10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 14, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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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
Mobivity Holdings Corp.
(Exact Name of Registrant as Specified in Its Charter)
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| (State or Other Jurisdiction of |
(I.R.S. Employer |
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| Incorporation or Organization) |
Identification No.) |
(Address of Principal Executive Offices)
(
(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.
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).
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 |
☐ |
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☒ |
Smaller reporting company |
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| Emerging Company |
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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
As of November 14, 2022, the registrant had
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets
| September 30, |
December 31, |
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| 2022 |
2021 |
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| (Unaudited) |
(Audited) |
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| ASSETS |
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| Current assets |
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| Cash |
$ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts $ and $, respectively |
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| Other current assets |
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| Total current assets |
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| Goodwill |
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| Right to use lease assets |
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| Intangible assets, net |
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| Other assets |
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| TOTAL ASSETS |
$ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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| Current liabilities |
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| Accounts payable |
$ | $ | ||||||
| Accrued interest |
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| Accrued and deferred personnel compensation |
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| Deferred revenue and customer deposits |
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| Related party notes payable, net - current maturities |
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| Notes payable, net - current maturities |
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| Operating lease liability |
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| Other current liabilities |
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| Total current liabilities |
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| Non-current liabilities |
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| Related party notes payable, net - long term |
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| Notes payable, net - long term |
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| Operating lease liability |
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| Total non-current liabilities |
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| Total liabilities |
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| Stockholders' equity (deficit) |
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| Common stock, $ par value; shares authorized; and , shares issued and outstanding |
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| Equity payable |
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| Additional paid-in capital |
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| Accumulated other comprehensive income (loss) |
( |
) | ( |
) | ||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| Total stockholders' equity (deficit) |
( |
) | ( |
) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| Three Months Ended |
Nine Months Ended |
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| September 30, |
September 30, |
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| 2022 |
2021 |
2022 |
2021 |
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| Revenues |
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| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of revenues |
$ | |||||||||||||||
| Gross profit |
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| Operating expenses |
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| General and administrative |
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| Sales and marketing |
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| Engineering, research, and development |
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| Impairment of intangible asset |
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| Depreciation and amortization |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income/(expense) |
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| Interest income |
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| Other Income |
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| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss on disposal of fixed assets |
( |
) | ||||||||||||||
| Foreign currency gain (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
| Total other income/(expense) |
( |
) | ( |
) | ||||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense |
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| Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive loss, net of income tax |
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| Foreign currency translation adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per share: |
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| Basic |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Diluted |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Weighted average number of shares: |
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| Basic |
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See accompanying notes to consolidated financial statements (unaudited).
Condensed Consolidated Statement of Stockholders’ Equity (Deficit)
(Unaudited)
| Common Stock |
Equity |
Additional Paid-in |
Accumulated Other Comprehensive |
Accumulated |
Total Stockholders' Equity |
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| Shares |
Dollars |
Payable |
Capital |
Loss |
Deficit |
(Deficit) |
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| Balance, December 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
| Fair value of options issued with related party debt |
— | $ | $ | $ | ||||||||||||||||||||||||
| Stock based compensation |
— | |||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, September 30, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Common Stock |
Equity |
Additional Paid-in |
Accumulated Other Comprehensive |
Accumulated |
Total Stockholders' Equity |
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| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Issuance of common stock for warrant exercise |
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| Issuance of common stock for PIPE financing |
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| Issuance of common stock for Settlement of Interest Payable on Related Party Debt |
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| Fair value of options issued with related party debt |
— | |||||||||||||||||||||||||||
| Stock based compensation |
— | |||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended |
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| September 30, |
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| 2022 |
2021 |
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| OPERATING ACTIVITIES |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Loss on Settelment of Debt - related party |
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| Bad debt expense |
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| Stock-based compensation |
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| Loss on Disposal of Fixed Assets |
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| Intangible asset impairment |
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| Gain on Forgiveness of Debt |
( |
) | ||||||
| Depreciation and amortization expense |
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| Amortization of Debt Discount |
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| Increase (decrease) in cash resulting from changes in: |
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| Accounts receivable |
( |
) | ( |
) | ||||
| Other current assets |
( |
) | ||||||
| Operating lease assets/liabilities |
( |
) | ||||||
| Contracts receivable, long-term |
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| Other assets |
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| Accounts payable |
( |
) | ||||||
| Accrued interest |
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| Accrued and deferred personnel compensation |
( |
) | ||||||
| Right to Use Lease |
( |
) | ||||||
| Other liabilities - non-current |
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| Other liabilities - current |
( |
) | ||||||
| Deferred revenue and customer deposits |
( |
) | ||||||
| Net cash used in operating activities |
$ | ( |
) | $ | ( |
) | ||
| INVESTING ACTIVITIES |
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| Purchases of equipment |
( |
) | ( |
) | ||||
| Capitalized software development costs |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| FINANCING ACTIVITIES |
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| Payments on notes payable |
( |
) | ( |
) | ||||
| Payments on related party notes payable |
( |
) | ||||||
| Proceeds from related party debt |
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| Proceeds from conversion of common stock warrants |
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| Proceeds from PIPE funding |
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| Net cash provided by (used in) financing activities |
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| Effect of foreign currency translation on cash flow |
( |
) | ( |
) | ||||
| Net Change in cash |
( |
) | ||||||
| Cash at beginning of period |
$ | $ | ||||||
| Cash at end of period |
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| Non cash investing and financing analysis: |
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| Interest Paid |
$ | $ | ||||||
| Fair Value of Options issued with related party debt |
$ | $ | ||||||
| Refinancing of debt-related party |
$ | $ | ||||||
| Fixed Asset Contribution by Lessor |
$ | $ | ||||||
| Initial ROU and asset and lease liability |
$ | $ | ||||||
| Shares issued for settlement of debt - related party |
$ | $ | ||||||
| Debt Discount on related party debt |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and Basis of Presentation
Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets, PCs, and Point of Sale (“POS”) systems, allow resellers, brands, and enterprises to market their products and services to consumers through text messages sent directly to consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. On November 14, 2018, we completed the acquisition of certain operating assets relating to Belly, Inc.’s proprietary digital customer loyalty platform, including client contracts, accounts receivable, and intellectual property. We generate revenue by charging the resellers, brands, and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021filed with the SEC on March 30, 2022.
In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of September 30, 2022, and for the three and nine months ended September 30, 2022 and 2021. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the operating results for the full year ending December 31, 2022.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates used are those related to stock-based compensation, asset impairments, the valuation and useful lives of depreciable tangible and certain intangible assets, the fair value of common stock used in acquisitions of businesses, the fair value of assets and liabilities acquired in acquisitions of businesses, the fair value of options issued with related party debt, and the valuation allowance of deferred tax assets. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications 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 and Cash Equivalents
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.
As of September 30, 2022, and December 31, 2021, we recorded an allowance for doubtful accounts of $
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.
We conducted our annual impairment tests of goodwill as of December 31, 2021. As a result of these tests, we had a total impairment charge of $
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 year to years. No significant residual value is estimated for intangible assets.
The Company’s evaluation of its long-lived assets resulted in $
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 -month period.
The Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its capitalized software development assets resulted in impairment charges of $
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, 2022 and 2021,
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 nine months ended September 30, 2022 and 2021, the comprehensive loss was $
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 $
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, 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 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 $
As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $
4. Goodwill and Purchased Intangibles
Goodwill
The carrying value of goodwill at each of September 30, 2022 and December 31, 2021 was $
The following table presents details of our purchased intangible assets as of September 30, 2022 and December 31, 2021:
Intangible assets
| Balance at December 31, 2021 | Additions |
Impairments |
Amortization |
Fx and Other |
Balance at September 30, 2022 | |||||||||||||||||||
| Patents and trademarks |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| Customer and merchant relationships |
( |
) | $ | ( |
) | |||||||||||||||||||
| Trade names |
$ | ( |
) | |||||||||||||||||||||
| Acquired technology |
$ | ( |
) | |||||||||||||||||||||
| Non-compete agreements |
$ | ( |
) | |||||||||||||||||||||
| $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||
The intangible assets are being amortized on a straight-line basis over their estimated useful lives of year to years.
Amortization expense for intangible assets was $
Amortization expense for intangible assets was $
The estimated future amortization expense of our intangible assets as of September 30, 2022 is as follows:
| Year ending December 31, |
Amount |
|||
| 2022 |
$ | |||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| 2026 |
||||
| Thereafter |
||||
| Total |
$ | |||
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, 2022 and December 31, 2021:
| Balance at December 31, 2021 | Additions |
Amortization |
Balance at September 30, 2022 | |||||||||||||
| Software Development Costs |
$ | $ | $ | ( |
) | $ | ||||||||||
| $ | $ | $ | ( |
) | $ | |||||||||||
Software development costs are being amortized on a straight-line basis over their estimated useful life of years.
Amortization expense for software development costs was $
Amortization expense for software development costs was $
The estimated future amortization expense of software development costs as of September 30, 2022 is as follows:
| Year ending December 31, |
Amount |
|||
| 2022 |
$ | |||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| 2026 |
||||
| Thereafter |
||||
| Total |
$ | |||
6. Operating Lease Assets
The Company entered into a lease agreement on February 1, 2021, for
The following are additional details related to leases recorded on our balance sheet as of September 30, 2022:
| Leases |
Classification |
Balance at September 30, 2022 | |||
| Assets |
|||||
| Current |
|||||
| Operating lease assets |
Operating lease assets |
$ | |||
| Noncurrent |
|||||
| Operating lease assets |
Noncurrent operating lease assets |
$ | |||
| Total lease assets |
$ | ||||
| Liabilities |
|||||
| Current |
|||||
| Operating lease liabilities |
Operating lease liabilities |
$ | |||
| Noncurrent |
|||||
| Operating lease liabilities |
Noncurrent operating lease liabilities |
$ | |||
| Total lease liabilities |
$ | ||||
The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:
| Year ending December 31, |
||||
| 2022 |
$ | |||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| 2026 |
||||
| Thereafter |
||||
| Total future lease payments |
||||
| Less: imputed interest |
( |
) | ||
| Total |
$ |
| Weighted Average Remaining Lease Term (years) |
||||
| Operating leases |
||||
| Weighted Average Discount Rate |
||||
| Operating leases |
% |
7. Notes Payable and Interest Expense
The following table presents details of our notes payable as of September 30, 2022 and December 31, 2021:
| Facility |
Maturity |
Interest Rate |
Balance at September 30, 2022 | Balance at December 31, 2021 | ||||||||||
| ACOA Note |
February 1, 2024 |
— | ||||||||||||
| TD Bank |
December 31, 2022 |
— | ||||||||||||
| Related Party Note |
various |
% | ||||||||||||
| Total Debt |
||||||||||||||
| Less current portion |
( |
) | ( |
) | ||||||||||
| Long-term debt, net of current portion |
$ | $ | ||||||||||||
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 $
Chase Loan
On April 10, 2020, we entered into a commitment loan with Chase Bank, N.A. under the CARES act and SBA Paycheck Protection Program, in the principal aggregate amount of $
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 $
Related Party Notes
Secured Promissory Notes
On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with one of the Company’s directors (the "Lender"). The Company can borrow up to $
The loan 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 (
On June 10, 2022, The Company took a draw of an additional $
On August 09, 2022 the Company took a draw of an additional $
During the nine months period ending September 30, 2022, the Company issued warrants to purchase an aggregate of
As of September 30, 2022, the Company has drawn a total of $
On November 13, 2022, an amendment to the Credit Facility 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 (
Unsecured Promissory Note
On July 1, 2021, we entered into Unsecured Promissory Notes (each individually, a “UP Note” and collectively, the “UP Notes”) in the aggregate principal amount of $
On August 13, 2022, an amendment to the Credit Facility agreement was agreed upon. The amendment updated the date to begin payment from July 31, 2022, to December 31, 2022. In addition, the interest 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 $
As of September 30, 2022, The Company has a principal balance of $
Interest Expense
Interest expense was $
Interest expense was $
8. Stockholders’ Equity
Common Stock
2021
During the year ended December 31, 2021, the Company did not issue any shares but, recorded a stock-based compensation expense of $
2022
On February 9, 2022,
On June 29, 2022, the Company received private investment funds to purchase
On August 24, 2022, the Company received private investment funds to purchase
During the nine months ended September 30, 2022 a total of $
During the nine months ended September 30, 2022 The Company recorded a stock-based compensation expense of $
As of the nine months ended September 30, 2022 we had an equity payable balance of $
Stock-based Plans
Stock Option Activity
The following table summarizes stock option activity for the nine months ended September 30, 2022.
| Options |
||||
| Outstanding at December 31, 2020 |
||||
| Granted |
||||
| Exercised |
— | |||
| Forfeited/canceled |
( |
) | ||
| Expired |
( |
) | ||
| Outstanding at December 31, 2021 |
||||
| Granted |
||||
| Exercised |
— | |||
| Forfeited/canceled |
( |
) | ||
| Expired |
( |
) | ||
| Outstanding at September 30, 2022 |
||||
The weighted average exercise price of stock options granted during the period was $
2021
On March 26, 2021, the Company granted
On May 2, 2021, the Company granted
On August 11, 2021, the Company granted
2022
On March 29, 2022, the Company granted
On May 16, 2022, the Company granted three employees
On September 22, 2022, the Company granted
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, 2022 and 2021 were as follows:
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| General and administrative |
$ | $ | $ | $ | ||||||||||||
| Sales and marketing |
||||||||||||||||
| Engineering, research, and development |
||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
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, 2022 and 2021.
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| 2022 |
2021 |
|||||||
| Risk-free interest rate |
% | % | ||||||
| Expected life (years) |
||||||||
| Expected dividend yield |
% | % | ||||||
| Expected volatility |
% | % | ||||||
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 2022 and 2021 is based on the historical publicly traded price of our common stock.
Restricted stock units
The following table summarizes restricted stock unit activity under our stock-based plans for the year ended December 31, 2021 and for the nine months ended September 30, 2022:
| Shares |
||||
| Outstanding at December 31, 2020 |
||||
| Awarded |
||||
| Released |
— | |||
| Canceled/forfeited/expired |
( |
) | ||
| Outstanding at December 31, 2021 |
||||
| Awarded |
||||
| Released |
— | |||
| Canceled/forfeited/expired |
||||
| Outstanding at September 30, 2022 |
||||
| Expected to vest at September 30, 2022 |
||||
| Vested at September 30, 2022 |
||||
| Unvested at September 30, 2022 |
— | |||
| Unrecognized expense at September 30, 2022 |
$ | — | ||
2021
On March 26, 2021, the Company issued to
On March 26, 2021, the Company granted to
On May 12, 2021, the Company issued to
On August 11, 2021, the Company issued to
On December 15, 2021, the Company granted
During the year ended December 31. 2021 the company recorded $
2022
On March 29, 2022, the company grated granted
On May 16, 2022, the company grated granted
On September 30, 2022, the company grated granted
In the nine months ended September 30, 2022, the Company recorded $
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, 2022 and 2021 was as follows:
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| General and administrative |
$ | $ | $ | $ | ||||||||||||
| Sales and marketing |
$ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of September 30, 2022, there was
Warrants
The following table summarizes investor warrants as of September 30, 2022 and the years ended December 31, 2021 and 2020:
| Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
||||||||||
| Outstanding at December 31, 2020 |
$ | |||||||||||
| Granted |
$ | — | — | |||||||||
| Exercised |
$ | — | — | |||||||||
| Canceled/forfeited/expired |
( |
) | $ | — | — | |||||||
| Outstanding at December 31, 2021 |
$ | |||||||||||
| Granted |
$ | — | — | |||||||||
| Exercised |
( |
) | $ | — | — | |||||||
| Canceled/forfeited/expired |
$ | — | — | |||||||||
| Outstanding at September 30, 2022 |
$ | |||||||||||
2021
On June 30, 2021, the Company issued warrants to purchase an aggregate of
On August 11, 2021, the Company issued warrants in connection with the Credit Facility Agreement by the related party exercisable at a rate equal to the 30-day VWAP for
As of September 30, 2021, we had outstanding warrants to purchase
2022
On February 9, 2022,
On June 29, 2022, six private investors purchased
On August 24, 2022, five private investors purchased
During the nine months ended September 30, 2022, the Company issued warrants to purchase an aggregate of
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, 2022 on a recurring and non-recurring basis:
| Description |
Level 1 |
Level 2 |
Level 3 |
Gains (Losses) |
||||||||||||
| Goodwill (non-recurring) |
$ | $ | $ | $ | — | |||||||||||
| Intangibles, net (non-recurring) |
$ | $ | $ | $ | — | |||||||||||
The following table presents assets that are measured and recognized at fair value as of December 31, 2021 on a recurring and non-recurring basis:
| Description |
Level 1 |
Level 2 |
Level 3 |
Gains (Losses) |
||||||||||||
| Goodwill (non-recurring) |
$ | $ | $ | $ | — | |||||||||||
| Intangibles, net (non-recurring) |
$ | $ | $ | $ | — | |||||||||||
10. Commitments and Contingencies
Litigation
As of the date of this report, there are no pending legal proceedings to which we or our properties are subject.
Operating Lease
As described in Note 6, the Company has a lease agreement for
11. Related Party Transactions
Unsecured Promissory Note Investments
2021
On July 1, 2021, we entered into an Unsecured Promissory Notes (each, individually, a “UP Note” and collectively, the “UP Notes”) in the aggregate principal amount of $
2022
On August 13, 2022, an amendment to the Credit Facility agreement was agreed upon. The amendment updated the date to begin payment from July 31, 2022, to December 31, 2022. In addition, the interest 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 $
As of September 30, 2022, The Company has a principal balance of $
Secured Promissory Note Investments
2021
On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with one of the Company’s directors. The Company can borrow up to $
The loan 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 (
2022
On June 10, 2022, The Company took a draw of an additional $
On August 09, 2022 the Company took a draw of an additional $
During the nine months period ending September 30, 2022, the Company issued warrants to purchase an aggregate of
As of September 30, 2022, the Company has drawn a total of $
On November 13, 2022, an amendment to the Credit Facility 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 (
12. Subsequent Events
On November 13, 2022, the Company entered into an amended and restated credit facility agreement with Thomas B. Akin, a director of the Company (the “A&R Credit Agreement”) and a corresponding convertible note in the amount of $
The foregoing description of the A&R Credit Agreement and Convertible Note does not purport to be complete and is qualified in its entirety by reference to the A&R Credit Agreement and Convertible Note, which fill be filed separately.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made and are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” or “will,” and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption “Risk Factors” included in our 2020 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 30, 2021, and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Overview
Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized data-driven marketing campaigns.
Mobivity’s Recurrency platform enables multi-unit retailers to leverage the power of their own data to yield maximum customer spend, frequency and loyalty while achieving the highest Return on Marketing Spend (ROMS) possible. Mobivity’s customers use Recurrency to:
| ● |
Transform messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence. |
|
| ● |
Measure, predict, and boost guest frequency and spend by channel. |
|
| ● |
Deploy and manage one-time use offer codes and attribute sales accurately across every channel, promotion, and media program. |
|
| ● |
Deliver 1:1 promotions and offers with customized Mobile Messaging, Personalized Receipt Promotions, and Integrated Loyalty programs. |
Mobivity’s Recurrency, delivered as a Software-as-a-Service (“SaaS”) platform, is used by leading brands including Subway, Sonic Drive-In, Baskin Robbins, Chick-fil-A and Checkers/Rally’s across more than 40,000 retail locations globally.
We’re living in a data-driven economy. By 2003 — when the concept of “Big Data” became common vernacular in marketing - the amount of data being created every two days was equal to the amount created in all of 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.
POS Data Capture
Recurrency captures, normalizes, integrates, and stores transaction data and is compatible with most POS systems used by restaurants and retailers today. The result is a clean useful dataset upon which to predict and influence customers’ buying behavior and deliver basket-level insights.
Analytics Powered by Machine Learning
Recurrency uses Machine Learning (“ML”) to uncover patterns in the buying behaviors of consumers and leverages that data to suggest pricing optimizations, and guide marketing campaigns.
Offers and Promotions
Recurrency provides a digital wallet system for creating and managing dynamic offers and promotions, enabling accurate and complete closed-loop attribution across all channels, media, and marketing efforts. Retailers can deploy one-time, limited-use, and multi-use promotions across all online and offline marketing channels that are scannable at the POS or redeemable online, enabling fraud-free, controllable promotion delivery and attribution at scale. Marketing teams can use the comprehensive attribution analysis and insights to optimize media mix and spend for maximum Return on Marketing Spend (“ROMS”).
Predictive Offers
Recurrency leverages the normalized data captured at the POS and applies Artificial Intelligence (“AI”) to build profiles of both known and anonymous customers, analyzes pre and post-redemption behavior, and then predicts offers that will drive the highest increases in customer spend and frequency at the lowest discount possible. The result is optimized, personalized promotions that produce the highest ROMS possible.
Personalized Receipt Promotions
Recurrency unlocks the power of transactional data to create relevant and timely customer messages printed on the receipts already being generated at the POS. Both clients and agencies are using Recurrency to drive better results and make decisions around offers, promotions, and customer engagement through the medium of the printed receipt. Software integrated with leading POS systems, such as Oracle or MICROS, or installed directly onto receipt printer platforms, such as Epson’s OmniLink product, dynamically controls what is printed on receipts including images, coupons, announcements, or other calls-to-action, such as invitations to participate in a survey. Recurrency offers a Web-based interface where users can design receipt content and implement business rules to dictate what receipt content is printed in particular situations. All receipt content is transmitted to cloud-based Recurrency for storage and analysis.
Customized Mobile Messaging
Recurrency transforms standard short message service (“SMS”), multimedia messaging service (“MMS”), and rich communication services (“RCS”) into a data-driven marketing medium. Recurrency tracks and measures offer effectiveness at a more granular level than other solutions, allowing clients to create smarter offers and drive higher redemption rates. Our proprietary platform connects to all wireless carriers so that any consumer, on any wireless service (for example, Verizon), can join our customer’s SMS/MMS mobile marketing campaign. Our customers use Recurrency’s self-service interface to build, segment, target and optimize mobile messaging campaigns to drive increased guest frequency and spend. Recurrency is an industry leader in RCS messaging and has an industry-leading broadcast reach.
Belly Loyalty
Mobivity’s Belly Loyalty solution drives increased customer engagement and frequency with a customer-facing digital rewards platform via an app and digital pad. Using Belly, customers can customize rewards and leverage pre-built email campaigns and triggers to encourage greater frequency as well as to identify and reactivate lapsed customers.
Company Strategy
Our objective is to build an industry-leading SaaS product that connects consumers to merchants and brands. The key elements of our strategy are:
| ● |
Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our proprietary POS Data Capture technology. Several years of development went into designing POS Data Capture such that the process of intercepting POS data and performing actions, such as controlling the receipt printer with receipt is scalable, portable to a wide variety of POS platforms, and does not impact performance factors including the print speed of a typical receipt printer. Furthermore, we believe the transmission of POS data to Mobivity’s cloud-based data stores presents a very competitive and innovative method of enabling POS data access. Additionally, we believe that our Recurrency platform is more advanced than technologies offered by our competitors and provides us with a significant competitive advantage. With more than ten years of development, we believe that our platform operates SMS/MMS text messaging transactions at a “least cost” relative to competitors while also being capable of supporting the SMS/MMS text messaging transactional volume necessary to serve our goal of several thousand end users. Leveraging our Recurrency platform allows for full attribution of SMS/MMS offers, which we believe is a unique combination of both SMS/MMS text messaging and POS data. |
| ● |
Evolve our sales and customer support infrastructure to uniquely serve very large customer implementations such as franchise-based brands that operate a large number of locations. Over the past few years, we have focused our efforts on the development of our technology and solutions with the goal of selling and supporting small and medium-sized businesses. Going forward, we intend to significantly increase our investments in sales and customer support resources tailored to selling to customers that operate franchise brands. Today we support more than 30,000 merchant locations globally. |
| ● |
Acquire complementary businesses and technologies. We will continue to search and identify unique opportunities which we believe will enhance our product features and functionality, revenue goals, and technology. We intend to target companies with some or all of the following characteristics: (1) an established revenue base; (2) strong pipeline and growth prospects; (3) break-even or positive cash flow; (4) opportunities for substantial expense reductions through integration into our platform; (5) strong sales teams; and (6) technology and services that further build out and differentiate our platform. Our acquisitions have historically been consummated through the issuance of a combination of our common stock and cash. |
| ● |
Build our intellectual property portfolio. We currently have nine issued patents that we believe have significant potential applications in the technology industry. We plan to continue our investment in building a strong intellectual property portfolio. |
While these are the key elements of our current strategy, there can be no guarantees that our strategy will not change or that our strategy will be successful.
Recent Events
Unsecured Promissory Note Investments in 2021
During the year ended December 31, 2021, we issued to Talkot Capital LLC, unsecured notes in the principal aggregate amount of $271,875, which are due and payable two years after issuance (the "Talkot Notes"). These Talkot Notes bear interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay the advances and accrued interest, in whole or in part, without notice, penalty, or charge.
Unsecured Promissory Note Investments in 2022
On August 13, 2022, an amendment to the Credit Facility agreement was agreed upon. The amendment updated the date to begin payment from July 31, 2022, to December 31, 2022. In addition, the interest 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.
As of September 30, 2022, The Company has a principal balance of $271,875, accrued interest of $55,530 and a total of $10,352 of interest was converted into 9,585 shares of common stock and The Company recorded a gain on settlement of interest payable of $162.
Secured Promissory Note Investments in 2021
On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with one of the Company’s directors. The Company can borrow up to $6,000,000 under this Credit Agreement amended on September 30, 2022. As of December 31, 2021, the company has drawn a total of $3,478,125 including cash in the amount of $3,206,250 and $271,875 of principal and accrued interest under the above-described Note that was rolled into the Credit Facility and paid a total of $200,000 toward the principal balance of the loan,
The loan 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 facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67 per share in connection with the issuance of funds under this Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the lender additional warrants entitling the lender to purchase a number of shares of the Company's common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume-weighted average price over the 30 trading days preceding the advance (the "VWAP"). Each warrant will be exercisable over a three-year period at an exercise price equal to the VWAP. 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 August 13, 2022, the Lender agreed to postpone the 24-month repayment period to a later period commencing on January 31, 2022, and further agreed that interest accrued on the loan between July 1, 2022 and December 31, 2022 is to be settled in shares of the Company’s common stock.
Secured Note Investments in 2022
On June 10, 2022, The Company took a draw of an additional $500,000 under the Credit Agreement.
On August 09, 2022 the Company took a draw of an additional $300,000 under the credit agreement.
During the nine months period ending September 30, 2022, the Company issued warrants to purchase an aggregate of 177,571 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 $73,469 using the Black-Scholes option valuation model as of September 30, 2022.
As of September 30, 2022, the Company has drawn a total of $4,078,125 including cash in the amount of $3,806,250, and $271,875 of principal and accrued interest under the above-described UP Notes which were rolled into the Credit Agreement, and we have accrued interest of $387,918. A total of $151,398 of accrued interest was settled into 140,185 shares of common stock and the Company recorded a loss on debt settlement of interest payable $2,259.
On November 13, 2022, an amendment to the Credit Facility 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 Agreement to $6,000,000. In addition, the interest 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.d for each month.
2022 Warrant Exercises
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. 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 December 2023. The company recorded $382,048 of stock-based expense related to warrants issued during the warrant conversion offer on February 9, 2022.
2022 Private Placement
In June 2022, we commenced a private placement of 1,062,500 units of our securities, at a price of $.80 per unit. Each unit consists of one share of our common stock and a common stock purchase warrant to purchase one share of our common stock, over a three-year period, at an exercise price of $1.50 per share. The offering was conducted by our management and no commission or other selling fees were paid by us.
In August 2022, we commenced a private placement of 1,500,000 units of our securities, at a price of $.80 per unit. Each unit consists of one share of our common stock and a common stock purchase warrant to purchase one share of our common stock, over a three-year period, at an exercise price of $1.50 per share. The offering was conducted by our management and no commission or other selling fees were paid by us.
As of September 30, 2022 issued 2,562,500 units under this placement.
2022 Equity Incentive Plan
On September 19, 2022, the directors of Mobivity Holdings Corp. (the “Company”) approved the Mobivity Holdings Corp. 2022 Equity Incentive Plan (the “2022 Plan”). As provided in the 2022 Plan, 12,000,000 shares of the Company’s common stock, $0.001 par value per share (“Common Stock”), are available for issuance as the subject of awards and issued to employees, consultants, and advisors of the Company or any subsidiary, as well as non-employee directors of the Company.
Office Relocation
We entered into a six-year office lease starting in February of 2021 for 8,898 square feet of office space located at 3133 W. Frye Road, Suite 215, Chandler, Arizona. Monthly rental payments, excluding common area maintenance charges, will be $25,953 to $28,733. The first 12 months of the lease included a 50% abatement period.
Intellectual Property
U.S. Patent number 10,949,868 B1 was granted on March 16, 2021. This patent covers the single use of electronic retailer coupons and a referral program. The method and system prevent fraud, are specific to geolocation, and provide an audit trail of the customer, cashier, and marketing platform. A user can also earn a subsequent coupon by referring a friend.
US Patent number 6,788,769 B1 expired in March of 2021. This patent covered a method and system for using telephone numbers as a key to address, email, and online content without the use of a look-up database. Using this system, a phone number is used to access a website or an email address in exactly the same way it is used to dial a telephone.
Results of Operations
Revenues
Revenues consist primarily of those generated by a suite of products under the Recurrency platform. The Recurrency platform is comprised of POS Data Capture, Analytics, Offers and Promotions, Predictive Offers, Personalized Receipt Promotions, Customized Mobile Messaging, Belly Loyalty, and other revenues.
Revenues for the three months ended September 30, 2022, were $1,890,437 a decrease of $421,111 or 18% compared to the same period in 2021.
Revenues for the nine months ended September 30, 2022, were $5,787,168 a decrease of $1,774,798 or 23% compared to the same period in 2021.
This decrease is primarily due to a decrease in revenue of $421,111 quarterly due to the restructuring of customer a contract related to Smart Receipt services.
Cost of Revenues
Cost of revenues consists primarily of cloud-based software licensing fees, short code maintenance expenses, messaging-related expenses, and other expenses.
Cost of revenues for the three months ended September 30, 2022, was $1,806,022, an increase of $797,319, or 79%, for the same period in 2021.
Cost of revenues for the nine months ended September 30, 2022, was $4,183,719, an increase of $861,080, or 26%, for the same period in 2021.
This increase is primarily due to an increase in customer acquisition costs, SMS messaging costs, and MMS messaging costs
General and Administrative
General and administrative expenses consist primarily of salaries and personnel-related expenses, consulting costs, and other expenses.
General and administrative expenses decreased $261,657 or 21%, to $983,428, during the three months ended September 30, 2022, compared to $1,245,085 for the same period in 2021. The decrease in general and administrative expenses was primarily due to a decrease in legal fees.
General and administrative expenses decreased $403,267 or 12%, to $3,088,588, during the nine months ended September 30, 2022, compared to $3,491,855 for the same period in 2021. The decrease in general and administrative expenses was primarily due to a decrease in legal fees.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and personnel-related expenses, stock-based compensation expenses, consulting costs, and other expenses.
Sales and marketing expenses decreased $364,368, or 37%, to $614,600 during the three months ended September 30, 2022, compared to $978,968 for the same period in 2021. The decrease is primarily due to reductions in payroll expenses and share-based compensation.
Sales and marketing expenses decreased $1,209,040, or 40%, to $1,778,371 during the nine months ended September 30, 2022, compared to $2,987,411 for the same period in 2021. The decrease is primarily due to reductions in payroll expenses and share-based compensation.
Engineering, Research & Development
Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.
Engineering, research & development expenses increased $106,595, or 16%, to $784,804 during the three months ended September 30, 2022, compared to $678,209 for the same period in 2021. This increase is primarily due to the end of the ASC 606 deduction, an increase in payroll, and an increase in professional services.
Engineering, research & development expenses increased $284,669, or 14%, to $2,360,863 during the nine months ended September 30, 2022, compared to $2,076,194 for the same period in 2021. This increase is primarily due to the end of the ASC 606 deduction, an increase in payroll, and an increase in professional services.
Impairment on Intangible Asset
Impairment on intangible assets consists of an intangible asset valued at less than its carrying value.
Impairment on intangible assets increased 100% from $0 to $238,143 for the three months ended September 30, 2022, compared to the same period in 2021 The increase is a result of the impairment analysis performed.
Impairment on intangible assets increased from $8,286 to $238,143 for the nine months ended September 30, 2022, compared to the same period in 2021. The increase is a result of the impairment analysis performed.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation on our equipment and amortization of our intangible assets.
Depreciation and amortization expenses decreased $64,346 or 35%, to $118,317 during the three months ended September 30, 2022 compared to $182,663 for the same period in 2021. This decrease is primarily due to the reduction in amortization of intangibles on software development costs.
Depreciation and amortization expenses decreased $171,424 or 33%, to $353,050 during the nine months ended September 30, 2022 compared to $524,474 for the same period in 2021. This decrease is primarily due to the reduction in amortization of intangibles on software development costs.
Interest Income
Interest income consists of stated interest income on our cash balances. Interest income was $0 during the three months ended September 30, 2022, compared to the same period in 2021.
Interest income consists of stated interest income on our cash balances. Interest income decreased $5 or 100% to $0, during the nine months ended September 30, 2022, compared to the same period in 2021.
Interest Expense
Interest expense consists of stated or implied interest expense on our notes payable, amortization of note discounts, and amortization of deferred financing costs.
Interest expense increased $105,170, or 119%, to a total of $193,501 during the three months ended September 30, 2022, from compared to $88,331 in the same period in 2021. This increase in interest expense is primarily related to the new line of credit taken out in 2021.
Interest expense increased $375,740, or 260%, to a total of $520,454 during the nine months ended September 30, 2022, compared to $144,714 in the same period in 2021. This increase in interest expense is primarily related to an increase in borrowings from our related parties.
Gain on Forgiveness of Debt
On July 21, 2021, SBA authorized full forgiveness of the $891,103 PPP Loan after the Company applied for loan forgiveness and met all the requirements for such loan forgiveness under the SBA program. The balance of the loan was forgiven and recorded as a gain on forgiveness of debt of $891,103. Gain on forgiveness of debt decrease 100% to $0 for the three and nine month periods ended September 30, 2022
Loss on Disposal of Fixed Assets
The loss on disposal of assets decreased by 100% from a September 30, 2021, balance of $880 to a September 30, 202, balance of $0.
Foreign Currency
The Company’s financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three and nine months ended September 30, 2022, was $1 Canadian equals $0.78 U.S. Dollars. This compares to an average rate of $1 Canadian equals $0.79 during the same period in 2021. The Company’s functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:
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The Company sells products primarily in U.S. Dollars; therefore, reported revenues are not highly impacted by foreign currency volatility. |
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A portion of the Company’s expenses are incurred in Canadian Dollars and therefore fluctuate in U.S. Dollars as the U.S. Dollar varies. A weaker U.S. Dollar results in an increase in translated expenses, and a stronger U.S. Dollar results in a decrease. |
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Changes in foreign currency rates also impact the translated value of the Company’s working capital that is held in Canadian Dollars. Foreign exchange rate fluctuations result in foreign exchange gains or losses based upon movement in the translated value of Canadian working capital into U.S. Dollars. |
The change in foreign currency was a loss of $76,228 and a loss of $13,150 for the three months ended September 30, 2022 and 2021, respectively.
The change in foreign currency was a loss of $76,862 and a loss of $22,391 for the nine months ended September 30, 2022 and 2021, respectively.
Liquidity and Capital Resources
As of September 30, 2022, we had current assets of $2,139,214, including $1,016,745 in cash, and current liabilities of $7,228,819, resulting in a working capital deficit of $5,089,605.
Cash Flows
| Nine Months Ended |
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| September 30, |
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| 2022 |
2021 |
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| Net cash provided by (used in): |
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| Operating activities |
$ | (4,966,359 | ) | $ | (3,189,511 | ) | ||
| Investing activities |
(30,742 | ) | (388,763 | ) | ||||
| Financing activities |
5,371,407 | 886,076 | ||||||
| Effect of foreign currency translation on cash flow |
(92,985 | ) | (21,726 | ) | ||||
| Net change in cash |
$ | 281,321 | $ | (2,713,924 | ) | |||
Operating Activities
We used cash from operating activities totaling $ 4,966,359 during the nine months ended September 30, 2022 and used cash from operating activities totaling $ 3,189,511during the nine months ended September 30, 2021.
Investing Activities
Investing activities during the nine months ended September 30, 2022, consisted of $18,712 of equipment purchases and $12,030 of capitalized software development costs.
Investing activities during the nine months ended September 30, 2021, consisted of $78,217 of equipment purchases and $310,546 of capitalized software development costs.
Financing Activities
Financing activities during the nine months ended September 30, 2022, consisted of $2,550,552 additional paid-in capital from a warrant conversion to common stock, $2,050,000 additional paid-in capital from two private placement financings, $800,000 proceeds for related party notes payable, and $29,145 in payment on notes payable.
Critical Accounting Policies and Estimates
Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. "Disclosure controls and procedures,” as defined in Exchange Act Rule 13a-15(e), are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, , including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that as of September 30, 2022 our disclosure controls and procedures were not effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the nine months ended September 30, 2022 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
None. From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any material legal proceedings.
We are a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On June 29, 2022, we sold 1,062,500 shares of common stock and warrants to purchase up to 1,062,500 additional shares of common stock for an aggregate offering price of $849,999. The warrants are exercisable for a period of three years from the date of issuance at an initial exercise price of $1.50 per share.
On August 24, 2022, we sold 1,250,000 shares of common stock and warrants to purchase up to 1,250,000 additional shares of common stock for an aggregate offering price of $1,000,000. The warrants are exercisable for a period of three years from the date of issuance at an initial exercise price of $1.50 per share.
For the foregoing warrants, the exercise price of the warrant and the number of the shares issuable upon exercise of the warrant are subject to customary adjustments prior to exercise upon the occurrence of certain events affecting all outstanding shares of common stock.
The foregoing securities were issued in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) to a limited number of persons who were “accredited investors,” as defined in Rule 501 of Regulation D of the Securities Act, without the use of any general solicitations or advertising to market or otherwise offer the securities for sale. None of the shares, warrants or shares of common stock issued upon exercise of the warrants have been registered under the Securities Act or applicable state securities laws and none may be offered or sold in the United States absent registration under the Securities Act, or an exemption from such registration requirements. Neither this quarterly report on Form 10-Q nor any exhibit attached hereto shall constitute an offer to sell or the solicitation of an offer to buy any securities.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
The information set forth below is included herein for purposes of providing the disclosure required under “Item 1.01 Entry Into a Material Definitive Agreement; Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. ” of Form 8-K.
On November 13, 2022, the Company entered into an amended and restated credit facility agreement with Thomas B. Akin, a director of the Company (the “A&R Credit Agreement”) and a corresponding convertible note in the amount of $4,466,043 (the “Convertible Note”). The A&R Credit Agreement amends and restates the current Credit Agreement and allows for the Company to borrow up to $6 million in advances. The Convertible Note accrues interest monthly at 15% per annum. Principal and accrued interest payments are due in 24 monthly installments under the Convertible Note beginning on January 31, 2023 and continuing on the last day of each of the next 23 months thereafter. 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 85% 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”). The Convertible Note and all accrued interest thereon will be automatically converted into common stock at the Conversion Price on the dated that is five business days prior to the date on which the Company becomes listed on a national securities exchange if all listing requirements have been satisfied by the Company (other than the Company satisfying any stockholders’ equity requirement to be listed on such national exchange).
In addition, in connection with the execution of the A&R Credit Agreement and the Convertible Note, the Company issued Mr. Akin 140,185 shares of common stock on November 14, 2022.
The foregoing description of the A&R Credit Agreement and Convertible Note does not purport to be complete and is qualified in its entirety by reference to the A&R Credit Agreement and Convertible Note, which fill be filed separately.
[A1]Note to Company: To confirm this is accurate.
| Exhibit No. |
Description |
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| 3.1 | Restated Articles of Incorporation filed with the Nevada Secretary of State on August 12, 2022* | |
| 3.2 | Bylaws (1) | |
| 3.3 | Amendment to the Bylaws, effective as of November 25, 2011 (2) | |
| 31.1 |
Certification by Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 * |
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| 31.2 |
Certification by Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 * |
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| 32.1 |
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| 101.INS |
Inline XBRL Instance Document * |
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| 101.SCH |
Inline XBRL Taxonomy Schema Document |
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| 101.CAL |
Inline XBRL Taxonomy Calculation Linkbase Document * |
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| 101.DEF |
Inline XBRL Taxonomy Definition Linkbase Document * |
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| 101.LAB |
Inline XBRL Taxonomy Label Linkbase Document* |
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| 101.PRE |
Inline XBRL Taxonomy Presentation Linkbase Document * |
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| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
* Filed electronically herewith
(1) Incorporated by reference to the Registration Statement on Form S-1 filed with the SEC on October 20, 2008, File No. 333-154455
(2) Incorporated by reference to the Company’s Current Report on Form 8-K filed December 2, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
| Mobivity Holdings Corp. |
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| Date: November 14, 2022 |
By: |
/s/ Dennis Becker |
| Dennis Becker |
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| Chairman and Chief Executive Officer |
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| (Principal Executive Officer) |
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| Date: November 14, 2022 |
By: |
/s/ Lisa Brennan |
| Lisa Brennan |
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| Chief Financial Officer (Principal Accounting Officer) |
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