Mobivity Holdings Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Restatement

Restatement

9 Months Ended

Sep. 30, 2012

On or about March 26, 2012, the Company's management concluded that the Company should restate goodwill related charges in connection with its three acquisitions that were completed during the year ended December 31, 2011. The Company’s method of valuing the restricted common stock issued in the acquisitions at the price paid by investors for Company shares in a number of private offerings around the time of the acquisitions was incorrect, and a revised discounted restricted common stock valuation be used, as required under FAS 157/ASC 820. This change in valuation method of securities also affected share based compensation expense and certain derivative liabilities and related expenses.

Under ASC 820 Fair Value Measurements & Disclosures, a quoted stock price in an active market is considered primary (Type I) indicator of fair value of restricted stock issued in consideration for the acquisitions completed in 2011. The Company believed that the infrequent and low volume of initial trading of its common stock did not constitute an active market. Alternatively, throughout the year the company conducted a private placement in which units comprised of shares of restricted common stock and attached warrants were sold at $1.50 per share. This price per share was bifurcated for the value of the common stock, the warrant, an embedded derivative related to down round protection on common stock, and an embedded derivative related to down round protection on the warrant. The price per common share that was determined by this valuation equaled $110 for the three months ended September 30, 2011. The use of this method resulted in understated asset value for certain intangible assets, understated stock based compensation expense, an understatement of certain derivative liabilities and an understatement of the related expense related to the Company’s derivative liability, as reflected in its financial statements for the quarter ended September 30, 2011.

The cumulative effect of this change through September 30, 2011 is an increase of $8,316,527 in goodwill, an increase of $32,143 in intangible assets, a decrease of ($1,834) in other current assets, an increase of $739,606 in current liabilities, an increase of $993,119 in earn-out payable, an increase of $8,177,272 in additional paid-in capital, and a decrease of ($1,913,161) in the Company’s net income; however, this had no effect on the Company’s reported cash flows. Unaudited Tables detailing the effect of the error on the Company’s previously filed financial statements for the quarter ended September 30, 2011 are included below.

Balance Sheet

	September 30, 2011
	As Filed			Adjustments				Restated

Current Assets
Cash	$	1,152		$	—			$	1,152
Accounts Receivable		318,919			—				318,919
Other Current Assets		52,689			(1,834	)	(a)		50,855
Total Current Assets		372,760			(1,834	)			370,926

Equipment, Net		31,714			—				31,714
Goodwill		5,120,712			8,316,527		(a)		13,437,239
Intangible Assets, Net		2,835,611			32,143		(a)		2,867,754
Other Assets		49,650			125,846		(c)		175,496
TOTAL ASSETS	$	8,410,447		$	8,472,682			$	16,883,129


Current Liabilities
Accounts Payable	$	581,392		$	—			$	581,392
Accrued Interest		120,923			—				120,923
Accrued and Deferred Personnel Compensation		160,763			—				160,763
Deferred Revenue - related party		200,000			—				200,000
Deferred Revenue and Customer Deposits		166,277			—				166,277
Notes Payable, net of discount		837,245			—				837,245
Convertible notes payable, net of discount		980,030			(2,944	)	(a)		977,086
Cash payment obligation, net of discount		147,414			—				147,414
Derivative Liabilities		582,443			742,550		(a)		1,324,993
Other Current Liabilities		143,722			—				143,722
Total Current Liabilities		3,920,209			739,606				4,659,815

Non-Current Liabilities
Long term note payable		—			125,846		(c)		125,846
Earn-out payable		2,664,466			993,119		(a)		3,657,585
Total Non-Current Liabilities		2,664,466			1,118,965				3,783,431
Total Liabilities		6,584,675			1,858,571				8,443,246

Stockholders' Deficit
Common Stock, $0.001 par value; 150,000,000
shares authorized; 22,360,793 and 17,700,000 shares
issued and outstanding as of June 30, 2011 and
December 31, 2010, respectively		22,361			—				22,361
Common Stock Liability		—			350,000		(b)		350,000
Additional Paid-in Capital		11,947,645			8,177,272		(a)		20,124,917
Accumulated Deficit		(10,144,234	)		(1,913,161	)	(a)		(12,057,395	)
Total Stockholders' Deficit		1,825,772			6,614,111				8,439,883
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT	$	8,410,447		$	8,472,682			$	16,883,129

(a) To reflect change due to the change in fair market value of restricted stock in underlyging calculations

(b) To reflect shares owed at Sept 30, 2011 not issued until Q4 2011.

Statement of Operations

	Three months ended September 30, 2011
	As Filed			Adjustments				Restated
Revenues

Revenues	$	842,885		$	—			$	842,885
Cost of revenues		311,717			—				311,717
Gross Margin		531,168			—				531,168

Operating Expenses
General & administrative		523,513			437,623		(a,b)		961,136
Sales & marketing expense		245,810			(5,088	)	(a)		240,722
Engineering, research, & development expense		156,851			17,951		(a)		174,802
Depreciation & amortization		191,783			—				191,783
Total Operating Expenses		1,117,957			450,486				1,568,443

Loss From Operations		(586,789	)		(450,486	)			(1,037,275	)

Other Income/(Expense)
Interest expense		(133,055	)		—				(133,055	)
Change in fair market value of derivative liabilities		(54,134	)		(347,576	)	(a)		(401,710	)
Total Other Income/(Expense)		(187,189	)		(347,576	)			(534,765	)

Loss before income taxes		(773,978	)		(798,062	)			(1,572,040	)

Income tax benefit/(expense)		(1,600	)		—				(1,600	)

Net Loss	$	(775,578	)	$	(798,062	)		$	(1,573,640	)

Net Loss Per Share - Basic and Diluted	$	(0.04	)	$	(0.04	)	(a)	$	(0.07	)

Weighted average number of shares during the period - basic and diluted		22,048,802			22,048,802				22,048,802

(a) To reflect change due to the change in fair market value of restricted stock in underlyging calculations

(b) To reflect shares owed at Sept 30, 2011 not issued until Q4 2011.

Statement of Operations

	Nine months ended September 30, 2011
	As Filed			Adjustments				Restated
Revenues

Revenues	$	1,536,630		$	—			$	1,536,630
Cost of revenues		570,605			—				570,605
Gross Margin		966,025			—				966,025

Operating Expenses
General & administrative		1,448,955			704,022		(a,b)		2,152,977
Sales & marketing expense		497,936			16,249		(a)		514,185
Engineering, research, & development expense		445,267			53,853		(a)		499,120
Depreciation & amortization		318,560			—				318,560
Total Operating Expenses		2,710,718			774,124				3,484,842

Loss From Operations		(1,744,693	)		(774,124	)			(2,518,817	)

Other Income/(Expense)
Interest expense		(376,548	)		—				(376,548	)
Change in fair market value of derivative liabilities		152,822			(1,139,038	)	(a)		(986,216	)
Total Other Income/(Expense)		(223,726	)		(1,139,038	)			(1,362,764	)

Loss before income taxes		(1,968,419	)		(1,913,162	)			(3,881,581	)

Income tax benefit/(expense)		(1,562	)		—				(1,562	)

Net Loss	$	(1,969,981	)	$	(1,913,162	)		$	(3,883,143	)

Net Loss Per Share - Basic and Diluted	$	(0.10	)	$	(0.09	)	(a)	$	(0.19	)

Weighted average number of shares during the period - basic and diluted		20,381,533			20,381,533				20,381,533

- Definition

Tabular disclosure of the nature and effects of a restatement to correct an error in the reported results of operations of prior periods. When prior period adjustments are recorded, the resulting effects (both gross and net of applicable income tax) on the net income of prior periods are disclosed in the annual report for the year in which the adjustments are made, and amended filings of previously issued reports are typically issued.

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