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 September 30, 2023

☐	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 November 14, 2023, the registrant had 67,949,709 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’ 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	18
Item 3. Quantitative and Qualitative Disclosures about Market Risk.	22
Item 4. Controls and Procedures.	22
PART II – OTHER INFORMATION	23
Item 1. Legal Proceedings	23
Item 1A. Risk Factors	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	23
Item 4. Mine Safety Disclosures	23
Item 5. Other Information	23
Item 6. Exhibits	23
SIGNATURES	24

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mobivity Holdings Corp.

Condensed Consolidated Balance Sheets


	September 30,			December 31,
	2023			2022
	(Unaudited)			(Audited)
ASSETS
Current assets
Cash	$	457,934		$	426,740
Accounts receivable, net of allowance for doubtful accounts $24,381 and $34,446, respectively		373,980			1,081,183
Other current assets		241,424			195,017
Total current assets		1,073,338			1,702,940
Right to use lease assets		825,041			981,896
Intangible assets and software development costs, net		78,244			194,772
Other assets		118,215			137,917
TOTAL ASSETS	$	2,094,838		$	3,017,525
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	3,492,562		$	3,412,612
Accrued interest		653,431			443,448
Accrued and deferred personnel compensation		111,610			569,347
Deferred revenue and customer deposits		218,552			902,727
Related party notes payable, net - current maturities		2,191,875			2,711,171
Notes payable, net - current maturities		14,363			32,617
Operating lease liability, current		269,815			251,665
Other current liabilities		15,505			49,541
Total current liabilities		6,967,713			8,373,128

Non-current liabilities
Related party notes payable, net - long term		3,461,472			2,481,290
Notes payable, net - long term		29,432			31,092
Operating lease liability		731,764			936,924
Total non-current liabilities		4,222,668			3,449,306
Total liabilities		11,190,381			11,822,434

Stockholders’ deficit
Common stock, $0.001 par value; 100,000,000 shares authorized; 67,949,709 and 61,311,155, shares issued and outstanding		67,950			61,311
Equity payable		100,862			324,799
Additional paid-in capital		117,138,356			108,806,353
Accumulated other comprehensive loss		22,227			(100,963	)
Accumulated deficit		(126,424,938	)		(117,896,409	)
Total stockholders’ deficit		(9,095,543	)		(8,804,909	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,094,838		$	3,017,525

See accompanying notes to consolidated financial statements.

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Mobivity Holdings Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Revenues
Revenues	$	1,633,071		$	1,890,437		$	5,375,724		$	5,787,168
Cost of revenues		1,160,880			1,806,022		$	3,598,661			4,183,719
Gross profit		472,191			84,415			1,777,063			1,603,449

Operating expenses
General and administrative		2,292,623			983,428			4,907,882			3,088,588
Sales and marketing		708,398			614,600			2,002,529			1,778,371
Engineering, research, and development		968,546			784,804			2,507,264			2,360,863
Impairment of intangible asset		—			238,143			—			238,143
Depreciation and amortization		30,418			118,317			130,902			353,050
Total operating expenses		3,999,985			2,739,292			9,548,577			7,819,015

Loss from operations		(3,527,794	)		(2,654,877	)		(7,771,514	)		(6,215,566	)

Other income/(expense)
Loss of settlement of debt		—			—			(10,857	)		—
Interest expense		(237,376	)		(193,501	)		(720,265	)		(520,454	)
Settlement Losses		(13,000	)		—			(25,500	)		—
Foreign currency gain		(102	)		(339	)		(393	)		2,470
Total other income/(expense)		(250,478	)		(193,840	)		(757,015	)		(517,984	)
Loss before income taxes		(3,778,272	)		(2,848,717	)		(8,528,529	)		(6,733,550	)
Income tax expense		—			—			—			—
Net loss		(3,778,272	)		(2,848,717	)		(8,528,529	)		(6,733,550	)
Other comprehensive loss, net of income tax
Foreign currency translation adjustments		91,825			(76,228	)		123,190			(76,862	)
Comprehensive loss	$	(3,686,447	)	$	(2,924,945	)	$	(8,405,339	)	$	(6,810,412	)
Net loss per share:
Basic and Diluted		(0.06	)		(0.05	)		(0.13	)		(0.12	)
Weighted average number of shares:
Basic and Diluted		66,785,952			60,297,083			64,878,021			58,544,432

See accompanying notes to consolidated financial statements (unaudited).

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Mobivity Holdings Corp.

Condensed Consolidated Statement of Stockholders’ 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, 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 settlement of interest payable on related party debt		—		—		—		6,201		—			—			6,201
Stock based compensation		—		—		—		589,650		—			—		$	589,650
Foreign currency translation adjustment		—		—		—		—		(12,895	)		—			(12,895	)
Net loss		—		—		—		—		—			(1,933,099	)		(1,933,099	)
Balance, March 31, 2022		58,598,885		58,599		100,862		105,590,136		(64,983	)		(109,768,386	)		(4,083,772	)
Issuance of common stock for PIPE financing		1,062,500		1,062		—		848,937		—			—			849,999
Fair market value of options issued with related party debt		—		—		—		48,654		—			—			48,654
Stock based compensation		—		—		—		211,775		—			—		$	211,775
Foreign currency translation adjustment		—		—		—		—		12,261			—			12,261
Net loss		—		—		—		—		—			(1,951,734	)		(1,951,734	)
Balance, June 30, 2022		59,661,385		59,661		100,862		106,699,502		(52,722	)		(111,720,120	)		(4,912,817	)
Issuance of common stock for PIPE financing		1,500,000		1,500		—		1,198,501		—			—			1,200,001
Fair market value of options issued with related party debt		—		—		—		18,614		—			—			18,614
Issuance of common stock for settlement of interest payable on related party debt		149,770		150		—		164,021		—			—			164,171
Stock based compensation		—		—		—		192,959		—			—		$	192,959
Foreign currency translation adjustment		—		—		—		—		(76,228	)		—			(76,228	)
Net loss		—		—		—		—		—			(2,848,717	)		(2,848,717	)
Balance, September 30, 2022		61,311,155	$	61,311	$	100,862	$	108,273,597	$	(128,950	)	$	(114,568,837	)	$	(6,262,017	)

	Common Stock				Equity			Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Dollars		Payable			Capital			Loss			Deficit			(Deficit)
Balance, December 31, 2022		61,311,155	$	61,311	$	324,799		$	108,806,353		$	(100,963	)	$	(117,896,409	)	$	(8,804,909	)
Issuance of common stock for warrant exercise		3,587,487		3,587		—			3,583,900			—			—			3,587,487
Issuance of common stock for settlement of interest payable on related party debt		163,757		164	$	(7,713	)		223,773			—			—			216,224
RSU’s issued - termination of a director’s service		545,012		545		—			(545	)		—			—		$	—
Stock based compensation		—		—		—			810,157			—			—			810,157
Foreign currency translation adjustment		—		—		—			—			31,502			—			31,502
Net loss		—		—		—			—			—		$	(2,478,175	)		(2,478,175	)
Balance, March 31, 2023		65,607,411	$	65,607	$	317,086		$	113,423,638		$	(69,461	)	$	(120,374,584	)	$	(6,637,714	)
Issuance of common stock for settlement of interest payable on related party debt		190,156		191		(9,768	)		216,033			—			—			206,456
Stock based compensation		—		—		—			228,577			—			—			228,577
Foreign currency translation adjustment		—		—		—			—			(137	)		—			(137	)
Net loss		—		—		—			—			—		$	(2,272,082	)		(2,272,082	)
Balance, June 30, 2023		65,797,567	$	65,798	$	307,318		$	113,868,248		$	(69,598	)	$	(122,646,666	)	$	(8,474,900	)
Issuance of common stock for warrant exercise		1,960,976		1,961		—			1,606,039			—			—			1,608,000
Issuance of common stock for settlement of interest payable on related party debt		191,166		191		(206,456	)		206,265			—			—			—
Fair market value of options issued with related party debt		—		—		—			28,463			—			—			28,463
Stock based compensation		—		—		—			1,429,341			—			—			1,429,341
Foreign currency translation adjustment		—		—		—			—			91,825			—			91,825
Net loss		—		—		—			—			—		$	(3,778,272	)		(3,778,272	)
Balance, September 30, 2023		67,949,709		67,950		100,862			117,138,356			22,227			(126,424,938	)		(9,095,543	)

See accompanying notes to consolidated financial statements (unaudited).

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Mobivity Holdings Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	September 30,
	2023			2022
OPERATING ACTIVITIES
Net loss	$	(8,528,529	)	$	(6,733,550	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on Settlement of Debt - related party		10,857			—
Bad debt expense		24,143			45,685
Stock-based compensation		2,468,075			994,384
Intangible Asset Impariment		—			238,143
Depreciation and amortization expense		162,209			353,050
Amortization of Debt Discount		89,349			83,334
Increase (decrease) in cash resulting from changes in:
Accounts receivable		683,060			(337,347	)
Other current assets		9,634			(17,148	)
Operating lease assets/liabilities		—			(15,029	)
Other assets		(13,250	)		—
Accounts payable		79,950			(184,859	)
Prepaid Expenses		(46,231	)		—
Accrued interest		621,806			432,959
Accrued and deferred personnel compensation		(457,687	)		(195,975	)
Other liabilities - current		(34,036	)		133,167
Lease Operating Assets		(30,155	)		—
Deferred revenue and customer deposits		(684,175	)		236,827
Net cash used in operating activities	$	(5,644,980	)	$	(4,966,359	)

INVESTING ACTIVITIES
Purchases of equipment		(18,252	)		(18,712	)
Cash paid for patent activities		(6,300	)		—
Capitalized software development cost		—			(12,030	)
Net cash used in investing activities		(24,552	)		(30,742	)

FINANCING ACTIVITIES
Payments on notes payable		(20,004	)		(29,145	)
Proceeds from Related Party Debt		400,000			800,000
Proceeds from conversion of common stock warrants		5,195,487			2,550,552
Proceeds from PIPE funding		—			2,050,000
Net cash provided by (used in) financing activities		5,575,483			5,371,407

Effect of foreign currency translation on cash flow		125,243			(92,985	)

Net Change in cash		31,194			281,321
Cash at beginning of period	$	426,740		$	735,424
Cash at end of period		457,934			1,016,745
Supplemental disclosure
Cash paid during period for:
Interest Paid	$	—		$	—

Fair Value of Options issued with related party debt	$	28,463		$	73,469
Shares issued for settlement of debt - related party	$	411,823		$	161,750
Shares issued for stock payable for settlement of debt - related party	$	223,937		$	—
Par Value pf RSU’s issued - termiation of director’s service	$	545		$	—

See accompanying notes to consolidated financial statements.

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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, 2022

filed with the SEC on April 3, 2023.

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 September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023.

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. 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 did not affect previously reported net losses.

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

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 September 30, 2023, and December 31, 2022, we recorded an allowance for doubtful accounts of $24,381 and $34,446 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 its 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.

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We conducted our annual impairment tests of goodwill as of December 31, 2022. As a result of these tests, we had a total impairment charge of $963,659.

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 goodwill and intangible assets resulted in no impairment charges for the nine months ended September 30, 2023 and 2022, respectively.

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 (“FASB”) 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. The 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 the 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 canceled or abandoned are charged to product development expenses 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 no impairment charges for the three months ended September 30, 2023 and 2022, respectively

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 nine months ended September 30, 2023 and 2022, two customers accounted for 52% and 50% of our revenues, respectively.

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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 a comprehensive loss. For the three months ended September 30, 2023 and 2022 , the comprehensive loss was$3,686,447, and $2,924,945 respectively. For the nine months ended September 30, 2023 and 2022, the comprehensive loss was $8,405,339 and $6,810,412 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 trade shows, sales enablement, content creation, paid engagement and other direct costs. Advertising expense was $169,549 and $315,540 for the nine months ended September 30, 2023 and 2022, respectively.

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 nine months ended September 30, 2023 and 2022, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock based compensation, stock options and warrants 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 is 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 had $457,934 of cash as of September 30, 2023. We had a net loss of $8,528,529 for the nine months ended September 30, 2023, and we used $5,644,980 of cash in our operating activities during that time. In the nine months ended September 30, 2022 we had a net loss of $6,733,550 and used $4,966,359 of cash in our operating expenses. We raised $3.6 million in cash from the exercise of warrants in February of 2023. In addition, we raised $1.6 million in cash from the exercise in August 2023. 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 $126.4 million as of September 30, 2023. 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 12 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.

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4. Goodwill and Purchased Intangibles

Goodwill

The carrying value of goodwill at each of September 30, 2023 and December 31, 2022 was $0.

The following table presents details of our purchased intangible assets as of September 30, 2023 and December 31, 2022:

Intangible assets

	Balance at December 31, 2022		Additions		Impairments		Amortization			Fx and Other		Balance at September 30, 2023
Patents and trademarks	$	52,698	$	6,300	$	—	$	(5,444	)	$	1,555	$	55,109
Customer and merchant relationships		30,690		—		—	$	(18,414	)		—		12,276
Trade names		8,050		—		—	$	(4,831	)		—		3,219
	$	91,438	$	6,300	$	—	$	(28,689	)	$	1,555	$	70,604

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 $28,689 and $107,211 for the nine months ended September 30, 2023 and 2022, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for intangible assets was $10,747 and $35,724 for the three months ended September 30, 2023 and 2022, respectively.

The estimated future amortization expense of our intangible assets as of September 30, 2023 is as follows:

Year ending December 31,	Amount
2023	$	9,193
2024		13,526
2025		5,778
2026		5,778
2027		5,778
Thereafter		30,551
Total	$	70,604

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 September 30, 2023 and December 31, 2022:

Schedule of Software Development Costs

	Balance at December 31, 2022		Additions		Amortization			Balance at September 30, 2023
Software Development Costs	$	103,334	$	—	$	(95,694	)	$	7,640
	$	103,334	$	—	$	(95,694	)	$	7,640

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

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Amortization expense for software development costs was $18,120 and $61,764 for the three months ended September 30, 2023 and 2022, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for software development costs was $95,694 and $207,027 for the nine months ended September 30, 2023 and 2022, respectively.

The estimated future amortization expense of software development costs as of September 30, 2023 is as follows:

Year ending December 31,	Amount
2023	$	3,134
2024		4,506
2025		—
2026		—
2027		—
Thereafter		—
Total	$	7,640

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 of $110,000 was required. The lessor contributed $110,000 towards the purchase of office furniture as part of the lease agreement. As of September 30, 2023, we have an operating lease asset balance of $825,041 and an operating lease liability balance of $1,001,579 recorded in accordance with ASC 842, Leases (ASC “842”).

The following are additional details related to leases recorded on our balance sheet as of September 30, 2023:

Leases	Classification	Balance at September 30, 2023
Assets
Current
Operating lease assets	Operating lease assets	$	—
Noncurrent
Operating lease assets	Noncurrent operating lease assets	$	825,041
Total lease assets		$	825,041

Liabilities
Current
Operating lease liabilities	Operating lease liabilities	$	269,815
Noncurrent
Operating lease liabilities	Noncurrent operating lease liabilities	$	731,764
Total lease liabilities		$	1,001,579

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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,
2023	$	81,194
2024		330,894
2025		337,568
2026		344,241
2027		28,734
Thereafter		—
Total future lease payments		1,122,631
Less: imputed interest		(121,052	)
Total	$	1,001,579

Schedule of Lease Cost

Weighted Average Remaining Lease Term (years)
Operating leases	3.58

Weighted Average Discount Rate
Operating leases	6.75	%

7. Notes Payable and Interest Expense

The following table presents details of our notes payable as of September 30, 2023 and December 31, 2022:

Schedule of Debt

Facility	Maturity	Interest Rate			Balance at September 30, 2023			Balance at December 31, 2022
ACOA Note	February 1, 2024		—			14,363			34,231
TD Bank	December 31, 2023		—			29,432			29,478
Related Party Note	various		15	%		5,653,347			5,192,461
Total Debt						5,697,142			5,256,170
Less current portion						(2,206,238	)		(2,743,788	)
Long-term debt, net of current portion					$	3,490,904		$	2,512,382

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 nine months ended September 30, 2023 we repaid $20,004 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, 2023. 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 December 31, 2023. Under the conditions of the loan, thirty-three percent (33%) of the loan will be forgiven if sixty-seven percent (67%) is repaid prior to the initial term date.

Related Party Notes

Secured Promissory Notes

On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with Thomas Akin, one of the Company’s directors (the “Lender”). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $6,000,000 under the Credit Agreement (“the “Credit Facility”).

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The Credit Facility is secured by all of our tangible and intangible assets including intellectual property. 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 Credit 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 the Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the corresponding 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.

Under the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in 24 equal monthly installments commencing on June 30, 2022, and ending on June 30, 2024. On November 11, 2022, an amendment to the Credit Agreement was signed. The amendment updated the payment terms to the following: “Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances, plus accrued interest thereon, in 24 equal monthly installments commencing on January 31, 2023 and continuing thereafter on the last day of each month (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day. Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum. Interest will be calculated on the basis of 365 days in a year.” The amendment raised the maximum amount of the Credit Facility to $6,000,000. In addition, the interest which is accrued monthly between July 1, 2022, and December 31, 2022, will be settled into equity. Common Stock will be issued at the end of each month at a rate of $1.08 per share of common stock in the amount of the interest accrued for each month.

On January 31, 2023, the Company then entered into Amendment No. 1 (the “Amendment”), which amends our existing Credit Facility Agreement^[1], dated as of November 11, 2022, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the Over-The Counter Venture Market operated by OTC Markets Group Inc. (“OTCQB®”) over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible notes to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the existing Credit Facility Agreement. The Amendment was considered a debt modification as the cash flows under the amended terms do not differ by at least 10% from the cash flows under the original agreement.

On August 22, 2023, The Company took a draw of an additional $150,000 under the Credit Agreement.

On September 20, 2023, The Company took a draw of an additional $250,000 under the Credit Agreement.

During the nine months ended September 30, 2023, a total of $591,880 of interest was accrued by the company. Interest payable of $391,139 to Thomas Akin was then surrendered to be converted and exchanged for the issuance of 362,335 shares of restricted common stock. The company recorded a loss of settlement of interest payable of $10,315 and amortized discount expense of $89,349.

During the nine months period ending September 30, 2023, the Company issued warrants to purchase an aggregate of 121,808 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 $28,463 using the Black-Scholes option valuation model as of September 30, 2023.

As of September 30, 2023, the Company had drawn a total of $5,573,125 and we have accrued interest of $589,345 and a discount balance of $191,653.

Unsecured Promissory Note

On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875 with Talkot Fund, LP and investor in 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 are due and payable no later than December 31, 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 to Talkot Fund LP 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 UP Note.

On January 31, 2023, the Lender agreed to postpone the 24-month repayment period to a later period commencing on January 31, 2024, and further agreed that interest accrued on the loan between July 1, 2022 and December 1, 2025 is to be settled in shares of the Company’s common stock quarterly.

During the nine months ended September 30, 2023, a total of $30,926 of interest was accrued by the company. Interest of $20,504 payable to Talkot Fund, LP was then surrendered to be converted and exchanged for the issuance of 18,987 shares of restricted common stock. The company recorded a loss of settlement of interest payable of $542.

As of September 30, 2023, the Company had an outstanding principal balance of $271,875, accrued interest of $65,952.

Interest Expense

Interest expense was $237,376 and $193,501 during the three months ended September 30, 2023 and 2022, respectively.

Interest expense was $720,265 and $520,454 during the nine months ended September 30, 2023 and 2022, respectively.

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8. Stockholders’ Equity

Common Stock and Equity Payable

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 an 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 $850,000, 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.

On August 24, 2022, the Company received private investment funds to purchase 1,500,000 shares of its common stock at a price of $0.80 per share, resulting in additional capital of $1,200,000, and issued the holders 1,500,000 new warrants to purchase common stock at $1.50 per share over a three year period expiring in August 2025.

During the nine months ended September 30, 2022 a total of $161,750 of interest was converted into 149,770 shares of Common Stock.

2023

On January 31, 2023 a total of 545,012 shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and no expense was recognized during the three months ended March 31, 2023.

On March 27, 2023 a total of 154,106 shares of common stock were granted from equity payable to Thomas Akin as settlement of $166,432 of interest payable. The Company recorded a loss on settlement of interest payable of $44,325 on December 31, 2022.

On March 27, 2023 a total of 9,651 shares of common stock were granted from equity payable to Talkot Fund LP as settlement of $10,423 of interest payable. The Company recorded a loss on settlement of interest payable of $2,757 on December 31, 2022.

On March 31, 2023 a total of $195,171 of interest was accrued and settled to equity payable for the issuance of 180,715 shares of common stock. The company recorded a loss of settlement of interest payable of $10,315.

On March 31, 2023 a total of $10,196 of interest was accrued and settled to equity payable for the issuance of 9,441 shares of common stock. The company recorded a loss of settlement of interest payable of $542.

During March, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,587,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 1,792,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in February 2025. The Company recorded $577,000 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

On June 30, 2023 a total of $196,148 of interest was accrued and settled to equity payable for the issuance of 181,620 shares of common stock.

On June 30, 2023 a total of $10,309 of interest was accrued and settled to equity payable for the issuance of 9,546 shares of common stock.

During August and September of 2023, 18 warrant holders exercised their common stock purchase warrant for 1,960,976 shares at the exercise price of $.82 per share, resulting in additional capital of $1,608,000. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 3,921,952 new warrants to purchase common stock at $.82 per share over a one and three-year period expiring between August and September 2026. The Company recorded $1,146,562 of stock-based expense related to warrants issued during the warrant conversion offer on September 6, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 63% and 73% and an option fair value of between $0.21 and $0.40.

During the nine months ended September 30, 2023 a total of 553,279 shares were issued from stock payable related to related party accrued interest.

As of the nine months ended September 30, 2023 we had an equity payable balance of $100,862.

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Stock-based Plans

Stock Option Activity

The following table summarizes stock option activity for the nine months ended September 30, 2023.

	Options
Outstanding at December 31, 2021		6,246,466
Granted		1,375,000
Exercised		—
Forfeited/canceled		(330,623	)
Expired		(599,627	)
Outstanding at December 31, 2022		6,691,216
Granted		2,645,000
Exercised		—
Forfeited/canceled		(79,165	)
Expired		(1,340,384	)
Outstanding at September 30, 2023		7,916,667

2022

On March 29, 2022, the Company granted one employee 150,000 options to purchase shares of the Company’s 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’s 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 May 16, 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.

On September 22, 2022, the Company granted one employee 1,000,000 options to purchase shares of the Company’s common stock at the closing price as of September 2022, of $0.98 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 September 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 76.15% and an option fair value of $0.697499 was $697,499.

2023

On May 11, 2023 the Company granted three employees 295,000 options to purchase shares of the Company’s common stock at the closing price as of May 11, 2023 of $0.98 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 16, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 75.76% and an option fair value of $0.705183 was $208,029.

On July 14, 2023 the Company granted one employees 1,000,000 options to purchase shares of the Company’s common stock at the closing price as of July 14, 2023 of $0.85 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 July 14, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.55% and an option fair value of $0.5590 was $605,383.

On July 17, 2023 the Company granted one employees 700,000 options to purchase shares of the Company’s common stock at the closing price as of July 17, 2023 of $0.79 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 July 17, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.57% and an option fair value of $0.5713 was $396,441.

On August 25, 2023 he Company granted four employees 650,000 options to purchase shares of the Company’s common stock at the closing price as of August 25, 2023 of $0.65 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 25, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 64.81% and an option fair value of $0.4257 was $285,773.

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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 nine months ended September 30, 2023 and 2022 were as follows:

	2023		2022		2023		2022
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
General and administrative	$	62,599	$	65,800	$	181,382	$	571,462
Sales and marketing		108,348		20,972		248,790		56,183
Engineering, research, and development		46,830		41,185		119,334		171,734
Total	$	217,777	$	127,957	$	549,506	$	799,379

Valuation Assumptions

The fair value of each stock option award was calculated on the date of the grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for the nine months ended September 30, 2023 and 2022.

	Nine Months Ended
	September 30,
	2023			2022
Risk-free interest rate		3.99	%		2.47	%
Expected life (years)		7.50			5.90
Expected dividend yield		—	%		—	%
Expected volatility		73.47	%		69.23	%

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 the 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 2023 and 2022 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, 2022 and for the nine months ended September 30, 2023:

	Shares
Outstanding at December 31, 2021		1,685,141
Awarded		244,792
Released		—
Canceled/forfeited/expired		—
Outstanding at December 31, 2022		1,929,933
Awarded		243,048
Released		(545,012	)
Canceled/forfeited/expired		—
Outstanding at September 30, 2023		1,627,969

Expected to vest at September 30, 2023		1,627,969
Vested at September 30, 2023		1,526,405
Unvested at September 30, 2023		—
Unrecognized expense at September 30, 2023	$	—

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2022

On March 29, 2022, the company 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 the grant. All units vested immediately. The shares of common stock associated with the restricted stock units 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 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 the grant. All units vested immediately. The shares of common stock associated with the restricted stock units 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 September 30, 2022, the company granted four independent directors a total of 65,100 restricted stock units. The units were valued at $65,002 or $0.9985 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units 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.

During the nine months ended September 30, 2022, the Company recorded $195,005 in restricted stock expense as board compensation.

2023

On March 31, 2023, the company grated granted four independent directors a total of 61,342 restricted stock units. The units were valued at $65,002 or $1.05 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) March 31, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On June 30, 2023, the company granted four independent directors a total of 80,160 restricted stock units. The units were valued at $65,003 or $0.81 per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) June 30, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On September 30, 2023, the company granted four independent directors a total of 101,564 restricted stock units. The units were valued at $65,001 or $0.64 per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) September 30,2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

In the nine months ended September 30, 2023, the Company recorded $195,006 in restricted stock expense 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 nine months ended September 30, 2023 and 2022 was as follows:

	2023		2022		2023		2022
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
General and administrative	$	65,001	$	65,002	$	195,006	$	195,005
Sales and marketing	$	—	$	—	$	—	$	—
Total	$	65,001	$	65,002	$	195,006	$	195,005

As of September 30, 2023, there was no unearned restricted stock unit compensation.

Warrants

The following table summarizes investor warrants as of September 30, 2023 and the years ended December 31, 2022 and 2021:

Schedule of Investor Warrants

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2021		3,246,690		$	2.26		3.59
Granted		6,089,398		$	—		—
Exercised		(3,188,190	)	$	—		—
Canceled/forfeited/expired		—		$	—		—
Outstanding at December 31, 2022		6,147,898		$	1.45		2.27
Granted		5,715,697		$	—		—
Exercised		(5,548,463	)	$	—		—
Canceled/forfeited/expired		—		$	—		—
Outstanding at September 30, 2023		6,315,132		$	1.62		2.50

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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 June 2025, and 1,062,500 shares at the exercise price of $0.80 per share, resulting in additional capital of $850,000.

On August 24, 2022, five private investors purchased 1,500,000 new warrants to purchase common stock at $1.50 per share over a three-year period expiring in August 2025, and 1,500,000 shares at the exercise price of $0.80 per share, resulting in additional capital of $1,200,000.

2023

During March 2023, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 3,921,952 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in February 2025. The Company recorded $577,000 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

During August and September of 2023, 18 warrant holders exercised their common stock purchase warrant for 1,906,976 shares at the exercise price of $.82 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 1,793,745 new warrants to purchase common stock at $.82 per share over a three-year period expiring between August and September 2026. The Company recorded $1,146,047 of stock-based expense related to warrants issued during the warrant conversion offer on September 6, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 72% and an option fair value of $0.2922.

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 September 30, 2023 on a recurring and non-recurring basis:

Description	Level 1		Level 2		Level 3		Gains (Losses)
Goodwill (non-recurring)	$	—	$	—	$	—	$	—
Intangibles, net (non-recurring)	$	—	$	—	$	78,244	$	—

The following table presents assets that are measured and recognized at fair value as of December 31, 2022 on a recurring and non-recurring basis:

Description	Level 1		Level 2		Level 3		Gains (Losses)
Goodwill (non-recurring)	$	—	$	—	$	—	$	—
Intangibles, net (non-recurring)	$	—	$	—	$	194,772	$	—

10. Commitments and Contingencies

Litigation

The company had a pending legal proceeding related to a Telephone Consumer Protection Act (“TCPA”) violation. This is a putative class action complaint alleging that the defendant initiated telephone solicitations through text messages in violation of the Florida Telephone Solicitation Act, Fla. Stat. §501.059 (“FTSA”). The defense of the matter was tendered to the Company by its client, Sonic Industries, Inc. During the nine months ended September 30, 2023, the Company has settled five TCPA claims for a total settlement loss of $25,500 and this amount is included within settlement losses on the accompanying unaudited consolidated statements of operations and comprehensive loss.

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 included a 50% abatement period. As of September 30, 2023, we have an operating lease asset balance for this lease of $825,041 and an operating lease liability balance for this lease of $1,001,579 recorded in accordance with ASC 842.

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11. Related Party Transactions

Secured Promissory Notes

On June 30, 2021, we entered into a Credit Facility Agreement with Thomas Akin, one of the Company’s directors (the “Lender”). The Credit Facility Agreement was amended on November 11, 2022 to allow the Company to borrow up to $6,000,000. The Credit Facility Agreement was amended again on January 31, 2023 to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025.

Unsecured Promissory Note

For more details regarding the two related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.

Related Party Warrant Exercise

On March 2, 2023, Thomas Akin exercised his common stock purchase warrant for 749,987 shares at the exercise price of $1.00 per share, resulting in additional capital of $749,987. As an inducement for the holder’s exercise of the warrants, we issued the holder 374,994 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in March 2026. The Company recorded $120,598 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

On February 7, 2023, Talkot Fund LP exercised their common stock purchase warrant for 750,000 shares at the exercise price of $1.00 per share, resulting in additional capital of $750,000. As an inducement for the holder’s exercise of the warrants, we issued the holder 375,000 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in March 2026. The Company recorded $120,600 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

On August 7, 2023, Thomas Akin exercised his common stock purchase warrant for 426,830 shares at the exercise price of $.82 per share, resulting in additional capital of $350,000. As an inducement for the holder’s exercise of the warrants, we issued the holder 853,660 new warrants to purchase common stock at $.82 per share over a three-year period expiring in March 2026. The Company recorded $178,136 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 64% and an option fair value of $0.2087.

On August 7, 2023, Talkot Fund LP exercised their common stock purchase warrant for 426,830 shares at the exercise price of $.82 per share, resulting in additional capital of $350,000. As an inducement for the holder’s exercise of the warrants, we issued the holder 853,660 new warrants to purchase common stock at $.82 per share over a three-year period expiring in March 2026. The Company recorded $178,136 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 64% and an option fair value of $0.2087.

12. Subsequent Events

The Company has discontinued the sale and operation of the Belly loyalty card platform. The last date of operation was October 15, 2023.

On November 10, 2023 three shareholders purchased convertible notes from the Company in the amount of $400,000. The Convertible Note accrues interest monthly at 8% per annum. Principal and accrued interest payments are due in full on November 8, 2026 under the Convertible Note. The Convertible Note and all accrued interest thereon are convertible into shares of our common stock, from time to time, at the option of the holder thereof, at a conversion price per share equal to the larger of either $0.50 or of the volume-weighted average price of our common stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the thirty (30) trading days immediately preceding such date (the “Conversion Price”). For value received the shareholders received 666,668 warrants to purchase common shares at and exercise price of $0.60 per share over a three year period ending November 10, 2026.

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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’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 the 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.