| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for
interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. They do not include
all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there has been no material
change in the information disclosed in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K
of Vocodia Holdings Corp for the year ended December 31, 2023. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months
ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. 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 June 30, 2024 and December
31, 2023, the Company had cash equivalents of $604,484 and $0, respectively. 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 June 30, 2024 was approximately $354,000. 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. 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. 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
(none for June 30, 2024):
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 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 June 30, 2024 and December 31, 2023, deferred
offering costs consisted of the following:
June 30, December 31,
General and administrative cash expenses $ - $ 153,976
Share-based equity compensation - 3,931,750
Total $ - $ 4,085,726 For the three months ended June 30, 2024, the
Company had no additional expense or deferred offering costs. For the six months ended June 30, 2024, the Company recognized additional
expenses of $24,375 and recorded $4,110,101 of deferred offering costs as a reduction to additional paid in capital, upon completion
of the IPO. Advertising The Company expenses advertising costs as they
are incurred. Advertising expenses for the three months ended June 30, 2024 and 2023, were $103,459 and $31,847, respectively. Advertising
expenses for the six months ended June 30, 2024 and 2023, were $229,368 and $46,471, 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. 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 Company includes in basic earnings per share, common stock that
is issuable for the conversion of warrants for little or no cash upon the satisfaction of certain contingent conditions. The Company has
determined that the Series B and C warrants meet these conditions as of June 30, 2024, and have included 126,140,138 (126,140,138
and 88,713,943 weighted for three and six months, respectively) shares of common stock as part of our basic earnings per share, for
the six months ended June 30, 2024. The dilutive effect of restricted stock units,
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 three and six months ended June 30,
2024 and 2023, 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. The number of shares is outstanding shares at June 30, 2024 and 2023.
June 30, June, 30
2024 2023
Shares Shares
Warrants 1,690,062 461,500
Convertible notes payable - 882,533
1,690,062 1,344,033 Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280,
“Segment Reporting-Improvements to Reportable Segment Disclosures” which allows disclosure of one or more measures of segment
profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires
enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an
annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting
periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The
Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included
within Notes to Condensed Consolidated Financial Statements. 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. |
