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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to __________

 

Commission file number 000-53851

 

Mobivity Holdings Corp.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada

 

26-3439095

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

3133 West Frye Road, # 215

Chandler, Arizona 85226

(Address of Principal Executive Offices)

 

(877) 282-7660

(Registrant’s Telephone Number, including Area Code)

 

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

None

None

None

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

  

Emerging Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

 

As of August 15, 2022, the registrant had 59,661,385 shares of common stock, par value $0.001 per share,  issued and outstanding. 

 

 

 

 

MOBIVITY HOLDINGS CORP.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

1

Item 1. Financial Statements

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Condensed Consolidated Financial Statements

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

18

Item 4. Controls and Procedures.

18

PART II – OTHER INFORMATION

19

Item 6. Exhibits

19

SIGNATURES

20

 

 

 

 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Mobivity Holdings Corp.

Condensed Consolidated Balance Sheets

 

  

June 30,

  

December 31,

 
  

2022

  

2021

 
  

(Unaudited)

  

(Audited)

 

ASSETS

        

Current assets

        

Cash

 $1,091,460  $735,424 

Accounts receivable, net of allowance for doubtful accounts of $46,512 and $56,340, respectively

  828,170   578,303 

Other current assets

  353,694   227,458 

Total current assets

  2,273,324   1,541,185 

Goodwill

  411,183   411,183 

Right to use lease assets

  1,081,388   1,187,537 

Intangible assets, net

  907,982   1,124,720 

Other assets

  153,572   173,325 

TOTAL ASSETS

 $4,827,449  $4,437,950 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

        

Current liabilities

        

Accounts payable

 $3,604,508  $3,823,909 

Accrued interest

  444,135   172,239 

Accrued and deferred personnel compensation

  178,210   495,533 

Deferred revenue and customer deposits

  302,979   377,170 

Related party notes payable

  1,181,250   819,531 

Notes payable, net - current maturities

  41,560   69,052 

Operating lease liability

  240,064   229,240 

Other current liabilities

     9,071 

Total current liabilities

  5,992,706   5,995,745 
         

Non-current liabilities

        

Related party notes payable, net - long term

  2,633,032   2,498,711 

Notes payable, net - long term

  49,373   39,086 

Operating lease liability

  1,065,155   1,188,589 

Total non-current liabilities

  3,747,560   3,726,386 

Total liabilities

  9,740,266   9,722,131 
         

Stockholders' equity (deficit)

        

Common stock, $0.001 par value; 100,000,000 shares authorized; 59,661,385 and 55,410,695, shares issued and outstanding

  59,661   55,411 

Equity payable

  100,862   100,862 

Additional paid-in capital

  106,699,502   102,446,921 

Accumulated other comprehensive income (loss)

  (52,722)  (52,088)

Accumulated deficit

  (111,720,120)  (107,835,287)

Total stockholders' equity (deficit)

  (4,912,817)  (5,284,181)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 $4,827,449  $4,437,950 

 

See accompanying notes to consolidated financial statements.

 

 

1

 

 

Mobivity Holdings Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2022

  

2021

  

2022

  

2021

 

Revenues

                

Revenues

 $1,867,162  $2,792,828  $3,896,731  $5,250,418 

Cost of revenues

  1,202,749   1,272,141  $2,377,697   2,313,936 

Gross profit

  664,413   1,520,687   1,519,034   2,936,482 
                 

Operating expenses

                

General and administrative

  897,984   957,400   2,105,160   2,246,770 

Sales and marketing

  566,270   1,111,693   1,163,771   2,008,443 

Engineering, research, and development

  873,836   674,035   1,576,059   1,397,985 

Goodwill impairment

            

Impairment of intangible asset

           8,286 

Depreciation and amortization

  110,421   183,584   234,733   341,811 

Total operating expenses

  2,448,511   2,926,712   5,079,723   6,003,295 
                 

Loss from operations

  (1,784,098)  (1,406,025)  (3,560,689)  (3,066,813)
                 

Other income/(expense)

                

Interest income

           5 

Interest expense

  (167,126)  (23,867)  (326,953)  (56,383)

Loss on disposal of fixed assets

     (880)     (880)

Foreign currency gain (loss)

  (510)  (1,774)  2,809   (2,248)

Total other income/(expense)

  (167,636)  (26,521)  (324,144)  (59,506)

Loss before income taxes

  (1,951,734)  (1,432,546)  (3,884,833)  (3,126,319)

Income tax expense

            

Net loss per share:

  (1,951,734)  (1,432,546)  (3,884,833)  (3,126,319)

Other comprehensive loss, net of income tax

                

Foreign currency translation adjustments

  12,261   (9,241)  (634)  (18,919)

Comprehensive loss

 $(1,939,473) $(1,441,787) $(3,885,467) $(3,145,238)

Net loss per share:

                

Basic and Diluted

 $(0.03) $(0.03) $(0.07) $(0.06)

Weighted average number of shares:

                

Basic and Diluted

  58,602,319   55,410,695   57,921,596   55,410,695 

 

See accompanying notes to consolidated financial statements (unaudited).

 

2

 

 

Mobivity Holdings Corp.

Condensed Consolidated Statement of Stockholders Equity (Deficit)

(Unaudited)

 

  

Common Stock

  

Equity

  

Additional Paid-in

  

Accumulated Other Comprehensive

  

Accumulated

  

Total Stockholders' Equity

 
  

Shares

  

Dollars

  

Payable

  

Capital

  

Loss

  

Deficit

  

(Deficit)

 

Balance, December 31, 2020

  55,410,695  $55,411  $100,862  $101,186,889  $(23,446) $(99,575,503) $1,744,213 

Fair value of options issued with related party debt

           $119,103        $119,103 

Stock based compensation

           504,076         504,076 

Foreign currency translation adjustment

              (18,919)     (18,919)

Net loss

                 (3,126,319)  (3,126,319)

Balance, June 30, 2021

  55,410,695  $55,411  $100,862  $101,810,068  $(42,365) $(102,701,822) $(777,846)

 

 

   

Common Stock

   

Equity

   

Additional Paid-in

   

Accumulated Other Comprehensive

   

Accumulated

   

Total Stockholders' Equity

 
   

Shares

           

Payable

   

Capital

   

Loss

   

Deficit

   

(Deficit)

 

Balance, December 31, 2021

    55,410,695     $ 55,411     $ 100,862     $ 102,446,921     $ (52,088 )   $ (107,835,287 )     (5,284,181 )

Issuance of common stock for warrant exercise

    3,188,190       3,188             2,547,364                   2,550,552  

Issuance of common stock for PIPE financing

    1,062,500       1,062             848,937                   849,999  

Fair value of options issued with related party debt

                      54,855                   54,855  

Stock based compensation

                      801,425                   801,425  

Foreign currency translation adjustment

                            (634 )           (634 )

Net loss

                                  (3,884,833 )     (3,884,833 )

Balance, June 30, 2022

    59,661,385     $ 59,661     $ 100,862     $ 106,699,502     $ (52,722 )   $ (111,720,120 )   $ (4,912,817 )

 

See accompanying notes to consolidated financial statements (unaudited).

 

3

 

 

Mobivity Holdings Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

  

Six Months Ended

 
  

June 30,

 
  

2022

  

2021

 

OPERATING ACTIVITIES

        

Net loss

 $(3,884,833) $(3,126,319)

Adjustments to reconcile net loss to net cash used in operating activities:

        

Bad debt expense

  18,631   61,834 

Stock-based compensation

  801,425   504,076 

Loss on Disposal of Fixed Assets

     880 

Intangible asset impairment

     8,286 

Depreciation and amortization expense

  241,191   295,287 

Amortization of Debt Discount

  50,895    

Increase (decrease) in cash resulting from changes in:

        

Accounts receivable

  (268,498)  (1,308,619)

Other current assets

  (123,940)  (38,087)

Operating lease assets/liabilities

  (6,461)  46,525 

Contracts receivable, long-term

     471,952 

Other assets

     3,556 

Accounts payable

  (219,401)  1,361,286 

Accrued interest

  271,896   (1,242)

Accrued and deferred personnel compensation

  (317,323)  201,819 

Other liabilities - non-current

     (277,178)

Other liabilities - current

  (9,071)  1,411 

Deferred revenue and customer deposits

  (74,191)  (97,861)

Net cash used in operating activities

 $(3,519,680) $(1,892,394)
         

INVESTING ACTIVITIES

        

Purchases of equipment

  (6,993)  (78,458)

Capitalized software development costs

     (190,699)

Net cash used in investing activities

  (6,993)  (269,157)
         

FINANCING ACTIVITIES

        

Payments on notes payable

  (15,947)  (436,426)

Payments on related party notes payable

     (80,000)

Proceeds from related party debt

  500,000   1,280,000 

Proceeds from conversion of common stock warrants

  2,550,552    

Proceeds from PIPE funding

  849,999    

Net cash provided by (used in) financing activities

  3,884,604   763,574 
         

Effect of foreign currency translation on cash flow

  (1,895)  (10,549)
         

Net change in cash

  356,036   (1,408,526)

Cash at beginning of period

  735,424   3,282,820 
   1,091,460   1,874,294 

Supplemental disclosures:

        

Cash paid during period for:

        

Lease adoption

 $  $101,375 

Non cash investing and financing analysis:

        

Fair Value of Options issued with related party debt

 $54,855  $0 

Refinancing of debt-related party

 $  $543,750 

Fixed Asset Contribution by Lessor

 $  $110,000 

Initial ROU and asset and lease liability

 $  $1,458,527 

Debt Discount on related party debt

 $  $119,103 

 

See accompanying notes to consolidated financial statements.

 

4

 

Mobivity Holdings Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

1. Nature of Operations and Basis of Presentation

 

Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets, PCs, and Point of Sale (“POS”) systems, allow resellers, brands and enterprises to market their products and services to consumers through text messages sent directly to consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. On November 14, 2018, we completed the acquisition of certain operating assets relating to Belly, Inc.’s proprietary digital customer loyalty platform, including client contracts, accounts receivable and intellectual property. We generate revenue by charging the resellers, brands and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended  December 31, 2021filed with the SEC on March 30, 2022.

 

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year ending December 31, 2022.

 

 

2. Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

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 and the reported amounts of expenses during the reporting period. Significant estimates used are those related to stock-based compensation, asset impairments, the valuation and useful lives of depreciable tangible and certain intangible assets, the fair value of common stock used in acquisitions of businesses, the fair value of assets and liabilities acquired in acquisitions of businesses, the fair value of options issued with related party debt, and the valuation allowance of deferred tax assets. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications had no effect on previously reported net loss.

 

Acquisitions

 

We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

 

Cash and Cash Equivalents

 

We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.

 

Accounts Receivable, Allowance for Doubtful Accounts and Concentrations

 

Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.

 

As of June 30, 2022, and December 31, 2021, we recorded an allowance for doubtful accounts of $46,512 and $56,340, respectively.

 

Goodwill and Intangible Assets

 

Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than it’s carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.

 

We conducted our annual impairment tests of goodwill as of December 31, 2021. As a result of these tests, we had a total impairment charges of $85,169.

 

Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one year to twenty years. No significant residual value is estimated for intangible assets.

 

The Company’s evaluation of its long-lived assets resulted in $0 and $8,286 of intangible impairment expense during the quarters ended June 30, 2022 and June 30, 2021.

 

5

 

Software Development Costs

 

Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. Technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered ‘research and development’ that are not capitalized are immediately charged to engineering, research, and development expense.

 

Capitalized costs for those products that are cancelled or abandoned are charged to product development expense in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to “Amortization Expense - Development” based on the straight-line method over a twenty-four month period.

 

The Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its capitalized software development assets resulted in impairment charges of $0 for the quarter ended June 30, 2022 and $0 for the year ended December 31, 2021.

 

Impairment of Long-Lived Assets

 

We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.

 

Foreign Currency Translation

 

The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.

 

Revenue Recognition and Concentrations

 

Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.

 

Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.

 

We determine revenue recognition under ASC 606 through the following steps:

 

 

identification of the contract, or contracts, with a customer;

 

identification of the performance obligations in the contract;

 

identification of the transaction price;

 

allocation of the transaction price to the performance obligations in the contract; and

 

recognition of revenue when, or as, we satisfy a performance obligation.

 

During the six months ended June 30, 2022 and 2021, two customers accounted for 49% and 66% of our revenues, respectively.

 

Comprehensive Income (Loss)

 

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at comprehensive loss. For the six months ended June 30, 2022 and 2021, the comprehensive loss was $3,885,467, and $3,145,238 respectively.

 

Stock-based Compensation

 

We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.

 

Research and Development Expenditures

 

Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.

 

Advertising Expense

 

Direct advertising costs are expensed as incurred and consist primarily of E-commerce advertisements, sales enablement, content creation, and other direct costs. Advertising expense was $188,825 and $368,219 for the six months ended June 30, 2022 and 2021, respectively. We also include the cost of attending trade shows under marketing expense. We recorded $12,300 and $4698 of expense related to those activities for the six months ended June 30, 2022 and 2021, respectively.

 

6

 

Income Taxes

 

We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.

 

Net Loss Per Common Share

 

Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and six months ended June 30, 2022 and 2021, we had securities outstanding which could potentially dilute basic earnings per share in the future. Those were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.

 

Recent Accounting Pronouncements

 

Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following are a summary of recent accounting developments.

 

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on  January 1, 2022.

 

 

3. Going Concern

 

We have $1,091,460 of cash as of June 30, 2022. We had a net loss of $2.0 million for the period then ended, and we used $3.5 million of cash in our operating activities during the period ended June 30, 2022. In 2021, we had a net loss of $8.3 million and used $4.5 million of cash in our operating expenses. We raised $2,550,553 in cash from the exercise of warrants in February 2022. There is substantial doubt that our additional cash from our warrant conversion along with our expected cash flow from operations, will be sufficient to fund our 12-month plan of operations. There can be no assurance that we will not require significant additional capital within 12 months.

 

As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $111,720,120 as of June 30, 2022. Further losses are anticipated in the development of the Company’s business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with proceeds from the sale of securities, and/or revenues from operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

 

4. Goodwill and Purchased Intangibles

 

Goodwill

 

The carrying value of goodwill at each of  June 30, 2022 and  December 31, 2021 was $411,183.

 

The following table presents details of our purchased intangible assets as of June 30, 2022 and  December 31, 2021:

 

Intangible assets

 

  Balance at December 31, 2021  

Additions

  

Impairments

  

Amortization

  

Fx and Other

  Balance at June 30, 2022 

Patents and trademarks

 $57,595  $  $  $(48,426) $3  $9,172 

Customer and merchant relationships

  545,533        $(4,521)     541,012 

Trade names

  32,393        $(8,150)     24,243 

Acquired technology

  112,191        $(7,930)     104,261 

Non-compete agreements

  29,212        $(2,451)     26,761 
  $776,924  $  $  $(71,478) $3  $705,449 

 

The intangible assets are being amortized on a straight-line basis over their estimated useful lives of one year to twenty years.

 

Amortization expense for intangible assets was $32,590 and $35,736 for the three months ended June 30, 2022 and 2021, respectively.

 

Amortization expense for intangible assets was $71,478 and $71,740 for the six months ended June 30, 2022 and 2021, respectively.

 

The estimated future amortization expense of our intangible assets as of June 30, 2022 is as follows:

 

Year ending December 31,

 

Amount

 

2022

  $ 74,059  

2023

    145,606  

2024

    109,009  

2025

    101,261  

2026

    101,261  

Thereafter

    174,253  

Total

  $ 705,449  

 

 

7

 

 

5. Software Development Costs

 

The Company has capitalized certain costs for software developed or obtained for internal use during the application development stage as it relates to specific contracts. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities

 

The following table presents details of our software development costs as of June 30, 2022 and  December 31, 2021:

 

  Balance at December 31, 2021  

Additions

  

Amortization

  Balance at June 30, 2022 

Software Development Costs

 $347,796  $  $(145,263) $202,533 
  $347,796  $  $(145,263) $202,533 

 

Software development costs are being amortized on a straight-line basis over their estimated useful life of two years.

 

Amortization expense for software development costs was $71,974 and $105,539 for the three months ended June 30, 2022 and 2021, respectively.

 

Amortization expense for software development costs was $145,263 and $204,748 for the six months ended June 30, 2022 and 2021, respectively.

 

The estimated future amortization expense of software development costs as of June 30, 2022 is as follows:

 

Year ending December 31,

 

Amount

 

2022

 $110,238 

2023

  92,288 

2024

  7 

2025

   

2026

   

Thereafter

   

Total

 $202,533 

 

 

 

 

6. Operating Lease Assets

 

The Company entered into a lease agreement on February 1, 2021 for 8,898 square feet, for its office facilities in Chandler, AZ through January 2027. Monthly rental payments, excluding common area maintenance charges, are $25,953 to $28,733. The first twelve months of the lease included a 50% abatement period and a deposit for $110,000 was required. The lessor contributed $110,000 towards the purchase of office furniture as part of the lease agreement. As of June 30, 2022, we have an operating lease asset balance of $1,081,388 and an operating lease liability balance of $1,305,219 recorded in accordance with ASC 842, Leases (ASC "842").

 

The following are additional details related to leases recorded on our balance sheet as of June 30, 2022:

 

Leases

Classification

 Balance at June 30, 2022 

Assets

     

Current

     

Operating lease assets

Operating lease assets

 $ 

Noncurrent

     

Operating lease assets

Noncurrent operating lease assets

 $1,081,388 

Total lease assets

 $1,081,388 
      

Liabilities

     

Current

     

Operating lease liabilities

Operating lease liabilities

 $240,064 

Noncurrent

     

Operating lease liabilities

Noncurrent operating lease liabilities

 $1,065,155 

Total lease liabilities

 $1,305,219 

 

 

The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term and weighted average discount rate:

 

Year ending December 31,

    

2022

 $159,052 

2023

  324,221 

2024

  330,894 

2025

  337,568 

2026

  344,241 

Thereafter

  28,733 

Total future lease payments

  1,524,709 

Less: imputed interest

  (219,490)

Total

 $1,305,219 

 

Weighted Average Remaining Lease Term (years)

    

Operating leases

  5.6 
     

Weighted Average Discount Rate

    

Operating leases

  6.75%

 

8

 

 

 

7. Notes Payable and Interest Expense

 

The following table presents details of our notes payable as of June 30, 2022 and  December 31, 2021:

 

Facility

 

Maturity

 

Interest Rate

  Balance at June 30, 2022  Balance at December 31, 2021 

ACOA Note

 

February 1, 2024

     59,860   76,642 

TD Bank

 

December 31, 2022

     31,072   31,496 

Related Party Note

 

various

  15%  3,814,283   3,318,242 

Total Debt

      3,905,215   3,426,380 

Less current portion

      (1,222,810)  (888,583)

Long-term debt, net of current portion

     $2,682,405  $2,537,797 

 

ACOA Note

 

On November 6, 2017, Livelenz (a wholly-owned subsidiary of the Company), entered into an amendment of the original agreement dated December 2, 2014 with the Atlantic Canada Opportunities Agency (“ACOA”). Under this agreement the note will mature, and the commitments will terminate on February 1, 2024. The monthly principal payment amount of $3,000 CAD increased to $3,500 CAD beginning on November 1, 2019, $4,000 CAD on August 1, 2021, $4,500 CAD on August 1, 2022, and $2,215 CAD during the remaining term of the agreement. Payments from April- December of 2020 were voluntarily deferred by ACOA due to COVID-19. During the six months ended June 30, 2022 we repaid $16,783 USD of principal.

 

TD Bank Loan

 

On April 22, 2020, we entered into a commitment loan with TD Bank under the Canadian Emergency Business Account (“CEBA”), in the principal aggregate amount of $40,000 CAD, which is due and payable on December 31, 2022. This note bears interest on the unpaid balance at the rate of zero percent (0%) per annum during the initial term. Under this note no interest or principal payments are due until January 1, 2023. Under the conditions of the loan, twenty-five percent (25%) of the loan will be forgiven if seventy-five percent (75%) is repaid prior to the initial term date.

 

Related Party Notes

 

On February 26, 2020, we issued an unsecured note (the "Initial Note") in the principle aggregate amount of $200,000, which becomes due two years after the date of issuance. This Initial Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this Initial Note without notice, subject to a two percent (2%) pre-payment penalty.

 

On November 18, 2020, we issued two additional unsecured notes (the "Additional Notes)" in the principle aggregate amount of $500,000, together with the Initial Note, the "Notes" become due two years after the date of issuance. These additional Notes bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay these Additional Notes without notice, subject to a two percent (2%) pre-payment penalty.

 

On December 31, 2020 $1,200,000 of the Notes and the accrued interest of $192,208 was settled into equity and we recorded a loss on settlement of debt of $668,260 for the year ended December 31, 2020. In summary, as of December 31, 2020, we have a principal balance of $580,000 and accrued interest of $42,492 outstanding.

 

On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with one of the Company’s directors. The Company can borrow up to $4,550,000 under this Credit Agreement. On November 19, 2021, a payment of $200,000 was paid toward the principal balance of the loan. The loan is secured by all of our tangible and intangible assets including intellectual property. We will begin repaying the principal amount, plus accrued interest, in 24 equal monthly installments commencing on June 30, 2022, and ending on June 30, 2024. This loan bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this loan without notice, penalty or charge. In consideration of the lender’s agreement to provide the facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67 per share in connection with the issuance of funds under this Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the lender additional warrants entitling the lender to purchase a number of shares of the Company's common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume weighted average price over the 30 trading days preceding the advance ( the "VWAP"). Each warrant will be exercisable over a three year period at an exercise price equal to the VWAP.

 

During the twelve month period ending  December 31, 2021, the Company issued warrants to purchase an aggregate of 600,570 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under this Credit Agreement. The estimated aggregate fair value of the warrants issued is $262,758 using the Black-Scholes option valuation model as of  December 31, 2021
.
On July  1, 2021 we entered into Unsecured Promissory Notes (each individually, a “UP Note” and collectively, the “UP Notes”) in the aggregate principal amount of $271,875 to certain investors, officers and directors of the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent ( 15%) per annum and the principal and accrued interest is due and payable no later than July  1, 2023. We may prepay any of the UP Notes without notice, subject to a two percent ( 2%) pre-payment penalty. The UP Note offer was conducted by our management and there were no commissions paid by us in connection with the solicitation. The Company issued warrants to purchase an aggregate of 33,017 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under this Credit Agreement.

 

On June 10, 2022, The Company took a draw of an additional $500,000 under the Credit Agreement.  As of June 30, 2022, the company has drawn a total of $3,978,125 including cash in the amount of $3,706,250 and $271,875 of principal and accrued interest under the above-described UP Notes which were rolled into the credit facility, and we have accrued interest of $439,968.

 

Interest Expense

 

Interest expense was $167,126 and $23,867 during the three months ended June 30, 2022 and 2021, respectively.

 

Interest expense was $326,953 and $56,383 during the six months ended June 30, 2022 and 2021, respectively.

 

9

 

 

8. Stockholders Equity

 

Common Stock

 

2021

 

During the year ended December 31, 2021, the Company did not issue any shares but, recorded stock-based compensation expense of $260,005 related to restricted stock units for members of our board of directors. The company recorded stock-based compensation expense of $187,501 related to restricted stock units for employee compensation.

 

2022

 

On  February 9, 2022 17 warrant holders exercised their common stock purchase warrant for 3,188,190 shares at the exercise price of $0.80 per share, resulting in additional capital of $2,550,552. As an inducement for the holders' exercise of the warrants, we issued the holders 3,188,190 new warrants to purchase common stock at $1.50 per share over a three year period expiring in  February 2025. We have recorded additional stock-based expense of $382,048.

 

On June 29, 2022 the Company received private investment funds to purchase 1,062,500 shares of its common stock at a price of  $0.80 per share, resulting in additional capital of $849,999.and issued the holders 1,062,500 new warrants to purchase common stock at $1.50 per share over a three year period expiring in June 2025.

 

During the six months ended June 30, 2022 the Company recorded stock-based compensation expense of  $ 130,004related to restricted stock units for members of our board of directors. The company recorded stock-based compensation expense of $289,373 related to stock units for employee compensation.

 

As of June 30, 2022 we had an equity payable balance of $100,862.

 

 

Stock-based Plans

 

Stock Option Activity

 

The following table summarizes stock option activity for the six months ended June 30, 2022.

 

  

Options

 

Outstanding at December 31, 2020

  6,007,552 

Granted

  637,500 

Exercised

   

Forfeited/canceled

  (272,029)

Expired

  (126,557)

Outstanding at December 31, 2021

  6,246,466 

Granted

  195,000 

Exercised

   

Forfeited/canceled

  (224,375)

Expired

  (10,250)

Outstanding at June 30, 2022

  6,206,841 

 

The weighted average exercise price of stock options granted during the period was $0.83 and the related weighted average grant date fair value was $0.54 per share.

 

2021

 

On March 26, 2021, the Company granted five employees a total of 67,500 options to purchase shares of the Company common stock at the closing price as of March 26, 2021 of $1.80 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 26, 2031. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.97% and an option fair value of $1.16 was $78,492.

 

On May 2, 2021, the Company granted one employee a total of 20,000 options to purchase shares of the Company common stock at the closing price as of May 2, 2021, of $1.48 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until May 2, 2031. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.79% and an option fair value of $0.93 was $18,628.

 

On August 11, 2021, the Company granted one employee a total of 5,000 options to purchase shares of the Company common stock at the closing price as of August 11, 2021, of $1.75 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until August 11, 2031. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.29% and an option fair value of $1.12 was $5,606.

 

2022

 

On March 29, 2022, the Company granted one employee 150,000 options to purchase shares of the Company common stock at the closing price as of March 29, 2022, of $0.8289 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 72.33% and an option fair value of $0.54 was $81,035.

 

On May 16, 2022, the Company granted three employees      45,000 options to purchase shares of the Company common stock at the closing price as of May 16, 2022, of $0.97 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.45% and an option fair value of $0.642608 was $28,917.

 

10

 

Stock-Based Compensation Expense from Stock Options and Warrants

 

The impact on our results of operations of recording stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 were as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2022

  

2021

  

2022

  

2021

 

General and administrative

 $377,415  $79,758  $505,661  $163,888 

Sales and marketing

  22,344   31,068   35,211   63,813 

Engineering, research, and development

  64,059   43,606   130,549   86,658 
  $463,818  $154,432  $671,421  $314,359 

 

Valuation Assumptions

 

The fair value of each stock option award was calculated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for the six months ended June 30, 2022 and 2021.

 

  

Six Months Ended

 
  

June 30,

 
  

2022

  

2021

 

Risk-free interest rate

  2.55%  1.01%

Expected life (years)

  6.00   6.00 

Expected dividend yield

  %  %

Expected volatility

  72.59%  74.16%

 

The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.

 

The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of the Company's stock-based awards.

 

The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.

 

The expected volatility in 2022 and 2021 is based on the historical publicly traded price of our common stock.

 

 

Restricted stock units

 

The following table summarizes restricted stock unit activity under our stock-based plans for the year ended  December 31, 2021 and for the six months ended June 30, 2022:

 

  

Shares

 

Outstanding at December 31, 2020

  1,436,728 

Awarded

  654,663 

Released

   

Canceled/forfeited/expired

  (406,250)

Outstanding at December 31, 2021

  1,685,141 

Awarded

  132,588 

Released

   

Canceled/forfeited/expired

   

Outstanding at June 30, 2022

  1,817,729 
     

Expected to vest at June 30, 2022

  1,817,729 

Vested at June 30, 2022

  1,817,729 

Unvested at June 30, 2022

   

Unrecognized expense at June 30, 2022

 $ 

 

2021

 

On March 26, 2021, the Company issued to four independent directors a total of 36,112 restricted stock units. These restricted stock units were issued for the $65,000 of board compensation earned for the first quarter of 2021. The units were valued at $65,002 or $1.80 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of common stock associated with the restricted stock Unit evidenced by this Agreement will be issued to each director upon the earliest to occur of (A) March 26, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

On March 26, 2021, the Company granted to one employee 1,000,000 restricted shares of the Company’s common stock at $1.80, the closing price as of March 26, 2021. The restricted stock will vest as follows (a) 50% of the restricted shares will vest ratably over forty eight months; (b) 15% of the restricted shares will vest upon the Company achieving $25,000,000 in annualized recurring revenues as reported by totaling all contracted revenues for the trailing 12 months following the end of a reporting quarter; (c) the final 35% of the restricted shares will vest upon the Company achieving $50,000,000 in annualized recurring revenues as reported by totaling all contracted revenues for the trailing 12 months following the end of a reporting quarter. Vesting is dependent on the employee’s continued employment with the Company. All of the 1,000,000 restricted shares will include a single trigger accelerated vesting should the Company undergo a change of control after August 1, 2021. If the Company undergoes a change of control prior to August 1, 2021, 300,000 of the restricted shares would be eligible for single trigger accelerated vesting.

On May 12, 2021, the Company issued to four independent directors a total of 38,924 restricted stock units. These restricted stock units were issued for the $65,000 of board compensation earned for the second quarter of 2021. The units were valued at $65,002 or $1.67 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of common stock associated with the restricted stock unit evidenced by this Agreement will be issued to each director upon the earliest to occur of (A) May 2, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

11

 

On August 11, 2021, the Company issued to four independent directors a total of 37,143 restricted stock units. These restricted stock units were issued for the $65,000 of board compensation earned for the third quarter of 2021. The units were valued at $65,000 or $1.75 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of common stock associated with the restricted stock unit evidenced by this Agreement will be issued to each director upon the earliest to occur of (A) , August 11, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

On December 15, 2021, the Company granted four independent directors a total of 42,484 restricted stock units. The units were valued at $65,000 or $1.53 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of common stock associated with the restricted stock unit evidenced by this Agreement will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

2022

 

On March 29, 2022 the company grated granted four independent directors a total of 78,420 restricted stock units. The units were valued at $65,002 or $0.829 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of common stock associated with the restricted stock unit evidenced by this Agreement will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

On May 16, 2022 the company grated granted four independent directors a total of 54,168 restricted stock units. The units were valued at $65,002 or $1.20 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of common stock associated with the restricted stock unit evidenced by this Agreement will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

In the six months ended June 30, 2022, the company recorded $ 130,004 in restricted stock units as board compensation.

 

Stock Based Compensation from Restricted Stock

 

The impact on our results of operations of recording stock-based compensation expense for restricted stock units for the three and six months ended June 30, 2022 and 2021 was as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2022

  

2021

  

2022

  

2021

 

General and administrative

 $65,002  $65,003  $130,004  $130,005 

Sales and marketing

 $  $56,018  $  $59,712 
  $65,002  $121,021  $130,004  $189,717 

 

As of June 30, 2022, there was no unearned restricted stock unit compensation.

 

Warrants

 

The following table summarizes investor warrants as of June 30, 2022 and the years ended for the years ended December 31, 2021 and 2020:

 

  

Shares

  

Weighted Average Exercise Price

  

Weighted Average Remaining Contractual Term (Years)

 

Outstanding at December 31, 2020

  2,691,459  $1.99   2.94 

Granted

  580,231  $    

Exercised

    $    

Canceled/forfeited/expired

  (25,000) $    

Outstanding at December 31, 2021

  3,246,690  $2.26   3.59 

Granted

  4,368,905  $    

Exercised

  (3,188,190) $    

Canceled/forfeited/expired

    $    

Outstanding at June 30, 2022

  4,427,405  $2.72   2.02 

 

 

2020

 

On March 2, 2020 one warrant holder exercised their common stock purchase warrant for 234,500 shares at the exercise price of $1.00 per share, resulting in additional capital of $234,500. In December 2020, warrant holders exercised warrants to purchase common stock at $1.25 per share. At the commencement of the December warrant exercise, there were warrants outstanding that entitled their holders to purchase 2,691,459 shares of our common stock at exercise prices of $1.25 per share. Pursuant to the offer, warrant holders exercised warrants to purchase 2,666,459 shares of our common stock, resulting in additional capital of $3,333,074. As part of the exercise, 2,666,459 new warrants were issued to purchase common stock at $2.00 per share within three years.

 

2021

 

On June 30, 2021, the company issued warrants to purchase an aggregate of 227,994 shares of its common stock at an exercise price of $1.67 per share for 119,760 inducement warrants and VWAP for 108,234 additional warrants in connection with the issuance of a loan by a related party. The warrants are exercisable for a period commencing upon issuance of the notes and ending 36 months after issuance of the financing. The estimated aggregate fair value of the warrants issued is $119,103 using the Black-Scholes option valuation model.

 

On August 11, 2021 the company issued warrants of in connection with loan by related party VWAP for 10,072 additional warrants in connection with the issuance of a loan by a related party. The warrants are exercisable for a period commencing upon issuance of the notes and ending 36 months after issuance of the financing. The estimated aggregate fair value of the warrants issued is $5,285 using the Black-Scholes option valuation model

 

As of September 30, 2021, we had outstanding warrants to purchase 2,666,459 shares of common stock at $2.06 per share. These warrants expire in 2023. We also have outstanding warrants to purchase 238,066 shares of common stock at stated price per share in connection with the issuance of a loan with a related party. These warrants expire in 2024.

 

12

 

2022

 

On  February 9, 2022 17 warrant holders exercised their common stock purchase warrant for 3,188,190 shares at the exercise price of $0.80 per share, resulting in additional capital of $2,550,553. As an inducement for the holder’s exercise of the warrants, we issued the holders 3,188,190 new warrants to purchase common stock at $1.50 per share over a three year period expiring in  February 2025. The company recorded $382,048 of stock-based expense related to warrants issued during the warrant conversion offer on February 9, 2022. 

 

On June 29, 2022 six private investors purchased 1,062,500 new warrants to purchase common stock at $1.50 per share over a three year period expiring in  February 2025, and 1,062,500 shares at the exercise price of $0.80 per share, resulting in additional capital of $850,000

 

During the six month period ending June 30, 2022, The Company issued warrants to purchase an aggregate of 118,215 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under the Credit Agreement. The estimated aggregate fair value of the warrants issued is $55,855 using the Black-Scholes option valuation model as of June 30, 2022

 

 

 

9. Fair Value Measurements

 

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. This hierarchy requires companies to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value.

 

The following table presents assets that are measured and recognized at fair value as of June 30, 2022 on a recurring and non-recurring basis:

 

Description

 

Level 1

  

Level 2

  

Level 3

  

Gains (Losses)

 

Goodwill (non-recurring)

 $  $  $411,183  $ 

Intangibles, net (non-recurring)

 $  $  $907,982  $ 

 

The following table presents assets that are measured and recognized at fair value as of  December 31, 2021 on a recurring and non-recurring basis:

 

Description

 

Level 1

  

Level 2

  

Level 3

  

Gains (Losses)

 

Goodwill (non-recurring)

 $  $  $411,183  $ 

Intangibles, net (non-recurring)

 $  $  $1,124,720  $ 

 

 

10. Commitments and Contingencies

 

Litigation

 

As of the date of this report, there are no pending legal proceedings to which we or our properties are subject, except for routine litigation incurred in the normal course of business.

 

Operating Lease

 

As described in Note 6, the Company has a lease agreement for 8,898 square feet, for its office facilities in Chandler, AZ through January 2027. Monthly rental payments, excluding common area maintenance charges, are $25,953 to $28,733. The first 12 months of the lease includes a 50% abatement period. As of June 30, 2022, we have an operating lease asset balance for this lease of $1,081,388and an operating lease liability balance for this lease of $1,305,219recorded in accordance with ASC 842.

 

11. Related Party Transactions

 

Unsecured Promissory Note Investments

 

2021

 

On July 1, 2021 we entered into an Unsecured Promissory Notes (each, individually, a “UP Note” and collectively, the “UP Notes”) in the aggregate principal amount of $271,875 to certain investors, officers and directors of the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest is due and payable no later than July 1, 2023. We may prepay any of the UP Notes without notice, subject to a two percent (2%) pre-payment penalty. The UP Note offer was conducted by our management and there were no commissions paid by us in connection with the solicitation. The Company issued warrants to purchase an aggregate of 33,017 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under the Credit Agreement.

 

Secured Promissory Note Investments

 

2021

 

On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with one of the Company’s directors. The Company can borrow up to $3,500,000 under this Credit Agreement. On November 19, 2021, a payment of $200,000 was paid toward the principal balance of the note. On November 19, 2021, a payment of $200,000 was paid toward the principal balance of the note. As of June 30, 2022, the company has drawn a total of $3,978,125 including cash in the amount of $3,706,250 and $271,875 of principal and accrued interest under the above-described UP Notes which were rolled into the credit facility. The loan is secured by all of our tangible and intangible assets, including intellectual property. We will repay the principal amount, plus accrued interest in 24 equal monthly installments commencing on December 31, 2022 and ending on December 31, 2024. This loan bears interest on unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this loan without notice, penalty or charge. In consideration of the lender’s agreement to provide the facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67 per share in connection with the issuance of funds under this Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the lender additional warrants entitling the lender to purchase a number of shares of the Company's common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume weighted average price over the 30 trading days preceding the advance (VWAP). Each warrant will be exercisable over a three year period at an exercise price equal to the VWAP.

 

2022

 

On June 10, 2022 the Company took a draw of an additional $500,000 under the Credit Agreement As of June 30, 2022, the Company has drawn a total of $3,978,125 including cash in the amount of $3,706,250 and $271,875 of principal and accrued interest under the above-described UP Notes that was rolled into the credit facility, we have accrued interest of $439,968.

 

13

 

 

 

12. Subsequent Events

 

On August 3, 2022 a Credit Agreement Amendment was created to increase the amount on our open line of credit under the current Credit Agreement originally signed in June of 2021. The Credit Agreement Amendment amended section 2.1 and increased the maximum advance to $6,000,000. On August 9, 2022 the Company drew an additional $300,000 under the Credit Agreement.

 

 

Item 2. Management

s Discussion and Analysis of Financial Condition and Results of Operations

 

 

This Quarterly Report on Form 10-Q contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made and are often identified by the use of words such as anticipate, believe, continue, could, estimate, expect, intend, may, or will, and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption Risk Factors included in our 2020 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 30, 2021 and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

 

Overview

 

Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven marketing campaigns.

 

Mobivity’s Recurrency platform enables multi-unit retailers to leverage the power of their own data to yield maximum customer spend, frequency and loyalty while achieving the highest Return on Marketing Spend (ROMS) possible. Mobivity’s customers use Recurrency to:

 

 

Transform messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence.

 

Measure, predict, and boost guest frequency and spend by channel.

 

Deploy and manage one-time use offer codes and attribute sales accurately across every channel, promotion and media program.

 

Deliver 1:1 promotions and offers with customized Mobile Messaging, Personalized Receipt Promotions and Integrated Loyalty programs.

 

Mobivity’s Recurrency, delivered as a Software-as-a-Service (“SaaS”) platform, is used by leading brands including Subway, Sonic Drive-In, Baskin Robbins, Chick-fil-A and Checkers/Rally’s across more than 40,000 retail locations globally.

 

We’re living in a data-driven economy. By 2003 — when the concept of “Big Data” became common vernacular in marketing - the amount of data being created every two days was equal to the amount created in all of time prior to 2003. Today, 90% of the world’s data has been created in just the past two years. Unfortunately, despite there being so much data accumulated, only one percent of data is being utilized today by most businesses.

 

The challenge for multi-unit retailers isn’t that they don’t have enough data; in fact, national retailers are collecting millions of detailed transactions daily from thousands of points of sale around the world. The challenge is being able to make sense of this transaction data, which is riddled with data entry errors, collected by multiple POS systems and complicated by a taxonomy compiled by thousands of different franchisee owners. To normalize such an overwhelming amount of data into usable intelligence and then leverage it to optimize media investment and promotion strategy requires numerous teams of data analysts and data scientists that many retailers and restaurant operators simply don’t have. This is why so many technology and data companies, that can help solve these challenges, have been invested in and acquired by brands including, McDonald’s, Starbucks and Yum Brands.

 

Mobivity’s Recurrency platform fills this need with a self-service SaaS offering, enabling operators to intelligently optimize their promotions, media and marketing spend. Recurrency drives system-wide sales producing on average a 13% increase in guest spend and a 26% improvement in frequency, ultimately delivering an average Return on Marketing Spend of 10X. In other words, for every dollar invested in marketing, retailers using Recurrency to manage, optimize and deliver multi-channel consumer promotions generate an average of ten dollars in incremental revenue from their customers.

 

The Recurrency Platform

 

Mobivity’s Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights. Our technology provides transactional data, in real-time, that uncovers market-basket information and attributes both online and traditional promotions. Recurrency is comprised of seven components, described in detail below.

 

POS Data Capture

 

Recurrency captures, normalizes, integrates, and stores transaction data and is compatible with most POS systems used by restaurants and retailers today. The result is a clean useful dataset upon which to predict and influence customers’ buying behavior and deliver basket-level insights.

 

Analytics Powered by Machine Learning

 

Recurrency uses Machine Learning (“ML”) to uncover patterns in the buying behaviors of consumers and leverages that data to suggest pricing optimizations, and guide marketing campaigns.

 

Offers and Promotions

 

Recurrency provides a digital wallet system for creating and managing dynamic offers and promotions, enabling accurate and complete closed-loop attribution across all channels, media and marketing efforts. Retailers can deploy one-time, limited-use and multi-use promotions across all online and offline marketing channels that are scannable at the POS or redeemable online, enabling fraud-free, controllable promotion delivery and attribution at scale. Marketing teams can use the comprehensive attribution analysis and insights to optimize media mix and spend for maximum Return on Marketing Spend (“ROMS”).

 

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Predictive Offers

 

Recurrency leverages the normalized data captured at the POS and applies Artificial Intelligence (“AI”) to build profiles of both known and anonymous customers, analyzes pre and post-redemption behavior and then predicts offers that will drive the highest increases in customer spend and frequency at the lowest discount possible. The result is optimized, personalized promotions that produce the highest ROMS possible.

 

Personalized Receipt Promotions

 

Recurrency unlocks the power of transactional data to create relevant and timely customer messages printed on the receipts already being generated at the POS. Both clients and agencies are using Recurrency to drive better results and make decisions around offers, promotions, and customer engagement through the medium of the printed receipt. Software integrated with leading POS systems, such as Oracle or MICROS, or installed directly onto receipt printer platforms, such as Epson’s OmniLink product, dynamically controls what is printed on receipts including images, coupons, announcements, or other calls-to-action, such as invitations to participate in a survey. Recurrency offers a Web-based interface where users can design receipt content and implement business rules to dictate what receipt content is printed in particular situations. All receipt content is transmitted to cloud-based Recurrency for storage and analysis.

 

Customized Mobile Messaging

 

Recurrency transforms standard short message service (“SMS”), multimedia messaging service (“MMS”), and rich communication services (“RCS”) into a data-driven marketing medium. Recurrency tracks and measures offer effectiveness at a more granular level than other solutions, allowing clients to create smarter offers and drive higher redemption rates. Our proprietary platform connects to all wireless carriers so that any consumer, on any wireless service (for example, Verizon), can join our customer’s SMS/MMS mobile marketing campaign. Our customers use Recurrency’s self-service interface to build, segment, target and optimize mobile messaging campaigns to drive increased guest frequency and spend. Recurrency is an industry leader in RCS messaging and has an industry leading broadcast reach.

 

Belly Loyalty

 

Mobivity’s Belly Loyalty solution drives increased customer engagement and frequency with a customer-facing digital rewards platform via an app and digital pad. Using Belly, customers can customize rewards and leverage pre-built email campaigns and triggers to encourage greater frequency as well as to identify and reactivate lapsed customers.

 

Company Strategy

 

Our objective is to build an industry-leading SaaS product that connects consumers to merchants and brands. The key elements to our strategy are:

 

 

Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our proprietary POS Data Capture technology. Several years of development went into designing POS Data Capture such that the process of intercepting POS data and performing actions, such as controlling the receipt printer with receipt is scalable, portable to a wide variety of POS platforms, and does not impact performance factors including the print speed of a typical receipt printer. Furthermore, we believe the transmission of POS data to Mobivity’s cloud-based data stores presents a very competitive and innovative method of enabling POS data access. Additionally, we believe that our Recurrency platform is more advanced than technologies offered by our competitors and provides us with a significant competitive advantage. With more than ten years of development, we believe that our platform operates SMS/MMS text messaging transactions at a “least cost” relative to competitors while also being capable of supporting SMS/MMS text messaging transactional volume necessary to support our goal of several thousand end users. Leveraging our Recurrency platform allows for full attribution of SMS/MMS offers, which we believe is a unique combination of both SMS/MMS text messaging and POS data.

 

Evolve our sales and customer support infrastructure to uniquely serve very large customer implementations such as franchise-based brands who operate a large number of locations. Over the past few years we have focused our efforts on the development of our technology and solutions with the goal of selling and supporting small and medium-sized businesses. Going forward, we intend to significantly increase our investments in sales and customer support resources tailored to selling to customers that operate franchise brands. Today we support more than 30,000 merchant locations globally.

 

Acquire complementary businesses and technologies. We will continue to search and identify unique opportunities which we believe will enhance our product features and functionality, revenue goals, and technology. We intend to target companies with some or all of the following characteristics: (1) an established revenue base; (2) strong pipeline and growth prospects; (3) break-even or positive cash flow; (4) opportunities for substantial expense reductions through integration into our platform; (5) strong sales teams; and (6) technology and services that further build out and differentiate our platform. Our acquisitions have historically been consummated through the issuance of a combination of our common stock and cash.

 

Build our intellectual property portfolio. We currently have nine issued patents that we believe have significant potential application in the technology industry. We plan to continue our investment in building a strong intellectual property portfolio.

 

While these are the key elements of our current strategy, there can be no guarantees that our strategy will not change or that our strategy will be successful.

 

Recent Events

 

Unsecured Promissory Note Investments in 2021

 

During the year ended December 31, 2021, we issued to Talkot Capital LLC, unsecured notes in the principal aggregate amount of $271,875, which are due and payable two years after issuance(the "Talkot Notes"). These Talkot Notes bear interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay the advances and accrued interest, in whole or in part, without notice, penalty or charge. As of December 31, 2021, we have $271,875 as a remaining balance of these Talkot Notes and accrued interest of $23,200.

 

Unsecured Promissory Note Investments in 2022

 

As of June 30, 2022, we have $271,875 as a remaining balance of these 2021 Notes and accrued interest of $38,937

 

Secured Promissory Note Investments in 2021

 

During the year ended December 31, 2021, we issued to one of our directors, Secured Notes in the principal aggregate amount of $3,478,125, including cash in the amount of $3,206,250 and $271,875 of principal and accrued interest under the above-described Note that was rolled into the Credit Facility, which are due and payable two years after issuance. These Notes bear interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay the advances and accrued interest, in whole or in part, without notice, penalty or charge. On November 19, 2021, a payment of $200,000 was paid toward the principal balance of the note. 

 

 

 

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Secured Note Investments in 2022

 

During the six months period ending June 30, 2022, the Company issued warrants to purchase an aggregate of 20,339 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under the Credit Agreement. The estimated aggregate fair value of the warrants issued is $6,201 using the Black-Scholes option valuation model as of June 30, 2022.

 

On June 10, 2022 the Company took a draw of an additional $500,000 under the Credit Line Agreement As of June 30, 2022, the Company has drawn a total of $3,978,125 including cash in the amount of $3,706,250 and $271,875 of principal and accrued interest under the above-described UP Notes which were rolled into the credit facility, we have accrued interest of $439,968.

 

Office Relocation

 

We entered into a six-year office lease starting in February of 2021 for 8,898 square feet of office space located at 3133 W. Frye Road, Suite 215, Chandler, Arizona. Monthly rental payments, excluding common area maintenance charges, will be $25,953 to $28,733. The first 12 months of the lease includes a 50% abatement period.

 

Intellectual Property

 

U.S. Patent number 10,949,868 B1 was granted on March 16, 2021. This patent covers the single use of electronic retailer coupons and a referral program. The method and system prevents fraud, is specific to geolocation and provides an audit trail of the customer, cashier and marketing platform. A user can also earn a subsequent coupon by referring a friend.

 

US Patent number 6,788,769 B1 expired in March of 2021. This patent covered a method and system for using telephone numbers as a key to address email and online content without the use of a look-up database. Using this system, a phone number is used to access a website or an email address in exactly the same way it is used to dial a telephone. 

 

Results of Operations

 

Revenues

 

Revenues consist primarily of those generated by a suite of products under the Recurrency platform. The Recurrency platform is comprised of POS Data Capture, Analytics, Offers and Promotions, Predictive Offers, Personalized Receipt Promotions, Customized Mobile Messaging, Belly Loyalty, and other revenues.

 

Revenues for the three months ended June 30, 2022, were $1,867,162 a decrease of $925,666 or 33% compared to the same period in 2021.

 

Revenues for the six months ended June 30, 2022, were $3,896,731 a decrease of $1,353,687 or 26% compared to the same period in 2021.

 

This decrease is primarily due to a decrease in revenue of $925,666 quarterly due to restructuring of customer contract related to Smart Receipt services.

 

Cost of Revenues

 

Cost of revenues consist primarily of cloud-based software licensing fees, short code maintenance expenses, messaging related expenses, and other expenses.

 

Cost of revenues for the three months ended June 30, 2022, was $1,202,749, an increase of $69,392, or 5%, compared to the same period in 2021.

 

Cost of revenues for the six months ended June 30, 2022, was $2,377,697, an increase of $63,761, or 3%, compared to the same period in 2021.

 

This increase is primarily due to an increase in customer acquisitions costs. 

 

General and Administrative

 

General and administrative expenses consist primarily of salaries and personnel related expenses, consulting costs and other expenses.

 

General and administrative expenses decreased $59,416 or 6%, to $897,984, during the three months ended June 30, 2022, compared to $957,400 for the same period in 2021. The decrease in general and administrative expense was primarily due a decrease in subscriptions, share-based compensation and legal fees.

 

General and administrative expenses decreased $141,610 or 6%, to $2,105,160, during the six months ended June 30, 2022, compared to $2,246,770 for the same period in 2021. The decrease in general and administrative expense was primarily due a decrease in subscriptions, and share-based compensation.

 

Sales and Marketing

 

Sales and marketing expenses consist primarily of salaries and personnel related expenses, stock-based compensation expense, consulting costs and other expenses.

 

Sales and marketing expenses decreased $545,423,or 49%, to $566,270 during the three months ended June 30, 2022, compared to $1,111,693 for the same period in 2021. The decrease is primarily due to reductions in payroll expense and share-based compensation and recruiting fees.

 

Sales and marketing expenses decreased $844,672, or 42%, to $1,163,771 during the six months ended June 30, 2022, compared to $2,008,443 for the same period in 2021. The decrease is primarily due to reductions in payroll expense and share-based compensation and recruiting fees.

 

Engineering, Research & Development

 

Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.

 

Engineering, research & development expenses increased $199,801, or 30%, to $873,836 during the three months ended June 30, 2022, compared to $674,035 for the same period in 2021. This decrease is primarily due to a reduction on payroll expenses.

 

Engineering, research & development expenses increased $178,074, or 13%, to $1,576,059 during the six months ended June 30, 2022, compared to $1,397,985 for the same period in 2021. This increase is primarily due to end of the ASC 606 deduction.

 

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Impairment on Intangible Asset

 

Impairment on intangible assets consists of an intangible asset valued at less than its carrying value. Impairment on intangible assets decreased 100% from $8,286 to $0 for the six months ended June 30, 2022 compared to the same period in 2021.

 

Depreciation and Amortization

 

Depreciation and amortization expense consist of depreciation on our equipment and amortization of our intangible assets.

 

Depreciation and amortization expense decreased $73,163 or 40%, to $110,421 during the three months ended June 30, 2022 compared to the same period in 2021.This decrease is primarily due to the reduction in amortization of intangibles on software development costs.

 

Depreciation and amortization expense decreased $107,078 or 31%, to $234,733 during the six months ended June 30, 2022 compared to the same period in 2021.This decrease is primarily due to the reduction in amortization of intangibles on software development costs.

 

Interest Income

 

Interest income consists of stated interest income on our cash balances. Interest income was $0 or during the three months ended June 30, 2022, compared to the same period in 2021. 

 

Interest income consists of stated interest income on our cash balances. Interest income decreased $5 or 100% to $0, during the six months ended June 30, 2022, compared to the same period in 2021. 

 

Interest Expense

 

Interest expense consists of stated or implied interest expense on our notes payable, amortization of note discounts, and amortization of deferred financing costs. Interest expense increased $143,259, or 600%, during the three months ended June 30, 2022, compared to $23,867 in the same period in 2021. This increase in interest expense is primarily related the new line of credit taken out in 2021.

 

Interest expense increased $270,570, or 480%, during the six months ended June 30, 2022, compared to $56,383 in the same period in 2021. This increase in interest expense is primarily related to an increase of borrowings from our related parties.

 

Foreign Currency

 

The Company’s financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three and six months ended June 30, 2022, was $1 Canadian equals $0.78 U.S. Dollars. This compares to an average rate of $1 Canadian equals $0.79 during the same period of 2021. The Company’s functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:

 

 

The Company sells products primarily in U.S. Dollars; therefore, reported revenues are not highly impacted by foreign currency volatility.

 

A portion of the Company’s expenses are incurred in Canadian Dollars and therefore fluctuate in U.S. Dollars as the U.S. Dollar varies. A weaker U.S. Dollar results in an increase in translated expenses, and stronger U.S. Dollar results in a decrease.

 

Changes in foreign currency rates also impact the translated value of the Company’s working capital that is held in Canadian Dollars. Foreign exchange rate fluctuations result in foreign exchange gains or losses based upon movement in the translated value of Canadian working capital into U.S. Dollars.

 

The change in foreign currency was a loss of $510 and a loss of $1,774 for the three months ended June 30, 2022 and 2021, respectively.

 

The change in foreign currency was a gain of $2,809 and a loss of $2,248 for the six months ended June 30, 2022 and 2021, respectively.

 

Liquidity and Capital Resources

 

As of June 30, 2022, we had current assets of $2,273,324, including $1,091,460 in cash, and current liabilities of $5,992,706, resulting in a working capital deficit of $3,719,382.

 

 

We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to sufficiently to fund our current level of operations through the end of the next twelve months or beyond. However, there can be no assurance that we will not require additional capital. If we require additional capital, we will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. There can be no assurance we will be able to obtain access to capital as and when needed, or that the terms of any available financing will be commercially reasonable.

 

 

Cash Flows

 

   

Six Months Ended

 
   

June 30,

 
   

2022

   

2021

 

Net cash provided by (used in):

               

Operating activities

  $ (3,519,150 )   $ (1,892,394 )

Investing activities

    (6,993 )     (269,157 )

Financing activities

    3,884,604       763,574  

Effect of foreign currency translation on cash flow

    (1,895 )     (10,549 )

Net change in cash

  $ 356,566     $ (1,408,526 )

 

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Operating Activities

 

We used cash from operating activities totaling $ 3,519,150 during the six months ended June 30, 2022 and used cash from operating activities totaling $ 1,892,394during the six months ended June 30, 2021. The increase in cash used in operations was primarily due to an increase in net loss.

 

Investing Activities

 

Investing activities during the six months ended June 30, 2022, consisted of $6,993 of equipment purchases and $0 of capitalized software development costs.

 

Financing Activities

 

Financing activities during the six months ended June 30, 2022, consisted of $3,400,551 additional paid in capital from a warrant conversion to common stock, $500,000 proceeds for related party notes payable and $15,947 in payment on notes payable.

 

 

Critical Accounting Policies and Estimates

 

Refer to Note 2, “Summary of Significant Accounting Polices,” in the accompanying notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that as of June 30, 2022 our disclosure controls and procedures were not effective.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred  during the six months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II OTHER INFORMATION

 

Item 1. Legal Proceedings.


None. From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any material legal proceedings.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

[None.]
 
Item 3. Defaults upon Senior Securities.

 

[None.]

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information
 
The information set forth below is included herein for purposes of providing the disclosure required under “Item 5.03 - Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year” of Form 8-K.

 

On August 12, 2022, following the approval of the Board, the Company filed Restated Articles of Incorporation with the Nevada Secretary of State, for the purpose of having one document on file with the Nevada Secretary of State which constitutes the articles of incorporation of Mobivity Holdings Corp. and all amendments thereto. 

 

Item 6. Exhibits

 

     

Exhibit No.

 

Description

3.1   Restated Articles of Incorporation filed with the Nevada Secretary of State on August 12, 2022*
3.2   Bylaws (1)
3.3   Amendment to the Bylaws, effective as of November 25, 2011 (2)

31.1

 

Certification by Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 *

31.2

 

Certification by Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 *

32.1

 

Certification Pursuant to 18 U.S.C. Section 1350 *

101.INS

 

Inline XBRL Instance Document *

101.SCH

 

Inline XBRL Taxonomy Schema Document

101.CAL

 

Inline XBRL Taxonomy Calculation Linkbase Document *

101.DEF

 

Inline XBRL Taxonomy Definition Linkbase Document * 

101.LAB

 

Inline XBRL Taxonomy Label Linkbase Document*

101.PRE

 

Inline XBRL Taxonomy Presentation Linkbase Document *

104   Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

 

* Filed electronically herewith

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized

 

     
 

Mobivity Holdings Corp.

     

Date: August 15, 2022

By:

/s/ Dennis Becker

   

Dennis Becker

   

Chairman and Chief Executive Officer

   

(Principal Executive Officer)

     

Date: August 15, 2022

By:

/s/ Lisa Brennan

   

Lisa Brennan

   

Chief Financial Officer

(Principal Accounting Officer)

 

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