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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

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

 

For the quarterly period ended March 31, 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 & Zip Code)

 

(877) 282-7660

(Registrant’s Telephone Number)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

 

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 x 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 x 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

x

Smaller reporting company

x

 

 

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 x

 

As of May 13, 2022, the registrant had 58,598,885 shares of common stock, par value $0.001, of the registrant 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

5

Notes to Condensed Consolidated Financial Statements

6

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

19

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

24

Item 4. Controls and Procedures.

25

PART II – OTHER INFORMATION

26

Item 6. Exhibits

26

SIGNATURES

27

 


PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Mobivity Holdings Corp.

Condensed Consolidated Balance Sheets

 

March 31,

December 31,

2022

2021

(Unaudited)

(Audited)

ASSETS

Current assets

Cash

$

1,455,147

$

735,424

Accounts receivable, net of allowance for doubtful accounts of $53,514 and $56,340, respectively

491,004

578,303

Other current assets

333,207

227,458

Total current assets

2,279,358

1,541,185

Goodwill

411,183

411,183

Right to use lease assets

1,132,317

1,187,537

Intangible assets, net

1,015,690

1,124,720

Other assets

157,366

173,325

TOTAL ASSETS

$

4,995,914

$

4,437,950

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities

Accounts payable

$

3,503,464

$

3,823,909

Accrued interest

305,364

172,239

Accrued and deferred personnel compensation

292,430

495,533

Deferred revenue and customer deposits

173,379

377,170

Related party notes payable

1,479,167

819,531

Notes payable, net - current maturities

41,577

69,052

Operating lease liability

237,761

229,240

Other current liabilities

9,071

Total current liabilities

6,033,142

5,995,745

Non-current liabilities

Related party notes payable, net - long term

1,857,079

2,498,711

Notes payable, net - long term

61,794

39,086

Operating lease liability

1,127,670

1,188,589

Total non-current liabilities

3,046,543

3,726,386

Total liabilities

9,079,685

9,722,131

Stockholders' equity (deficit)

Common stock, $0.001 par value; 100,000,000 shares authorized; 58,598,885 and 55,410,695, shares issued and outstanding

58,599

55,411

Equity payable

100,862

100,862

Additional paid-in capital

105,590,137

102,446,921

Accumulated other comprehensive income (loss)

(64,983)

(52,088)

1


Accumulated deficit

(109,768,386)

(107,835,287)

Total stockholders' equity (deficit)

(4,083,771)

(5,284,181)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$

4,995,914

$

4,437,950

See accompanying notes to consolidated financial statements.

 


2


Mobivity Holdings Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

Three Months Ended

March 31,

2022

2021

Revenues

Revenues

$

2,029,569

$

2,457,590

Cost of revenues

1,174,948

1,041,795

Gross profit

854,621

1,415,795

Operating expenses

General and administrative

1,207,176

1,289,370

Sales and marketing

597,501

896,750

Engineering, research, and development

702,223

723,950

Impairment of intangible asset

8,286

Depreciation and amortization

124,312

158,227

Total operating expenses

2,631,212

3,076,583

Loss from operations

(1,776,591)

(1,660,788)

Other income/(expense)

Interest income

5

Interest expense

(159,827)

(32,516)

Foreign currency gain (loss)

3,319

(474)

Total other income/(expense)

(156,508)

(32,985)

Loss before income taxes

(1,933,099)

(1,693,773)

Income tax expense

Net loss:

(1,933,099)

(1,693,773)

Other comprehensive loss, net of income tax

Foreign currency translation adjustments

(12,895)

(9,678)

Comprehensive loss

$

(1,945,994)

$

(1,703,451)

Net loss per share:

Basic and Diluted

$

(0.03)

$

(0.03)

Weighted average number of shares:

Basic and Diluted

57,233,309

55,410,695

See accompanying notes to consolidated financial statements (unaudited).

 


3


 

Mobivity Holdings Corp.

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

(Unaudited)

 

Common Stock

Equity

Additional

Accumulated Other

Accumulated

Total Stockholders'

Shares

Dollars

Payable

Paid-in Capital

Comprehensive Loss

Deficit

Equity (Deficit)

Balance, December 31, 2020

55,410,695

$

55,411

$

100,862

101,186,889

$

(23,446)

(99,575,503)

1,744,213

Stock based compensation

228,623

228,623

Foreign currency translation adjustment

(9,678)

(9,678)

Net loss

(1,693,773)

(1,693,773)

Balance, March 31, 2021

55,410,695

$

55,411

$

100,862

$

101,415,512

$

(33,124)

$

(101,269,276)

$

269,385

Common Stock

Equity

Additional

Accumulated Other

Accumulated

Total Stockholders'

Shares

Dollars

Payable

Paid-in Capital

Comprehensive Loss

Deficit

Equity (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

$

2,547,365

$

$

$

2,550,553

Fair value of options issued with related party lue of 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

$

105,590,137

$

(64,983)

$

(109,768,386)

$

(4,083,771)

See accompanying notes to consolidated financial statements (unaudited).

See accompanying notes to consolidated financial statements (unaudited).  


4


Mobivity Holdings Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended

March 31,

2022

2021

OPERATING ACTIVITIES

Net loss

$

(1,933,099)

$

(1,693,773)

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

Bad debt expense

(10,705)

11,297

Stock-based compensation

589,650

228,623

Intangible asset impairment

8,286

Depreciation and amortization expense

124,312

141,591

Amortization of Debt Discount

24,205

Increase (decrease) in cash resulting from changes in:

Accounts receivable

98,004

(1,071,359)

Other current assets

(105,749)

(70,901)

Operating lease assets/liabilities

2,822

16,636

Contracts receivable, long-term

235,976

Other assets

(108,652)

Accounts payable

(320,445)

308,399

Accrued interest

133,125

(15,775)

Accrued and deferred personnel compensation

(203,103)

248,828

Other liabilities - non-current

(9,071)

(138,589)

Other liabilities - current

(36,130)

Deferred revenue and customer deposits

(203,791)

33,584

Net cash used in operating activities

(1,813,845)

(1,901,959)

INVESTING ACTIVITIES

Purchases of equipment

(75,852)

Capitalized software development costs

(50,588)

Net cash used in investing activities

(126,440)

FINANCING ACTIVITIES

Payments on notes payable

(6,354)

(141,058)

Payments on related party notes payable

(80,000)

Proceeds from conversion of common stock warrants

2,550,553

Net cash provided by (used in) financing activities

2,544,199

(221,058)

Effect of foreign currency translation on cash flow

(10,631)

(6,155)

Net change in cash

719,723

(2,255,612)

Cash at beginning of period

735,424

3,282,820

Cash at end of period

$

1,455,147

$

1,027,208

Supplemental disclosures:

Cash paid during period for:

Interest

$

$

29,541

Non Cash investing and financing analysis:

Fair Value of Options issued with related party debt

$

6,201

$

Fixed Asset Contributed by Lessor

110,000

Initial ROU and asset and least liability

1,458,527

5


See accompanying notes to consolidated financial statements.


6


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, 2021 filed 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 March 31, 2022, and for the three months ended March 31, 2022 and 2021. The results of operations for the three months ended March 31, 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.

7


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 March 31, 2022, and December 31, 2021, we recorded an allowance for doubtful accounts of $53,514 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 completed resulted in $0 and $8,286 of intangible impairment expense during the quarters ended March 31, 2022 and March 31, 2021.

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 FASB guidance for the costs of computer software to be sold, leased, or otherwise marketed (“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 asset resulted in impairment charges of $0 for the quarter ended March 31, 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.

 

8


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 Accounting Standards Codification 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 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 (Accounting Standards Codification 606 (“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 three months ended March 31, 2022 and 2021, two customers accounted for 53% and 64% 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 three months ended March 31, 2022 and 2021, the comprehensive loss was $1,945,994, and $1,703,451 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

9


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 $163,734 and $188,343 for the three months ended March 31, 2022 and 2021, respectively. We also include the cost of attending trade shows under marketing expense. We recorded $10,000 and $0 of expense related to those activities for the three months ended March 31, 2022 and 2021, 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 months ended March 31, 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” or the “ASU”). ASU No. 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The company adopted January 1, 2022.

  

10


3. Going Concern

We have $1,455,147 of cash as of March 31, 2022. We had a net loss of $1.9 million for the quarter then ended, and we used $1.8 million of cash in our operating activities during the quarter ended March 31, 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 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 not 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 $109,768,386 as of March 31, 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 the 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 March 31, 2022 and December 31, 2021 was $411,183.

 

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

 

Intangible assets

Balance at December 31, 2021

Additions

Impairments

Amortization

Fx and Other

Balance at
March 31,
2022

Patents and trademarks

$

57,595

$