November 26, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2024

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

For the transition period from ___________ to __________

Commission file number 000-53851

Mobivity Holdings Corp.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		26-3439095
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3133 West Frye Road, # 215

Chandler, Arizona 85226

(Address of Principal Executive Offices)

(877) 282-7660

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered
None		None		None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 25, 2024, the registrant had 70,466,103 shares of common stock, par value $0.001 per share, issued and outstanding.

MOBIVITY HOLDINGS CORP.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Condensed Consolidated Balance Sheets		1
Condensed Consolidated Statements of Operations and Comprehensive Loss		2
Condensed Consolidated Statement of Stockholders’ Deficit		3
Condensed Consolidated Statements of Cash Flows		4
Notes to Condensed Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures about Market Risk.		25
Item 4. Controls and Procedures.		25
PART II – OTHER INFORMATION		26
Item 1. Legal Proceedings		26
Item 1A. Risk Factors		26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3. Defaults Upon Senior Securities		26
Item 4. Mine Safety Disclosures		26
Item 5. Other Information		26
Item 6. Exhibits		27
SIGNATURES		28

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mobivity Holdings Corp.

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2024			2023
	(Unaudited)			(Audited)
ASSETS
Current assets
Cash	$	532,450		$	416,395
Accounts receivable, net of allowance for doubtful accounts $35,909 and $16,107, respectively		116,748			29,904
Current assets from discontinued operations		450,517			846,561
Other current assets		267,849			135,916
Total current assets		1,367,564			1,428,776
Right to use lease assets		600,624			770,623
Intangible assets and software development costs, net		57,589			65,916
Other assets		42,349			69,036
TOTAL ASSETS	$	2,068,126		$	2,334,351
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	586,155		$	115,053
Liabilities from discontinued operations		2,261,892			3,257,088
Accrued interest		329,742			21,474
Accrued and deferred personnel compensation		288,064			272,247
Deferred revenue and customer deposits		20,684			155,472
Related party notes payable, net - current maturities		3,840,625			3,072,500
Notes payable, net - current maturities		—			7,154
Operating lease liability, current		295,486			276,072
Other current liabilities		468,125			248,434
Total current liabilities		8,090,773			7,425,494

Non-current liabilities
Related party notes payable, net - long term		8,000,858			4,413,987
Notes payable, net - long term		224,836			265,959
Operating lease liability		436,278			660,852
Total non-current liabilities		8,661,972			5,340,798
Total liabilities		16,752,745			12,766,292

Stockholders’ deficit
Common stock, $0.001 par value; 100,000,000 shares authorized; 70,466,103 and 67,949,709, shares issued and outstanding		70,464			67,950
Equity payable		336,420			989,947
Additional paid-in capital		122,035,163			118,624,601
Accumulated other comprehensive loss		62,856			(153,831	)
Accumulated deficit		(137,189,522	)		(129,960,608	)
Total stockholders’ deficit		(14,684,619	)		(10,431,941	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,068,126		$	2,334,351

See accompanying notes to consolidated financial statements.

Table of Contents

Mobivity Holdings Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	2024			2023			2024			2023
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Revenues
Revenues	$	226,208		$	50,180		$	900,008		$	183,413
Cost of revenues		120,125			35,671		$	541,161			122,782
Gross profit		106,083			14,509			358,847			60,631

Operating expenses
Bad Debt Expense		(7,575	)		—			14,849			—
General and administrative		229,968			1,352,383			542,990			2,250,757
Sales and marketing		197,713			132,518			541,762			310,323
Engineering, research, and development		323,752			79,875			840,207			196,376
Depreciation and amortization		612			1,038			2,812			4,022
Total operating expenses		744,470			1,565,814			1,942,620			2,761,478

Loss from operations		(638,387	)		(1,551,305	)		(1,583,773	)		(2,700,847	)

Other income/(expense)
Loss of settlement of debt		(6,514	)		—			(7,699	)		(370	)
Interest expense		(529,841	)		(237,376	)		(1,429,977	)		(720,265	)
Settlement Losses		—			(399	)		—			(870	)
Foreign currency gain		—			(3	)		(7	)		(13	)
Total other income/(expense)		(536,355	)		(237,778	)		(1,437,683	)		(721,518	)
Loss before income taxes		(1,174,742	)		(1,789,083	)		(3,021,456	)		(3,422,365	)
Income tax expense		—			—			—			—
Net loss from continuing operations		(1,174,742	)		(1,789,083	)		(3,021,456	)		(3,422,365	)
Loss from discontinued operations		(1,283,810	)		(1,989,189	)		(4,207,458	)		(5,106,164	)
Net Loss		(2,458,552	)		(3,778,272	)		(7,228,914	)		(8,528,529	)
Other comprehensive loss, net of income tax
Foreign currency translation adjustments		1,358			91,825			216,687			123,190
Comprehensive loss	$	(1,173,384	)	$	(1,697,258	)	$	(2,804,769	)	$	(3,299,175	)
Basic and Diluted	$	(0.03	)	$	(0.06	)	$	(0.10	)	$	(0.13	)
Weighted average number of shares:
Basic and Diluted		70,482,976			66,785,952			69,719,515			64,878,021

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

Mobivity Holdings Corp.

Condensed Consolidated Statement of Stockholders’ Deficit

(Unaudited)

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

	Common Stock				Equity			Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Dollars		Payable			Capital		Loss			Deficit			(Deficit)
Balance, December 31, 2023		67,949,709	$	67,950	$	989,947		$	118,624,601	$	(153,831	)	$	(129,960,608	)	$	(10,431,941	)
Fair value of options issued with related party debt				—		—			466,594		—			—			466,594
Stock based compensation - Employees		—		—		—			112,660		—			—			112,660
Stock Based Compensation - Directors									81,250		—			—			81,250
Foreign currency translation adjustment		—		—		—			—		217,929			—			217,929
Net loss		—		—		—			—		—		$	(2,254,242	)		(2,254,242	)
Balance, March 31, 2024		67,949,709	$	67,950	$	989,947		$	119,285,105	$	64,098		$	(132,214,850	)	$	(11,807,750	)
Fair value of options issued with related party debt				—		—			619,191		—			—			619,191
Issuance of common stock for settlement of interest payable on related party debt		—		—		465,996					—			—			465,996
Stock based compensation - Employees		—		—		—			131,414		—			—			131,414
Stock based compensation -Directors									81,249								81,249
Foreign currency translation adjustment		—		—		—			—		(2,600	)		—			(2,600	)
Net loss		—		—		—			—		—		$	(2,516,120	)		(2,516,120	)
Balance, June 30, 2024		67,949,709	$	67,950	$	1,455,943		$	120,116,959	$	61,498		$	(134,730,970	)	$	(13,028,620	)
Balance		67,949,709	$	67,950	$	1,455,943		$	120,116,959	$	61,498		$	(134,730,970	)	$	(13,028,620	)
Issuance of common stock for settlement of interest payable on related party debt		2,516,394		2,514		(1,355,081	)		1,389,977		—			—			37,410
Interest Payable on related party debt recorded to equity payable						235,558											235,558
Fair market value of options issued with related party debt		—		—		—			298,188		—			—			298,188
Stock based compensation - Employees		—		—		—			148,789		—			—			148,789
Stock Based Compensation - Directors									81,250								81,250
Foreign currency translation adjustment		—		—		—			—		1,358			—			1,358
Net loss		—		—		—			—		—		$	(2,458,552	)		(2,458,552	)
Balance, September 30, 2024		70,466,103		70,464		336,420			122,035,163		62,856			(137,189,522	)		(14,684,619	)
Balance		70,466,103		70,464		336,420			122,035,163		62,856			(137,189,522	)		(14,684,619	)

See accompanying notes to consolidated financial statements (unaudited).

Table of Contents

Mobivity Holdings Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	2024			2023
	Nine Months Ended
	September 30,
	2024			2023
OPERATING ACTIVITIES
Net Loss	$	(7,228,914	)	$	(8,528,529	)
Net loss from discontinued operations		4,207,458			5,106,164
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on Settlement of Debt - related party		37,410			10,857
Bad debt expense		14,849			—
Stock-based compensation		636,612
Loss on disposal of fixed assets		—			—
Intangible Asset Impairment		—			—
Depreciation and amortization expense		48,341			162,209
Amortization of Debt Discount		372,847			89,349
Increase (decrease) in cash resulting from changes in:
Accounts receivable		(101,693	)		683,060
Other current assets		—			9,634
Other assets		—			(13,250	)
Accounts payable		471,102			104,093
Prepaid Expenses		(131,933	)		(46,231	)
Accrued interest		1,009,822			621,806
Accrued and deferred personnel compensation		15,939			(457,687	)
Other liabilities - current		219,691			(34,036	)
Lease Operating Assets		(35,161	)		(30,155	)
Deferred revenue and customer deposits		(134,788	)		(684,175	)
Net Cash Used in Operating Activities of continuing operations		(598,418	)		(3,006,891	)
Net Cash Used in Operating Activities of discontinuing operations		(4,806,610	)		(2,638,089	)
Net cash used in operating activities	$	(5,405,028	)	$	(5,644,980	)

INVESTING ACTIVITIES
Cash paid for patent activities		(8,768	)		(6,300	)
Purchases of equipment		(4,559	)		(18,252	)
Net cash used in investing activities		(13,327	)		(24,552	)

FINANCING ACTIVITIES
Payments on notes payable		(7,035	)		(20,004	)
Proceeds from Related Party Debt		5,325,000			400,000
Proceeds from conversion of common stock warrants		—			5,195,487
Net cash provided by (used in) financing activities		5,317,965			5,575,483

Effect of foreign currency translation on cash flow		216,445			125,243

Net Change in cash		116,055			31,194
Cash at beginning of period	$	416,395		$	426,740
Cash at end of period		532,450			457,934
Supplemental disclosures
Interest paid	$	11,571		$	9,110

Non-cash investing and financing activities:
Fair Value of Options issued with related party debt	$	1,389,673		$	28,463
Shares Issued for settlement of debt		—			411,823
Shares issued for settlement of debt - related party		701,554			223,937
Par Value of RSU’s issued - termination of director’s service	$	—		$	545

See accompanying notes to consolidated financial statements.

Table of Contents

Mobivity Holdings Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations and Basis of Presentation

Mobivity Holdings Corp. (the “Company” or “us”, “our”, or “we”) is a Nevada corporation organized in 2008, which develops and operates proprietary platforms over which brick and mortar brands and digital first enterprises can conduct national and localized, data-driven marketing campaigns with unique targeting, incentivization and promotion to drive customer acquisition and loyalty. The company’s core technology platform, RecurrencyTM, enables:

	●	Transformation of messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence.
	●	Measurement, prediction, and ability to boost guest frequency and spend by channel.
	●	Deployment and management of one-time use offer codes and attribution of sales accurately across every channel, promotion and media program.
	●	Delivery of uniquely attributable 1:1 offers that power incentivized actions in digital environments like user acquisition, continued monetization, and activities taken in a digital environment.

Our recurrency platform generates revenue in two ways. First, delivered as a Software-as-a-Service (“SaaS”) platform used by leading convenience and quick service restaurant brands to build and engage with their loyal customers. Second, through our Connected RewardsTM business, our platform enables and powers unique incentivized programs in digital environments. Through our Connected Rewards platform, we enable businesses to reward their users and customers with products in the real world for actions taken in a digital environment. Our customers include some of the largest mobile casual game publishers in the world and some of the largest convenience and quick service restaurant brands in the world. The programs we run for our customers include incentivized user acquisition where users are rewarded with a real-world product, like a free or discounted burger, for downloading a mobile game, and rewarded play where users receive real world products for accomplishing activities in game, like achieving a certain level or winning enough points. We charge our customers for each unique action where our rewards are delivered, these include a per install or per individual engagement fee.

On September 25, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with SMS Factory, Inc., a Florida corporation (“SMS Factory”). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company’s SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company’s SMS/MMS text messaging platform business (the “Business Assets”) effective as of September 25, 2024 (the “Closing Date”). Given that the effect of the Asset Purchase Agreement meets all the initial criteria of ASC Topic 205-20, Presentation of Financial Statements – Discontinued Operations for the classification of discontinued operations, the assets, liabilities, and operating results of Mobivity Holdings Corp have been classified as discontinued operations as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023. The consolidated financial statements for the prior periods have been adjusted to reflect comparable information.

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, 2024 filed with the SEC on April 16, 2024.

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, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024.

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, 2024, and December 31, 2023 we recorded an allowance for doubtful accounts of $35,909 and $16,107, respectively.

Goodwill and Intangible Assets

Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.

Table of Contents

We conducted our annual impairment tests of goodwill as of December 31, 2023. As a result of these tests, we had a total impairment charge of $0.

Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one year to twenty years. No significant residual value is estimated for intangible assets.

The Company’s evaluation of its goodwill and intangible assets resulted in no impairment charges for the nine months ended September 30, 2024 and 2023, respectively.

Software Development Costs

Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board (“FASB”) guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. The technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered “research and development” that are not capitalized are immediately charged to engineering, research, and development expense.

Capitalized costs for those products that are canceled or abandoned are charged to product development expenses in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to “Amortization Expense - Development” based on the straight-line method over a twenty-four-month period.

The Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its capitalized software development assets resulted in no impairment charges for the three months ended September 30, 2024 and 2023, respectively.

Impairment of Long-Lived Assets

We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.

Foreign Currency Translation

The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.

Revenue Recognition and Concentrations

Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under ASC 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, 2024 and 2023, two customers accounted for 52% and 51% of our revenues, respectively.

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Comprehensive 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, 2024 and 2023, the comprehensive loss was $1,173,384, and $1,697,258 respectively. For the nine months ended September 30, 2024 and 2023, the comprehensive loss was $2,804,769 and $3,299,175 respectively.

Stock-based Compensation

We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.

Research and Development Expenditures

Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.

Advertising Expense

Direct advertising costs are expensed as incurred and consist primarily of trade shows, sales enablement, content creation, paid engagement and other direct costs. Advertising expense was $151,953 and $169,549 for the nine months ended September 30, 2024 and 2023, respectively.

Income Taxes

We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.

Net Loss Per Common Share

Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and nine months ended September 30, 2024 and 2023, 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. Discontinued Operations

The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the current assets and liabilities of discontinued operations as presented on the Company’s Consolidated Balance Sheets:

	As of September 30, 2024		As of December 31,2023
Assets			$
Current assets
Accounts receivable	$	450,517	$	846,561

Total Assets	$	450,517	$	846,561

Liabilities
Current liabilities
Accounts Payable	$	2,261,892	$	3,257,088

Total Liabilities	$	2,261,892	$	3,257,088

The following table provides details about the major classes of line items constituting “Income (loss) from discontinued operations” as presented on the Company’s Consolidated Statements of Loss:

	2024			2023			2024			2023
	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues	$	1,072,865		$	1,582,891		$	3,473,012		$	5,192,311
Cost of Revenue		570,704			1,125,209			2,093,161			3,475,879
Gross Profit		502,161			457,682			1,379,851			1,716,432

Operating Expenses
Bad Debt Expense		(29,232	)		—			70,428			—
General and administrative		476,788			940,240			1,381,340			2,657,125
Sales and marketing		566,510			575,880			1,837,504			1,692,206
Engineering, research and development		738,649			888,671			2,254,966			2,310,888
Depreciation and amortization		2,360			29,380			13,335			126,880
Total operating expenses		1,755,075			2,434,171			5,557,573			6,787,099

Loss from Operations		(1,252,914	)		(1,976,489	)		(4,177,722	)		(5,070,667	)

Other income/(expense)
Loss on settlement of debt		(30,896	)		—			(29,711	)		(10,487	)
Interest expense		—			—			—			—
Settlement Losses		—			(12,601	)		—			(24,630	)
Foreign currency gain		—			(99	)		(25	)		(380	)
Total other income/(expense)		(30,896	)		(12,700	)		(29,736	)		(35,497	)

Net Loss from Discontinued Operations	$	(1,283,810	)	$	(1,989,189	)	$	(4,207,458	)	$	(5,106,164	)

The Company’s execution of the Asset Purchase Agreement has met the criteria to be reported as discontinued operations. In accordance with GAAP, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets, and results of discontinued operations are reported as a separate component of Consolidated net loss in the Consolidated Statements of Loss, for all periods presented, resulting in changes to the presentation of certain prior period amounts. Cash flows from discontinued operations are not reported separately in the Consolidated Statements of Cash Flows. The assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets for all periods presented.

4. Going Concern

We had $532,450 of cash as of September 30, 2024. We had a net loss of $7,228,914 for the nine months ended September 30, 2024, and we used $5,405,028 of cash in our operating activities during that time. In the nine months ended September 30, 2023 we had a net loss of $8,528,529 and used $5,644,980 of cash in our operating expenses. We raised $3.0 million in cash Convertible Notes issued during 2023. We raised an additional $5.3 million from the issuance of convertible notes in 2024. There is substantial doubt that our additional cash from our warrant conversion along with our expected cash flow from operations, will be sufficient to fund our 12-month plan of operations, and there can be no assurance that we will not require significant additional capital within 12 months.

As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $137.2 million as of September 30, 2024. Further losses are anticipated in the development of the Company’s business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next 12 months with proceeds from the sale of securities, and/or revenues from operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

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4. Intangibles

Intangible assets

The following table presents details of our purchased intangible assets as of September 30, 2024 and December 31, 2023:

Schedule of Intangible Assets

	Balance at December 31, 2023		Additions		Impairments		Amortization			Foreign Exchange and Other		Balance at September 30, 2024
Patents and trademarks	$	53,663	$	8,768	$	—	$	(4,930	)	$	—	$	57,501
Customer and merchant relationships		6,138		—		—	$	(6,138	)		—		—
Trade names		1,609		—		—	$	(1,609	)		—		—
	$	61,410	$	8,768	$	—	$	(12,677	)	$	—	$	57,501

The intangible assets are being amortized on a straight-line basis over their estimated useful lives of one year to twenty years.

Amortization expense for intangible assets was $12,677 and $28,689 for the nine months ended September 30, 2024 and 2023, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for intangible assets was $1,819 and $10,747 for the three months ended September 30, 2024 and 2023, respectively.

The estimated future amortization expense of our intangible assets as of September 30, 2024 was as follows:

Year ending December 31,	Amount
2024	$	1,811
2025	$	7,246
2026	$	7,246
2027	$	7,246
2028	$	7,246
Thereafter	$	26,706
Total	$	57,501

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, 2024 and December 31, 2023:

Schedule of Software Development Costs

Balance at

December 31,

2023

Additions

Amortization

Balance at

September 30,

2024

Software Development Costs

4,506

—

(4,418

)

4,506

—

(4,418

)

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

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Amortization expense for software development costs was $1,140 and $18,120 for the three months ended September 30, 2024 and 2023, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for software development costs was $4,418 and $95,694 for the nine months ended September 30, 2024 and 2023, respectively.

The estimated future amortization expense of software development costs as of September 30, 2024 is as follows:

Year ending December 31,	Amount
2024	$	88
2025		—
2026		—
2027		—
2028		—
Thereafter		—
Total	$	88

6. Operating Lease Assets

The Company entered into a lease agreement on February 1, 2021, for 8,898 square feet, for its office facilities in Chandler, AZ through January 2027. Monthly rental payments, excluding common area maintenance charges, are $25,953 to $28,733. The first twelve months of the lease included a 50% abatement period and a deposit of $110,000 was required. The lessor contributed $110,000 towards the purchase of office furniture as part of the lease agreement. As of September 30, 2024, we have an operating lease asset balance of $600,624 and an operating lease liability balance of $731,764 recorded in accordance with ASC 842, Leases (ASC “842”).

The Company entered in to a sublease on March 1, 2024 for its office facilities in Chandler, AZ through February 28, 2025. Monthly rental payments including rental of office furniture and excluding taxes, are $24,470.

The following are additional details related to leases recorded on our balance sheet as of September 30, 2024:

Leases	Classification	Balance at September 30, 2024
Assets
Current
Operating lease assets	Operating lease assets	$	—
Noncurrent
Operating lease assets	Noncurrent operating lease assets	$	600,624
Total lease assets		$	600,624

Liabilities
Current
Operating lease liabilities	Operating lease liabilities	$	295,486
Noncurrent
Operating lease liabilities	Noncurrent operating lease liabilities	$	436,278
Total lease liabilities		$	731,764

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The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:

Year ending December 31,
2024	$	82,863
2025		337,568
2026		344,241
2027		28,733
2028		—
Thereafter		—
Total future lease payments		793,405
Less: imputed interest		(61,641	)
Total	$	731,764

Weighted Average Remaining Lease Term (years)
Operating leases	2.33

Weighted Average Discount Rate
Operating leases	6.75	%

7. Notes Payable and Interest Expense

The following table presents details of our notes payable as of September 30, 2024 and December 31, 2023:

Schedule of Debt

Facility	Maturity	Interest Rate			Balance at September 30, 2024			Balance at December 31, 2023
ACOA Note	February 1, 2024		15	%		—			7,154
Related Party Secured Promissory Note	June 30, 2026		8	%		5,718,738			5,677,251
Related Party Convertible Notes	various		15	%		5,850,870			1,587,361
Related Party Unsecured Promissory Note	June 30,2026		8	%		271,875			271,875
Convertible Notes	Various		15	%		224,836			215,959
Total Debt						12,066,319			7,759,600
Less current portion						(3,840,625	)		(3,079,654	)
Long-term debt, net of current portion					$	8,225,694		$	4,679,946

ACOA Note

On November 6, 2017, Livelenz (a wholly owned subsidiary of the Company), entered into an amendment of the original agreement dated December 2, 2014, with the Atlantic Canada Opportunities Agency (“ACOA”). Under this agreement, the note will mature, and the commitments will terminate, on February 1, 2024. The monthly principal payment amount of $3,000 CAD increased to $3,500 CAD beginning on November 1, 2019, $4,000 CAD on August 1, 2021, $4,500 CAD on August 1, 2022, and $2,215 CAD during the remaining term of the agreement. Payments from April-December of 2020 were voluntarily deferred by ACOA due to COVID-19.

During the nine months ended September 30, 2024 we repaid $7,035 USD of principal. The final payment was made on February 28, 2024 and the loan is paid in full.

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Related Party Notes

Secured Promissory Notes

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

The Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this loan without notice, penalty, or charge. In consideration of the Lender’s agreement to provide the Credit Facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67 per share in connection with the issuance of funds under the Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the corresponding notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the Lender additional warrants entitling the Lender to purchase a number of shares of the Company’s common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume-weighted average price over the 30 trading days preceding the advance (the “VWAP”). Each warrant will be exercisable over a three-year period at an exercise price equal to the VWAP.

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

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

On January 31, 2024 amended terms were agreed upon and the Company then entered into Amendment No. 2 (the “Amendment”) signed on May 3,2024, which amends the terms of the Credit Facility Agreement, 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 June 30, 2026. Principal payments have been deferred to a period beginning on July 31, 2024 and ending June 30, 2026.

On August 13, 2024 amended terms were agreed upon and the Company then entered into Amendment No. 3 (the “Amendment”) signed on May 3,2024, which amends the terms of the Credit Facility Agreement, 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 June 30, 2026. Principal payments have been deferred to a period beginning on October 31, 2024 and ending September 30, 2026.

During the nine months ended September 30, 2024, a total of $681,432 of interest was accrued by the company. The company recorded amortized discount expense of $64,053.

As of September 30, 2024, the Company had drawn a total of $5,873,125, with a debt discount of $201,087 for a net principal balance of $5,672,038 and has equity payable balance $336,417.

Related Party Convertible Notes

During fourth quarter 2023 the Company issued 8 Convertible Notes payable to related parties for $2,000,000. As an inducement we issued 3,333,332 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

The Convertible Note and all accrued interest thereon are convertible into shares of our common stock, from time to time, at the option of the holder thereof, at a conversion price per share equal to the larger of either $0.50 or of the volume-weighted average price of our common stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the thirty (30) trading days immediately preceding such date (the “Conversion Price”).

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During first quarter 2024 the Company issued 8 Convertible Notes payable to related parties for $1,950,000. As an inducement we issued 3,249,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the second quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $2,100,000. As an inducement we issued 3,499,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $1,275,000. As an inducement we issued 2,124,999 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the nine months ended September 30, 2024 accrued interest of $293,735 was recorded in connection with the related party convertible notes. The Company recorded $299,917 in amortized debt discount in connections with related party convertible notes.

As of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $7,325,000 with a debt discount of $1,425,974 for a net principal balance of $5,899,026 and accrued interest of $313,233.

Unsecured Promissory Note

On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875 with Talkot Fund, LP and investor in the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest are due and payable no later than December 31, 2023. We may prepay any of the UP Notes without notice, subject to a two percent (2%) pre-payment penalty. The UP Note offer was conducted by our management and there were no commissions paid by us in connection with the solicitation. The Company issued to Talkot Fund LP warrants to purchase an aggregate of 33,017 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under this UP Note.

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

On January 31 2024, the Lender agreed to postpone the 24-month repayment period to a later period commencing on July 31, 2024.

During the nine months ended September 30, 2024, a total of $20,122 of interest was accrued by the company and recorded to equity payable.

As of September 30, 2024, the Company had an outstanding principal balance of $271,875, an equity payable balance of $20,122 of accrued interest.

Convertible Notes

During fourth quarter 2023 the Company issued 10 Convertible Notes payable to related parties for $250,000. As an inducement we issued 416,667 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the nine months ended September 30, 2024 the company recorded accrued interest of $15,222 in connection with convertible notes and $8,876 in amortized debt discount.

As of September 30, 2024 the Convertible Notes had a principal balance of $250,000 with a debt discount of $25,165 for a net principal balance of $224,835 and accrued interest of $16,509.

Interest Expense

Interest expense was $529,841 and $237,376 during the three months ended September 30, 2024 and 2023, respectively.

Interest expense was $1,429,977 and $720,265 during the nine months ended September 30, 2024 and 2023, respectively.

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8. Stockholders’ Equity

Common Stock and Equity Payable

2023

On January 31, 2023 a total of 545,012 shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and no expense was recognized during the six months ended June 30, 2023.

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

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

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

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

During March of 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 $3,587,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 1,792,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in March 2026. The Company recorded $577,000 of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

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

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

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

During the nine months ended September 30, 2023 a total of 163,757 shares were issued from stock payable related to related party accrued interest.

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

2024

On June 30, 2024 a total of $445,379 of interest was accrued and settled to equity payable for the issuance of 1,093,267 shares of common stock.

On June 30, 2024 a total of $20,617 of interest was accrued and settled to equity payable for the issuance of 50,609 shares of common stock.

On September 30, 2024 a total of $225,136 of interest was accrued and settled to equity payable for the issuance of 964,593 shares of common stock.

On September 30, 2024 a total of $10,422 of interest was accrued and settled to equity payable for the issuance of 44,653 shares of common stock.

During the nine months ended September 30, 2024 2,516,394 shares were issued for $1,355,081 from equity payable and $235,558 equity payable was recorded.

As of the nine months ended September 30, 2024 we had an equity payable balance of $336,420.

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Stock-based Plans

Stock Option Activity

The following table summarizes stock option activity for the nine months ended September 30, 2024.

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2022		6,691,216		$	1.19		5.86
Granted		2,678,500		$	—		—
Exercised		—		$	—		—
Forfeited/canceled		(329,893	)	$	—		—
Expired		(1,742,468	)	$	0.90		7.28
Outstanding at December 31, 2023		7,297,355		$	—		—
Granted		260,000		$	—		—
Exercised		—		$	—		—
Forfeited/canceled		(949,520	)	$	—		—
Expired		(2,163,335	)	$	—		—
Outstanding at September 30, 2024		4,444,500		$	0.92		7.72

2023

On May 11, 2023 the Company granted three employees 295,000 options to purchase shares of the Company’s common stock at the closing price as of May 11, 2023 of $0.98 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until May 16, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 75.76% and an option fair value of $0.705183 was $208,029.

On July 14, 2023 the Company granted one employees 1,000,000 options to purchase shares of the Company’s common stock at the closing price as of July 14, 2023 of $0.85 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until July 14, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.55% and an option fair value of $0.5590 was $605,383.

On July 17, 2023 the Company granted one employees 700,000 options to purchase shares of the Company’s common stock at the closing price as of July 17, 2023 of $0.79 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until July 17, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.57% and an option fair value of $0.5713 was $396,441.

On August 25, 2023 he Company granted four employees 650,000 options to purchase shares of the Company’s common stock at the closing price as of August 25, 2023 of $0.65 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until August 25, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 64.81% and an option fair value of $0.4257 was $285,773.

2024

On April 1, 2024, the Company granted two employees 250,000 options to purchase shares of the Company’s common stock at the closing price as of April 1, 2024 of $0.502 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until April 1, 2034. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.63% and an option fair value of $0.212377 was $53,094.

On August 14, 2024, the Company granted one employee 10,000 options to purchase shares of the Company’s common stock at the closing price as of August 14, 2024 of $0.502 per share. The option shares will vest 25% immediately, then equally in 36 monthly installments thereafter, and are exercisable until August 14, 2034. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.63% and an option fair value of $0.0724 was $724.

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Stock-Based Compensation Expense from Stock Options and Warrants

The impact on our results of operations of recording stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 were as follows:

	2024		2023		2024			2023
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024			2023
General and administrative	$	3,261	$	62,599	$	(35,842	)	$	181,382
Sales and marketing		105,100		108,348		301,245			248,790
Engineering, research, and development		40,429		46,830		127,461			119,334
Total	$	148,790	$	217,777	$	392,864		$	549,506

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, 2024 and 2023.

	Nine Months Ended
	September 30,
	2024			2023
Risk-free interest rate		4.69	%		3.99	%
Expected life (years)		7.00			7.50
Expected dividend yield		—	%		—	%
Expected volatility		73.63	%		73.47	%

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 2024 and 2023 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, 2023 and for the nine months ended September 30, 2024:

	Shares
Outstanding at December 31, 2022		1,929,933
Awarded		414,104
Released		(545,012	)
Canceled/forfeited/expired		—
Outstanding at December 31, 2023		1,799,025
Awarded		715,205
Released		—
Canceled/forfeited/expired		—
Outstanding at September 30, 2024		2,514,230

Expected to vest at September 30, 2024		2,514,230
Vested at September 30, 2024		2,514,230
Unvested at September 30, 2024		—
Unrecognized expense at September 30, 2024	$	—

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2023

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

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

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

In the nine months ended September 30, 2023 the Company recorded $195,006 in restricted stock expense as board compensation.

2024

On March 31, 2024 the company granted five independent directors a total of 162,500 restricted stock units. The units were valued at $81,250 or $.50 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) March 31, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On June 30,2024 the company granted five independent directors a total of 187,210 restricted stock units. The units were valued at $81,249 or $.434 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) June 30, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On September 30, 2024 the company granted five independent directors a total of 365,495 restricted stock units. The units were valued at $81,250 or $.222 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) September 30, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

In the nine months ended September 30, 2024, the Company recorded $243,749 in restricted stock expense as board compensation.

Stock Based Compensation from Restricted Stock

The impact on our results of operations of recording stock-based compensation expense for restricted stock units for the three and nine months ended September 30, 2024 and 2023 was as follows:

	2024		2023		2024		2023
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
General and administrative	$	81,250	$	65,001	$	243,749	$	195,006
Total	$	81,250	$	65,001	$	243,749	$	195,006

As of September 30, 2024, there was no unearned restricted stock unit compensation.

Warrants

The following table summarizes investor warrants as of September 30, 2024 and the years ended December 31, 2023 and 2022:

Schedule of Investor Warrants

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2022		6,147,898		$	1.45		2.27
Granted		9,563,787		$	—		—
Exercised		(5,548,463	)	$	—		—
Canceled/forfeited/expired		—		$	—		—
Outstanding at December 31, 2023		10,163,222		$	0.94		2.48
Granted		8,916,660		$	—		—
Exercised		—		$	—		—
Canceled/forfeited/expired		—		$	—		—
Outstanding at September 30, 2024		19,079,882		$	0.77		2.13

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2023

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

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

2024

During the first quarter of 2024, one warrant holders was issued 3,291,664 warrants as an inducement for Convertible Notes issued at the exercise price of $.60 per share, resulting in additional capital of $2,250,000. The Company recorded $466,594 of stock-based expense related to warrants issued with issuance of convertible notes. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 93% and an option fair value of $0.1418.

During the second quarter of 2024, one warrant holders was issued 3,499,997 warrants as an inducement for Convertible Notes issued at the exercise price of $.60 per share, resulting in additional capital of $2,100,000. The Company recorded $371,242 of stock-based expense related to warrants issued with issuance of convertible notes. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 91% and an option fair value of $0.1768.

During the third quarter of 2024, one warrant holders was issued 2,124,999 warrants as an inducement for Convertible Notes issued at the exercise price of $.60 per share, resulting in additional capital of $1,275,000. The Company recorded $176,219 of stock-based expense related to warrants issued with issuance of convertible notes. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 104% and an option fair value of $0.1403.

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, 2024 on a recurring and non-recurring basis:

Description	Level 1		Level 2		Level 3		Gains (Losses)
Goodwill (non-recurring)	$	—	$	—	$	—	$	—
Intangibles, net (non-recurring)	$	—	$	—	$	57,589	$	—

The following table presents assets that are measured and recognized at fair value as of December 31, 2023 on a recurring and non-recurring basis:

Description	Level 1		Level 2		Level 3		Gains (Losses)
Goodwill (non-recurring)	$	—	$	—	$	—	$	—
Intangibles, net (non-recurring)	$	—	$	—	$	65,916	$	—

10. Commitments and Contingencies

Litigation

Marina Soliman v. Subway Franchisee Advertising Fund Trust, LTD, Second Circuit Court of Appeals, Case No. 22-1726 – this is putative class action alleging that Defendant initiated telephone solicitations through text messages in violation of the Telephone Consumer Protection Act, 47 U.S.C § 227 et al. (“TCPA”). The district court granted Defendant’s motion to dismiss. The matter has been under submission with the Court since October 24, 2023. In the event that the Court reverses and remands the matter, the Company intends to seek an individual settlement of the matter, and if one cannot be reached, the Company intends to vigorously defend the matter.

Ruhi Reimer vs. Checkers Drive-In Restaurants, Inc. - JAMS Ref No. 5410000618 – this is a single Claimant arbitration action filed against Mobivity’s business partner alleging that text messages were sent to the consumer in violation of the TCPA’s regulations relating to the National Do Not Call Registry. The parties are beginning discovery at this time and a Merits Hearing has been set for January 14, 2025. Based on our current understanding, we believe that the case is pretextual and was set up in advance by the Claimant and his attorneys. Because discovery has only just started, it is premature to assess whether there is any material risk of an adverse award.

Abboud v. Circle K Stores Case – United States District Court, Dist. Arizona, Case No 2:23-cv-01683-DWL – this is a putative TCPA class action alleging that Mobivity and its business partner initiated text messages in violation of the TCPA’s regulations relating to the National Do Not Call Registry. We believe that plaintiff has sued the wrong defendant and that the client’s other servicer is actually responsible for any text messages that were sent to the putative class. We are actively attempting to persuade Plaintiff’s counsel to drop Mobivity from the suit.

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Operating Lease

As of September 30, 2024, we have an operating lease asset balance for this lease of $600,624 and an operating lease liability balance for this lease of $731,764 recorded in accordance with ASC 842.

11. Related Party Transactions

Secured Promissory Notes

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

As of September 30, 2024, the Company had drawn a total of $5,873,125, with a debt discount of $201,087 for a net principal balance of $5,672,038 and has equity payable balance $336,417.

Unsecured Promissory Note

As of September 30, 2024, the Company had an outstanding principal balance of $271,875, an equity payable balance of $20,122 of accrued interest.

Convertible Notes

During first quarter of 2024, the Company issued 8 Convertible Notes payable to related parties for $1,950,000. As an inducement we issued 3,249,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the second quarter of 2024 the Company 8 Convertible Notes payable to related parties for $2,100,000. As an inducement we issued 3,499,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

As of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $7,325,000 with a debt discount of $

Form: 10-Q

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