10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 14, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| 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
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| 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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 14, 2023, the registrant had shares of common stock, par value $0.001 per share, issued and outstanding.
MOBIVITY HOLDINGS CORP.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mobivity Holdings Corp.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts $ |
||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Right to use lease assets | ||||||||
| Intangible assets and software development costs, net | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued and deferred personnel compensation | ||||||||
| Deferred revenue and customer deposits | ||||||||
| Related party notes payable, net - current maturities | ||||||||
| Notes payable, net - current maturities | ||||||||
| Operating lease liability, current | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Related party notes payable, net - long term | ||||||||
| Notes payable, net - long term | ||||||||
| Operating lease liability | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Common stock, $ par value; shares authorized; and , shares issued and outstanding | ||||||||
| Equity payable | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( |
) | ||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total stockholders’ deficit | ( |
) | ( |
) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 1 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | $ | |||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| Impairment of intangible asset | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income/(expense) | ||||||||||||||||
| Loss of settlement of debt | ( |
) | ||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Settlement Losses | ( |
) | ( |
) | ||||||||||||
| Foreign currency gain | ( |
) | ( |
) | ( |
) | ||||||||||
| Total other income/(expense) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive loss, net of income tax | ||||||||||||||||
| Foreign currency translation adjustments | ( |
) | ( |
) | ||||||||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per share: | ||||||||||||||||
| Basic and Diluted | ) | ) | ) | ) | ||||||||||||
| Weighted average number of shares: | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 2 |
Mobivity Holdings Corp.
Condensed Consolidated Statement of Stockholders’ Deficit
(Unaudited)
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive |
Accumulated | Total Stockholders’ Equity |
|||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ||||||||||||||||||||||||||||
| Stock based compensation | — | $ | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, March 31, 2022 | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Issuance of common stock for PIPE financing | ||||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation | — | $ | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, June 30, 2022 | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Issuance of common stock for PIPE financing | ||||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ||||||||||||||||||||||||||||
| Stock based compensation | — | $ | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive |
Accumulated | Total Stockholders’ Equity |
|||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | $ | ( |
) | |||||||||||||||||||||||||
| RSU’s issued - termination of a director’s service | ( |
) | $ | |||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | $ | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( |
) | ||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | $ | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( |
) | ||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | $ | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, September 30, 2023 | ( |
) | ( |
) | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 3 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on Settlement of Debt - related party | ||||||||
| Bad debt expense | ||||||||
| Stock-based compensation | ||||||||
| Intangible Asset Impariment | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of Debt Discount | ||||||||
| Increase (decrease) in cash resulting from changes in: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Other current assets | ( |
) | ||||||
| Operating lease assets/liabilities | ( |
) | ||||||
| Other assets | ( |
) | ||||||
| Accounts payable | ( |
) | ||||||
| Prepaid Expenses | ( |
) | ||||||
| Accrued interest | ||||||||
| Accrued and deferred personnel compensation | ( |
) | ( |
) | ||||
| Other liabilities - current | ( |
) | ||||||
| Lease Operating Assets | ( |
) | ||||||
| Deferred revenue and customer deposits | ( |
) | ||||||
| Net cash used in operating activities | $ | ( |
) | $ | ( |
) | ||
| INVESTING ACTIVITIES | ||||||||
| Purchases of equipment | ( |
) | ( |
) | ||||
| Cash paid for patent activities | ( |
) | ||||||
| Capitalized software development cost | ( |
) | ||||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| FINANCING ACTIVITIES | ||||||||
| Payments on notes payable | ( |
) | ( |
) | ||||
| Proceeds from Related Party Debt | ||||||||
| Proceeds from conversion of common stock warrants | ||||||||
| Proceeds from PIPE funding | ||||||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of foreign currency translation on cash flow | ( |
) | ||||||
| Net Change in cash | ||||||||
| Cash at beginning of period | $ | $ | ||||||
| Cash at end of period | ||||||||
| Supplemental disclosure | ||||||||
| Cash paid during period for: | ||||||||
| Interest Paid | $ | $ | ||||||
| Fair Value of Options issued with related party debt | $ | $ | ||||||
| Shares issued for settlement of debt - related party | $ | $ | ||||||
| Shares issued for stock payable for settlement of debt - related party | $ | $ | ||||||
| Par Value pf RSU’s issued - termiation of director’s service | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 4 |
Mobivity Holdings Corp.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and Basis of Presentation
Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets, PCs, and Point of Sale (“POS”) systems, allow resellers, brands, and enterprises to market their products and services to consumers through text messages sent directly to consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. On November 14, 2018, we completed the acquisition of certain operating assets relating to Belly, Inc.’s proprietary digital customer loyalty platform, including client contracts, accounts receivable, and intellectual property. We generate revenue by charging the resellers, brands, and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022
filed with the SEC on April 3, 2023.
In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications did not affect previously reported net losses.
Acquisitions
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.
Cash
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.
As
of September 30, 2023, and December 31, 2022, we recorded an allowance for doubtful accounts of $
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.
| 5 |
We
conducted our annual impairment tests of goodwill as of December 31, 2022. As a result of these tests, we had a total impairment charge
of $
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
The
Company’s evaluation of its goodwill and intangible 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 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 of Long-Lived Assets
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.
Revenue Recognition and Concentrations
Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.
We determine revenue recognition under ASC 606 through the following steps:
| ● | identification of the contract, or contracts, with a customer; | |
| ● | identification of the performance obligations in the contract; | |
| ● | identification of the transaction price; | |
| ● | allocation of the transaction price to the performance obligations in the contract; and | |
| ● | recognition of revenue when, or as, we satisfy a performance obligation. |
During
the nine months ended September 30, 2023 and 2022, two customers accounted for
| 6 |
Comprehensive Income (Loss)
Comprehensive
loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.
We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are
recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses
on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the three months ended September
30, 2023 and 2022 , the comprehensive loss was$
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.
Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and nine months ended September 30, 2023 and 2022, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock based compensation, stock options and warrants were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.
Recent Accounting Pronouncements
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on January 1, 2022.
3. Going Concern
We
had $
As
shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit
of $
| 7 |
4. Goodwill and Purchased Intangibles
Goodwill
The
carrying value of goodwill at each of September 30, 2023 and December 31, 2022 was $
The following table presents details of our purchased intangible assets as of September 30, 2023 and December 31, 2022:
Intangible assets
| Balance at December 31, 2022 |
Additions | Impairments | Amortization | Fx and Other |
Balance at September 30, 2023 |
|||||||||||||||||||
| Patents and trademarks | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| Customer and merchant relationships | $ | ( |
) | |||||||||||||||||||||
| Trade names | $ | ( |
) | |||||||||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
The
intangible assets are being amortized on a straight-line basis over their estimated useful lives of
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, 2023 is as follows:
| Year ending December 31, | Amount | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 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, 2023 and December 31, 2022:
| Balance at December 31, 2022 |
Additions | Amortization | Balance at September 30, 2023 |
|||||||||||||
| Software Development Costs | $ | $ | $ | ( |
) | $ | ||||||||||
| $ | $ | $ | ( |
) | $ | |||||||||||
Software
development costs are being amortized on a straight-line basis over their estimated useful life of
| 8 |
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, 2023 is as follows:
| Year ending December 31, | Amount | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 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, 2023:
| Leases | Classification | Balance at September 30, 2023 |
||||
| 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 | $ | |||||
| 9 |
The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:
| Year ending December 31, | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 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, 2023 and December 31, 2022:
| Facility | Maturity | Interest Rate | Balance at September 30, 2023 |
Balance at December 31, 2022 |
||||||||||
| ACOA Note | — | |||||||||||||
| TD Bank | — | |||||||||||||
| 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 $
During
the nine months ended September 30, 2023 we repaid $
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 Thomas Akin, one of the Company’s
directors (the “Lender”). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $
| 10 |
The
Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on
the unpaid balance at the rate of fifteen percent (
Under
the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in
On January 31, 2023, the Company then entered into Amendment No. 1 (the “Amendment”), which amends our existing Credit Facility Agreement[1], dated as of November 11, 2022, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the Over-The Counter Venture Market operated by OTC Markets Group Inc. (“OTCQB®”) over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible notes to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the existing Credit Facility Agreement. The Amendment was considered a debt modification as the cash flows under the amended terms do not differ by at least 10% from the cash flows under the original agreement.
On
August 22, 2023, The Company took a draw of an additional $
On
September 20, 2023, The Company took a draw of an additional $
During
the nine months ended September 30, 2023, a total of $
During
the nine months period ending September 30, 2023, the Company issued warrants to purchase an aggregate of
As
of September 30, 2023, the Company had drawn a total of $
Unsecured Promissory Note
On
July 1, 2021, we entered into UP Notes in the aggregate principal amount of $
On
January 31, 2023, the Lender agreed to postpone the
During
the nine months ended September 30, 2023, a total of $
As
of September 30, 2023, the Company had an outstanding principal balance of $
Interest Expense
Interest
expense was $
Interest
expense was $
| 11 |
8. Stockholders’ Equity
Common Stock and Equity Payable
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 $
2023
On January 31, 2023 a total of shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and expense was recognized during the three months ended March 31, 2023.
On
March 27, 2023 a total of shares of common stock were granted from equity payable to Thomas Akin as settlement of $
On
March 27, 2023 a total of shares of common stock were granted from equity payable to Talkot Fund LP as settlement of $
On
March 31, 2023 a total of $
On
March 31, 2023 a total of $
During
March,
On June 30, 2023 a total of $ of interest was accrued and settled to equity payable for the issuance of shares of common stock.
On June 30, 2023 a total of $ of interest was accrued and settled to equity payable for the issuance of shares of common stock.
During
August and September of 2023,
During the nine months ended September 30, 2023 a total of shares were issued from stock payable related to related party accrued interest.
As
of the nine months ended September 30, 2023 we had an equity payable balance of $
| 12 |
Stock-based Plans
Stock Option Activity
| Options | ||||
| Outstanding at December 31, 2021 | ||||
| Granted | ||||
| Exercised | ||||
Forfeited/canceled |
( |
) | ||
| Expired | ( |
) | ||
| Outstanding at December 31, 2022 | ||||
| Granted | ||||
| Exercised | ||||
| Forfeited/canceled | ( |
) | ||
| Expired | ( |
) | ||
| Outstanding at September 30, 2023 | ||||
2022
On
March 29, 2022, the Company granted
On
May 16, 2022, the Company granted
On
September 22, 2022, the Company granted
2023
On
May 11, 2023 the Company granted
On
July 14, 2023 the Company granted
On
July 17, 2023 the Company granted
On
August 25, 2023 he Company granted
| 13 |
Stock-Based Compensation Expense from Stock Options and Warrants
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Valuation Assumptions
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| 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 2023 and 2022 is based on the historical publicly traded price of our common stock.
Restricted stock units
| Shares | ||||
| Outstanding at December 31, 2021 | ||||
| Awarded | ||||
| Released | ||||
| Canceled/forfeited/expired | ||||
| Outstanding at December 31, 2022 | ||||
| Awarded | ||||
| Released | ( |
) | ||
| Canceled/forfeited/expired | ||||
| Outstanding at September 30, 2023 | ||||
| Expected to vest at September 30, 2023 | ||||
| Vested at September 30, 2023 | ||||
| Unvested at September 30, 2023 | ||||
| Unrecognized expense at September 30, 2023 | $ | |||
| 14 |
2022
On
March 29, 2022, the company granted
On
May 16, 2022, the company granted
On
September 30, 2022, the company granted
During
the nine months ended September 30, 2022, the Company recorded $
2023
On
March 31, 2023, the company grated granted
On
June 30, 2023, the company granted
On
September 30, 2023, the company granted
In
the nine months ended September 30, 2023, the Company recorded $
Stock Based Compensation from Restricted Stock
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of September 30, 2023, there was unearned restricted stock unit compensation.
Warrants
The following table summarizes investor warrants as of September 30, 2023 and the years ended December 31, 2022 and 2021:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) |
||||||||||
| Outstanding at December 31, 2021 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | ) | $ | — | — | ||||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | ) | $ | — | — | ||||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at September 30, 2023 | $ | |||||||||||
| 15 |
2022
On
February 9, 2022,
On
June 29, 2022,
On
August 24, 2022,
2023
During
March 2023,
During
August and September of 2023,
9. Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. This hierarchy requires companies to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value.
The following table presents assets that are measured and recognized at fair value as of September 30, 2023 on a recurring and non-recurring basis:
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||
| Goodwill (non-recurring) | $ | $ | $ | $ | ||||||||||||
| Intangibles, net (non-recurring) | $ | $ | $ | $ | ||||||||||||
The following table presents assets that are measured and recognized at fair value as of December 31, 2022 on a recurring and non-recurring basis:
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||
| Goodwill (non-recurring) | $ | $ | $ | $ | ||||||||||||
| Intangibles, net (non-recurring) | $ | $ | $ | $ | ||||||||||||
10. Commitments and Contingencies
Litigation
The
company had a pending legal proceeding related to a Telephone Consumer Protection Act (“TCPA”) violation. This is a putative
class action complaint alleging that the defendant initiated telephone solicitations through text messages in violation of the Florida
Telephone Solicitation Act, Fla. Stat. §501.059 (“FTSA”). The defense of the matter was tendered to the Company
by its client, Sonic Industries, Inc. During the nine months ended September 30, 2023, the Company has settled
Operating Lease
As
described in Note 6, the Company has a lease agreement for
| 16 |
11. Related Party Transactions
Secured Promissory Notes
On
June 30, 2021, we entered into a Credit Facility Agreement with Thomas Akin, one of the Company’s directors (the “Lender”).
The Credit Facility Agreement was amended on November 11, 2022 to allow the Company to borrow up to $
Unsecured Promissory Note
On
July 1, 2021, we entered into UP Notes in the aggregate principal amount of $
For more details regarding the two related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.
Related Party Warrant Exercise
On
March 2, 2023, Thomas Akin exercised his common stock purchase warrant for
On
February 7, 2023, Talkot Fund LP exercised their common stock purchase warrant for
On
August 7, 2023, Thomas Akin exercised his common stock purchase warrant for
On
August 7, 2023, Talkot Fund LP exercised their common stock purchase warrant for
12. Subsequent Events
The Company has discontinued the sale and operation of the Belly loyalty card platform. The last date of operation was October 15, 2023.
On
November 10, 2023 three shareholders purchased convertible notes from the Company in the amount of $
| 17 |
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”).
| 18 |
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
2023 Warrants Exercises
During the quarter ended March 30, 2023, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders 1,793,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in February 2025.
During the quarter ended September 30, 2023, 18 warrant holders exercised their common stock purchase warrant for 1,906,976 shares at the exercise price of $.82 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 1,793,745 new warrants to purchase common stock at $.82 per share over a three-year period expiring between August and September 2026. The Company recorded $1,146,047 of stock-based expense related to warrants issued during the warrant conversion offer on September 6, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 72% and an option fair value of $0.2922.
| 19 |
2023 Related Party Notes Payable
On January 31, 2023, the Company entered into Amendment No. 1 (the “Amendment”) to the Amended and Restated Credit Facility Agreement and Convertible Notes which amends our existing Amended and Restated Credit Facility Agreement, dated as of November 11, 2022, between the Company and Thomas B. Akin, a director of the Company (the “Existing Credit Agreement” and as amended by the Amendment, the “Credit Agreement”) and any convertible notes issued thereunder. The Amendment amends the Existing Credit Agreement to extend the maturity of the Credit Agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the Credit Agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the OTCQB® Venture Market operated by OTC Markets Group Inc. over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible note to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the Existing Credit Agreement.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment, a copy of which was filed with the SEC on the Company’s Current Report on Form 8-Kdated January 31, 2023, and is attached as Exhibit 10.1 to such Current Report on Form 8-K and incorporated herein by reference.
2023 Shares Issued
On January 31, 2023 a total of 545,012 shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation.
On March 27, 2023 a total of 154,106 shares of common stock were issued to Thomas Akin as settlement of interest payable.
On March 27, 2023 a total of 9,651 shares were issued to Talkot Fund LP as settlement of interest payable.
On May 08,2023 a total of 180,715 shares of common stock were issued to Thomas Akin as settlement of interest payable.
On May 08, 2023 a total of 9,441 shares were issued to Talkot Fund LP as settlement of interest payable.
On July 17,2023 a total of 181,620 shares of common stock were issued to Thomas Akin as settlement of interest payable.
On July 17, 2023 a total of 9,546 shares were issued to Talkot Fund LP as settlement of interest payable.
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, 2023, were $1,633,071 a decrease of $257,366 compared to the same period in 2022.
Revenues for the nine months ended September 30, 2023, were $5,375,724 a decrease of $411,444 or 7% compared to the same period in 2022
This decrease is primarily due to a decrease of in subscription revenue.
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, 2023, was $1,160,880, a decrease of $645,142, or 36%, compared to $1,806,022 for the same period in 2022.
Cost of revenues for the nine months ended September 30, 2023, was $3,598,661, a decrease of $585,058, or 14%, compared to $4,183,719 for the same period in 2022.
This increase is primarily due to an decrease of $500,000 in application expense.
General and Administrative
General and administrative expenses consist primarily of salaries and personnel-related expenses, consulting costs, and other expenses.
General and administrative expenses increased $1,309,195 or 133% to $2,292,623, during the three months ended September 30, 2023, compared to $983,428 for the same period in 2022. The increase in general and administrative expenses was primarily due to an increase in stock related expense for the warrant exercise that occurred during the period.
General and administrative expenses increased $1,819,294 or 59% to $4,907,882 during the nine months ended September 30, 2023, compared to $3,088,588 for the same period in 2022. The increase in general and administrative expenses was primarily due to an increase in stock related expense for the warrant exercise that occurred during the period.
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 increased $93,798, or 15%, to $708,398 during the three months ended September 30, 2023, compared to $614,600 for the same period in 2022. The increase is primarily due to and $112,000 increase in payroll expense.
Sales and marketing expenses increased $224,158, or 13%, to $2,002,529 during the nine months ended September 30, 2023, compared to $1,778,371 for the same period in 2022. The increase is primarily due to a $297,000 increase in payroll.
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Engineering, Research & Development
Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.
Engineering, research & development expenses increased $183,742, or 23%, to $968,546 during the three months ended September 30, 2023, compared to $784,804 for the same period in 2022. This decrease is primarily due to an decrease of $62,000 in payroll expense.
Engineering, research & development expenses increased $146,401, or 6%, to $2,507,264 during the nine months ended September 30, 2023, compared to $2,360,863 for the same period in 2022. This decrease is primarily due to a $238,000 decrease in payroll expenses.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation on our equipment and amortization of our intangible assets.
Depreciation and amortization expense decreased $87,899 or 74%, to $30,418 during the three months ended September 30, 2023 compared to $118,317 for the same period in 2022.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2022.
Depreciation and amortization expenses decreased $222,148 or 63%, to $130,902 during the nine months ended September 30, 2023 compared to $353,050 for the same period in 2022. This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2022.
Impairment of Intangible Assets
Impairment of intangible asset expenses decreased to $0 during the three months ended September 30, 2023 compared to $238,143 for the same period in 2022.
Impairment of intangible asset expenses decreased to $0 during the nine months ended September 30, 2023 compared to $238,143 for the same period in 2022.
Interest Expense
Interest expense increased $43,875, or 23%, to $237,376 during the three months ended September 30, 2023, compared to $193,501 in the same period in 2022. This increase in interest expense is primarily related to the increased balance on related party notes payable.
Interest expense increased $199,811 or 38%, to $720,265 during the nine months ended September 30, 2023, compared to $520,454 in the same period in 2022. This increase in interest expense is primarily related to the increase balance on related party notes payable.
Settlement Losses
Settlement losses consist of legal settlement for TCPA settlements.
Settlement losses for the three and nine months ended September 30, 2023 were $13,000 and $25,500, respectively. There were no settlement losses for the three and nine months ended September 30, 2022.
Loss on Settlement of Debt
Loss on Settlement of debt consists of the expense from the settlement of notes payable when they are settled into shares.
Loss on settlement of debt for the three and nine months ended September 30, 2023 was $0 and $10,857, respectively. There was no loss on settlement of debt for the three and nine months ended September 30, 2022.
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, 2023, was $1 Canadian equals $0.75 and $0.74 U.S. Dollars, respectively. This compares to an average rate of $1 Canadian equals $0.77 and $0.78 during the same period in 2022. The Company’s functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:
| ● | The Company sells products primarily in U.S. Dollars; therefore, reported revenues are not highly impacted by foreign currency volatility. | |
| ● | A portion of the Company’s expenses are incurred in Canadian Dollars and therefore fluctuate in U.S. Dollars as the U.S. Dollar varies. A weaker U.S. Dollar results in an increase in translated expenses, and a stronger U.S. Dollar results in a decrease. | |
| ● | Changes in foreign currency rates also impact the translated value of the Company’s working capital that is held in Canadian Dollars. Foreign exchange rate fluctuations result in foreign exchange gains or losses based upon movement in the translated value of Canadian working capital into U.S. Dollars. |
The change in foreign currency was a gain of $91,825 and a loss of $76,228 for the three months ended September 30, 2023 and 2022, respectively.
The change in foreign currency was a gain of $123,190 and a loss of $76,862 for the nine months ended September 30, 2023 and 2022, respectively.
Liquidity and Capital Resources
As of September 30, 2023, we had current assets of $1,073,338, including $457,934 in cash, and current liabilities of $6,967,713, resulting in a working capital deficit of $5,894,375.
We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to sufficiently fund our current level of operations through the end of the next 12 months or beyond. We will require additional capital and will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. There can be no assurance we will be able to obtain access to capital as and when needed, or that the terms of any available financing will be commercially reasonable.
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Cash Flows
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (5,644,980 | ) | $ | (4,966,359 | ) | ||
| Investing activities | (24,552 | ) | (30,742 | ) | ||||
| Financing activities | 5,575,483 | 5,371,407 | ||||||
| Effect of foreign currency translation on cash flow | 125,243 | (92,985 | ) | |||||
| Net change in cash | $ | 31,194 | $ | 281,321 | ||||
Operating Activities
We used cash in operating activities totaling $5,644,980 during the nine months ended September 30, 2023 and used cash in operating activities totaling $4,966,359 during the nine months ended September 30, 2022. Key drivers of the cash used in operating activities are the net loss of $8,528,529 and changes to accounts receivable of $683,060, accrued interest of $621,806, accrued and deferred personnel compensation of $457,687, and deferred revenue and customer deposits of $684,175.
Investing Activities
Investing activities during the nine months ended September 30, 2023, consisted of $6,300 in patent fees compared to $0 in the nine months ending September 2022 and $18,252 of equipment purchases compared to $18,712 in the nine months ended September 30, 2022. In addition, there was $0 in capitalized software development costs in nine months ended September 30, 2023 compared to $12,030 in the nine months ended September 30, 2022
Financing Activities
Financing activities during the nine months ended September 30, 2023, consisted of $5,195,487 additional paid-in capital from a warrant conversion to common stock, compared to $2,550,552 additional paid in capital from a warrant conversation to common stock and $2,050,000 additional paid-in capital from a PIPE funding in the nine months ended September 30, 2022.In addition there was $400,000 proceeds for related party notes payable compared to $800,000 in the same period in 2022, and $20,004 in payment on notes payable compared to $29,145 in the same period in 2022.
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, 2023 our disclosure controls and procedures were not effective.
As a small company with limited resources that are mainly focused on the development and sales of software products and services, the Company does not employ a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material misstatement to occur in future periods while it employs the current number of personnel in its finance department.
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, 2023 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company had a legal proceeding related to TCPA (Telephone Consumer Protection Act) Violation. This is a putative class action complaint alleging that Defendant initiated telephone solicitations through text messages in violation of the Florida Telephone Solicitation Act, Fla. Stat. §501.059 (“FTSA”). The defense of the matter was tendered to the Company by its client, Sonic Industries, Inc. During the nine months ended September 30, 2023, the Company has settled four TCPA claims for a total settlement loss of $25,500 and this amount is included within settlement losses on the accompanying unaudited consolidated statements of operations and comprehensive loss.
Item 1A. Risk Factors.
We are a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the March 2023, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders 1,793,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in March 2026.
During August 2023, 18 warrant holders exercised their common stock purchase warrant for 1,906,976 shares at the exercise price of $.82 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 1,793,745 new warrants to purchase common stock at $.82 per share over a three-year period expiring between August and September 2026.
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.
Item 5. Other Information
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.
Item 6. Exhibits
| Exhibit No. | Description | |
| 31.1 | Certification by Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 * | |
| 31.2 | Certification by Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 * | |
| 32.1 | Certification Pursuant to 18 U.S.C. Section 1350 * | |
| 10.1 | Form of Exercise Notice | |
| 10.2 | Warrant Offer Letter | |
| 10.3 | New Warrant | |
| 10.4 | Securities Purchase Agreement | |
| 10.5 | Convertible Note | |
| 10.6 | New Warrant - Convertible | |
| 101.INS | Inline XBRL Instance Document * | |
| 101.SCH | Inline XBRL Taxonomy Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document * | |
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document * | |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document* | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document * | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
* Filed electronically herewith
| (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 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
| Mobivity Holdings Corp. | ||
| Date: November 14, 2023 | By: | /s/ Thomas B. Akin |
| Thomas B. Akin | ||
| Chairman of the Board of Directors | ||
| (Principal Executive Officer) | ||
| Date: November 14, 2023 | By: | /s/ Will Sanchez |
| Will Sanchez | ||
| Chief Financial Officer | ||
| (Principal Accounting Officer) | ||
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