| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation The financial statements and related disclosures
have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial
statements have been prepared using the accrual basis of accounting in accordance with GAAP. Basis of Consolidation The financial statements have been prepared on
a consolidated basis with those of the Company’s wholly owned subsidiaries, Vocodia FL, LLC, Vocodia JV, LLC, and CFM. All intercompany
transactions and balances have been eliminated in consolidation. Reclassification Certain accounts from prior periods have been
reclassified to conform to the current period presentation. 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 December 31, 2023 and 2022,
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 December 31, 2023 and 2022 was approximately $0 and $447,626 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. 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 The Company recognizes 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.
The Company follows 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 currently 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 awards discounts to its customers on a discretionary basis. The Company will consider
additional revenue streams as its technology develops and new opportunities present. 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. 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, 2023
and 2022 (see Note 7):
December 31, 2023 Level 1 Level 2 Level 3 Carrying
Liabilities:
Derivative Liability – Warrants $ - $ - $ 1,698,135 $ 1,698,135
Derivative Liability – Conversion feature - - 224,744 224,744
Total Liabilities $ - $ - $ 1,922,879 $ 1,922,879
December 31, 2022 Level 1 Level 2 Level 3 Carrying
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 years
ended December 31, 2023 and 2022. 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 of December 31, 2023 and 2022, deferred offering
costs consisted of the following:
2023 2022
General and administrative cash expenses $ 153,976 $ 70,000
Share-based equity compensation 3,931,750 3,511,000
Total $ 4,085,726 $ 3,581,000 Advertising The Company expenses advertising costs as they
are incurred. Advertising expenses for the years ended December 31, 2023, and 2022 were $78,097 and $319,474, 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 Note 9. 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, 2023 and 2022, 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 years ended December 31, 2023 and 2022. 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 Warrants The Company accounts 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. 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,m
options and warrants 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. For the years ended December 31, 2023 and 2022,
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.
December 31 December 31
2023 2022
Shares Shares
Warrants 461,500 361,500
Convertible notes payable 1,507,531 580,094
Total common stock equivalents 1,969,031 941,594 Segment 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 December 2023, the FASB issued ASU 2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting
entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for the Company’s
fiscal years beginning after February 1, 2025, with early adoption permitted. The Company does not expect the adoption of this standard
to have any material impact on its financial statements. Recently Adopted 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, on January 1, 2023, did not have a material impact on its consolidated financial
statements. There have been no other recent accounting pronouncements,
changes in accounting pronouncements or recently adopted accounting guidance during the year ended December 31, 2023 that are of significance
or potential significance to the Company. |
