this prospectus as to the contents or provisions of any documents referred to in this prospectus are not necessarily complete, and in each instance where a copy of the document has been filed as an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matters involved.

 

Registration statements and certain other filings made with the Securities and Exchange Commission electronically are publicly available through the Securities and Exchange Commission’s website located at www.sec.gov. The registration statement, including all exhibits and amendments to the registration statement, has been filed electronically with the Securities and Exchange Commission.

 

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VOCODIA HOLDINGS CORP

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

VOCODIA HOLDINGS CORP

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

September 30, 2023

 

  Page
Condensed Consolidated Balance Sheets F-2
Condensed Consolidated Statements of Operations F-3
Condensed Consolidated Statements of Changes in Stockholder’s Equity (Deficit) F-4
Condensed Consolidated Statements of Cash Flows F-5
Notes to Condensed Consolidated Financial Statements F-6

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2022 and 2021

 

  Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 89) F-17
Consolidated Balance Sheets F-19
Consolidated Statements of Operations F-20
Consolidated Statements of Changes in Stockholder’s Equity F-21
Consolidated Statements of Cash Flows F-22
Notes to Consolidated Financial Statements F-23

 

F-1

 

 

Vocodia Holdings Corp

Condensed Consolidated Balance Sheets

(Unaudited)

 

    September 30,     December 31,  
    2023     2022  
ASSETS            
Current Assets            
Cash and cash equivalents   $