10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 26, 2024
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 Incorporation or Organization) |
(I.R.S.
Employer 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 ☐ No
As of November 25, 2024, the registrant had shares of common stock, par value $ 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, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts $ |
||||||||
| Current assets from discontinued operations | ||||||||
| 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 | $ | $ | ||||||
Liabilities from discontinued operations |
||||||||
| 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, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | $ | |||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Bad Debt Expense | ( |
) | ||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| 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 from continuing operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss from discontinued operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net Loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive loss, net of income tax | ||||||||||||||||
| Foreign currency translation adjustments | ||||||||||||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 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, 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 director’s service | ( |
) | ||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| 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, 2023 | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| 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, 2023 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive | Accumulated |
Total Stockholders’ Equity |
|||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Fair value of options issued with related party debt | ||||||||||||||||||||||||||||
| Stock based compensation - Employees | — | |||||||||||||||||||||||||||
| Stock Based Compensation - Directors | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | $ | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| Fair value of options issued with related party debt | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation - Employees | — | |||||||||||||||||||||||||||
| Stock based compensation -Directors | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss | — | $ | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( |
) | ||||||||||||||||||||||||||
| Interest Payable on related party debt recorded to equity payable | ||||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation - Employees | — | |||||||||||||||||||||||||||
| Stock Based Compensation - Directors | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | $ | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, September 30, 2024 | ( |
) | ( |
) | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 3 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( |
) | $ | ( |
) | ||
| Net loss from discontinued operations | ||||||||
| 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 | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Intangible Asset Impairment | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of Debt Discount | ||||||||
| Increase (decrease) in cash resulting from changes in: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Other current assets | ||||||||
| 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 of continuing operations | ( |
) | ( |
) | ||||
| Net Cash Used in Operating Activities of discontinuing operations | ( |
) | ( |
) | ||||
| Net cash used in operating activities | $ | ( |
) | $ | ( |
) | ||
| INVESTING ACTIVITIES | ||||||||
| Cash paid for patent activities | ( |
) | ( |
) | ||||
| Purchases of equipment | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| FINANCING ACTIVITIES | ||||||||
| Payments on notes payable | ( |
) | ( |
) | ||||
| Proceeds from Related Party Debt | ||||||||
| Proceeds from conversion of common stock warrants | ||||||||
| 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 disclosures | ||||||||
| Interest paid | $ | $ | ||||||
Non-cash investing and financing activities: |
||||||||
| Fair Value of Options issued with related party debt | $ | $ | ||||||
| Shares Issued for settlement of debt | ||||||||
| Shares issued for settlement of debt - related party | ||||||||
| Par Value of RSU’s issued - termination 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 “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 $
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, 2023. 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 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 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 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
| 6 |
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 $
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, 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
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”).
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 | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts Payable | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
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:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Bad Debt Expense | ( |
) | ||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from Operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income/(expense) | ||||||||||||||||
| Loss on settlement of debt | ( |
) | ( |
) | ( |
) | ||||||||||
| Interest expense | ||||||||||||||||
| Settlement Losses | ( |
) | ( |
) | ||||||||||||
| Foreign currency gain | ( |
) | ( |
) | ( |
) | ||||||||||
| Total other income/(expense) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net Loss from Discontinued Operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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 $
As
shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit
of $
| 7 |
4. Intangibles
Intangible assets
The following table presents details of our purchased intangible assets as of September 30, 2024 and December 31, 2023:
| Balance at December 31, 2023 | Additions | Impairments | Amortization | Foreign Exchange and Other | Balance at September 30, 2024 | |||||||||||||||||||
| 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, 2024 was as follows:
| Year ending December 31, | Amount | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| 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, 2024 and December 31, 2023:
|
Balance at December 31, 2023 |
Additions | Amortization |
Balance at September 30, 2024 |
|||||||||||||
| 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, 2024 is as follows:
| Year ending December 31, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
6. Operating Lease Assets
The
Company entered into a lease agreement on February 1, 2021, for
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 $
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 | $ | ||||
| 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, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 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, 2024 and December 31, 2023:
| Facility | Maturity | Interest Rate |
Balance at September 30, 2024 |
Balance at December 31, 2023 |
||||||||||
| ACOA Note | % | |||||||||||||
| Related Party Secured Promissory Note | % | |||||||||||||
| Related Party Convertible Notes | various | % | ||||||||||||
| Related Party Unsecured Promissory Note | % | |||||||||||||
| Convertible Notes | 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, 2024 we repaid $
| 10 |
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 $
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 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 $
As
of September 30, 2024, the Company had drawn a total of $
Related Party Convertible Notes
During
fourth quarter 2023 the Company issued 8 Convertible Notes payable to related parties for $
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 $
| 11 |
During
first quarter 2024 the Company issued 8 Convertible Notes payable to related parties for $
During
the second quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $
During
the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $
During
the nine months ended September 30, 2024 accrued interest of $
As
of September 30, 2024 the Convertible Notes issued to related parties had a principal balance 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
On
January 31 2024, the Lender agreed to postpone the
During
the nine months ended September 30, 2024, a total of $
As
of September 30, 2024, the Company had an outstanding principal balance of $
Convertible Notes
During
fourth quarter 2023 the Company issued 10 Convertible Notes payable to related parties for $
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 $
During
the nine months ended September 30, 2024 the company recorded accrued interest of $
As
of September 30, 2024 the Convertible Notes had a principal balance of $
Interest Expense
Interest
expense was $
Interest
expense was $
| 12 |
8. Stockholders’ Equity
Common Stock and Equity Payable
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 no expense was recognized during the six months ended June 30, 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 of 2023,
On
June 30, 2023 a total of $
On
June 30, 2023 a total of $
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 September 30, 2023 we had an equity payable balance of $
2024
On
June 30, 2024 a total of $
On
June 30, 2024 a total of $
On
September 30, 2024 a total of $
On
September 30, 2024 a total of $
During
the nine months ended September 30, 2024 shares were issued for $
As
of the nine months ended September 30, 2024 we had an equity payable balance of $
| 13 |
Stock-based Plans
Stock Option Activity
| Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
||||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Forfeited/canceled | ( |
) | $ | — | ||||||||
| Expired | ( |
) | $ | |||||||||
| Outstanding at December 31, 2023 | $ | — | ||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Forfeited/canceled | ( |
) | $ | — | ||||||||
| Expired | ( |
) | $ | — | ||||||||
| Outstanding at September 30, 2024 | $ | |||||||||||
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
2024
On
April 1, 2024, the Company granted
On
August 14, 2024, the Company granted
| 14 |
Stock-Based Compensation Expense from Stock Options and Warrants
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative | $ | $ | $ | ( |
) | $ | ||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Valuation Assumptions
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 2024 and 2023 is based on the historical publicly traded price of our common stock.
Restricted stock units
| Shares | ||||
| Outstanding at December 31, 2022 | ||||
| Awarded | ||||
| Released | ) | |||
| Canceled/forfeited/expired | ||||
| Outstanding at December 31, 2023 | ||||
| Awarded | ||||
| Released | ||||
| Canceled/forfeited/expired | ||||
| Outstanding at September 30, 2024 | ||||
| Expected to vest at September 30, 2024 | ||||
| Vested at September 30, 2024 | ||||
| Unvested at September 30, 2024 | ||||
| Unrecognized expense at September 30, 2024 | $ | |||
| 15 |
2023
On
March 31, 2023, the Company 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 $
2024
On
March 31, 2024 the company granted
On
June 30,2024 the company granted
On
September 30, 2024 the company granted
In
the nine months ended September 30, 2024, the Company recorded $
Stock Based Compensation from Restricted Stock
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of September 30, 2024, there was 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:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | ) | $ | — | — | ||||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at December 31, 2023 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | $ | — | — | |||||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at September 30, 2024 | $ | |||||||||||
| 16 |
2023
During
March 2023,
During
August and September of 2023,
2024
During
the first quarter of 2024,
During
the second quarter of 2024,
During
the third quarter of 2024,
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) | $ | $ | $ | $ | ||||||||||||
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) | $ | $ | $ | $ | ||||||||||||
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.
| 17 |
Operating Lease
As
of September 30, 2024, we have an operating lease asset balance for this lease of $
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 $
As
of September 30, 2024, 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 $
As
of September 30, 2024, the Company had an outstanding principal balance of $
Convertible Notes
During
first quarter of 2024, the Company issued 8 Convertible Notes payable to related parties for $
During
the second quarter of 2024 the Company 8 Convertible Notes payable to related parties for $
During
the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $
As
of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $
For more details regarding the three related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.
12. Sales of Certain Contracts
Acquisition by SMS Factory
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”).
In
consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a
period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each
Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $
The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.
13. Subsequent Events
Convertible Notes
During
October 2024, the Company issued one Convertible Notes to Thomas B. Akin for a total amount of $
Related Party Notes Payable
The Company entered into Amendment No. 4 (the “Amendment”) to Amended and Restated Credit Facility Agreement and Convertible Notes (the Credit Facility Agreement), signed on November 21,2024, 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 March 31, 2027. Principal payments have been deferred to a period beginning on April 30, 2025 and ending March 31, 2027.
| 18 |
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 2023 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 17, 2024, 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 “us”, “our”, or we”) 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 locations and digital environments 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 2 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.
The Recurrency Platform
The Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights and power Connected Rewards interactions. Our technology analyzes transaction data to provide insights, delivers mobile rewards and powers redemption at all potential points of sale (i.e., mobile, in-store, in-app), and provides 100% attribution of the transaction. In Connected Rewards applications, Recurrency is integrated into mobile gaming platforms and mobile attribution partners to deliver the necessary data to deliver rewards for in-game actions.
| 19 |
Company Strategy
Our objective is to build an industry-leading mobile marketing technology product that bridges between in-person and digital environments powering a unique and defensible alternative for digital-first businesses to engage and retain their customers by rewarding them with real-world products and offers. The key elements to our strategy are:
| ● | Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our ability to integrate our Recurrency platform into digital environments and deliver rewards based on activities taken in a digital environment. Because of our long history operating as a loyalty marketing solution we believe we have a defensible head start and ability to continue building products and features that will retain our competitive advantage. | |
| ● | Evolve our sales and customer support infrastructure to uniquely meet the needs of the quickly evolving digital marketing universe. We have quickly evolved our organization and business to fill a gap in the digital marketing landscape. Through continued innovation and emphasis on automation and predictive analytics we believe we will expand our niche and create further value for our Connected Rewards Customers. | |
| ● | 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 and defensible technology services that further build out and differentiate our platform; (3) opportunities for substantial expense reductions through integration into our platform; and (4) strong sales teams. 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 application 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 or implemented at all.
Recent Events
2024 Related Party Convertible Notes
During the 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 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.
2024 Related Party Notes Payable
The Company entered into Amendment No. 2 (the “Amendment”) to Amended and Restated Credit Facility Agreement and Convertible Notes (the Credit Facility Agreement), 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.
Acquisition of Certain Contracts by SMS Factory
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”).
In consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $303,000. The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.
| 20 |
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, 2024, were $226,208 an increase of $176,028 compared to $50,180 for the same period in 2023.
Revenues for the nine months ended September 30, 2024, were $900,008 an increase of $716,595 compared to $183,413 for the same period in 2023.
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, 2024, was $120,125, an increase of $84,454, or 237%, compared to $35,671 for the same period in 2023.
Cost of revenues for the nine months ended September 30, 2024, was $541,161, an increase of $418,379, or 237%, compared to $122,782 for the same period in 2023.
This increase is primarily due to an decrease in SMS/MMS Messaging costs.
Bad Debt Expense
Bad Debt expense for the nine months ended September 30, 2024 was $14,849, an increase of $14,849, or 100%, compared to $0 for the nine months ended September 30, 2023. This increase is due to a decrease in past due invoices.
Bad Debt expense for the three months ended September 30, 2024 was a gain of $7,575 an decrease of $7,575, or 100%, compared to $0 for the three months ended September 30, 2023. This decrease is due to a decrease in past due invoices.
General and Administrative
General and administrative expenses consist primarily of salaries and personnel-related expenses, consulting costs, and other expenses.
General and administrative expenses decreased $1,122,415, or 83%, to $229,968, during the three months ended September 30, 2024, compared to $1,352,383 for the same period in 2023. The decrease in general and administrative expenses was primarily due to a decrease in stock related expense for the warrant exercise that occurred during the same period in 2023.
General and administrative expenses decreased $1,707,767, or 76%, to $542,990, during the nine months ended September 30, 2024, compared to $2,250,757 for the same period in 2023. The decrease in general and administrative expenses was primarily due to a decrease in stock related expense for the warrant exercise that occurred during the same period in 2023.
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 $65,195, or 49%, to $197,713 during the three months ended September 30, 2024, compared to $132,518 for the same period in 2023. The increase is primarily due to an increase in travel and tradeshow expenses.
Sales and marketing expenses increased $231,439, or 75% to $541,762 during the nine months ended September 30, 2024, compared to $310,323 for the same period in 2023. The increase is primarily due to an increase in travel and tradeshow expenses.
| 21 |
Engineering, Research & Development
Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.
Engineering, research & development expenses increased $243,877, or 305%, to $323,752 during the three months ended September 30, 2024, compared to $79,875 for the same period in 2023. This increase is primarily due to an increase in payroll expenses.
Engineering, research & development expenses increased $643,831, or 328%, to $840,207 during the nine months ended September 30, 2024, compared to $196,376 for the same period in 2023. This increase is primarily due to an increase 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 $426, or 41%, to $612 during the three months ended September 30, 2024 compared to $1,038 for the same period in 2023.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2023.
Depreciation and amortization expense decreased $1,210 or 30%, to $2,812 during the nine months ended September 30, 2024 compared to $4,022 for the same period in 2023.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2023.
Interest Expense
Interest expense increased $292,465, or 123%, to $529,841 during the three months ended September 30, 2024, compared to $237,376 in the same period in 2023. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.
Interest expense increased $709,712, or 99%, to $1,429,977 during the nine months ended September 30, 2024, compared to $720,265 in the same period in 2023. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.
Settlement Losses
Settlement losses consist of legal settlement for TCPA settlements.
Settlement losses for the three months ended September 30, 2024 and 2023 were $0 and $399, respectively.
Settlement losses for the nine months ended September 30, 2024 and 2023 were $0 and $870, respectively.
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 months ended September 30, 2024 and 2023 was $6,514 and $7,699, respectively.
Loss on settlement of debt for the nine months ended September 30, 2024 and 2023 was $0 and $370, respectively.
| 22 |
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, 2024, was $1 Canadian equals $0.74 U.S. Dollars, respectively. This compares to an average rate of $1 Canadian equals $0.74 during the same period in 2023. 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 $1,358 and a loss of $91,825 for the three months ended September 30, 2024 and 2023, respectively.
The change in foreign currency was a gain of $216,687 and a gain of $123,190 for the nine months ended September 30, 2024 and 2023, respectively.
Liquidity and Capital Resources
As of September 30, 2024, we had current assets of $1,367,564, including $532,450 in cash, and current liabilities of $8,090,773, resulting in a working capital deficit of $6,723,209.
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.
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 Company has transition to a 100% remote work force and this has resulted in a decrease in monthly rental expense.
| 23 |
Cash Flows
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (5,405,028 | ) | $ | (5,644,980 | ) | ||
| Investing activities | (13,327 | ) | (24,552 | ) | ||||
| 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 | ||||
Operating Activities
We used cash in operating activities totaling $5,405,028 during the nine months ended September 30, 2024 and used cash in operating activities totaling $5,644,980 during the nine months ended September 30, 2023. Key drivers of the cash used in operating activities are the net loss of $7,228,914, a net loss from discontinued operations of $4,207,458 changes to accounts receivable of $86,844, accrued interest of $1,009,822, stock-based compensation of $636,612, accounts payable of $471,102, and amortization of debt discount of $372,874.
Investing Activities
Investing activities during the nine months ended September 30, 2024, consisted of $4,559 of equipment purchases compared to $20,004 in the nine months ended September 30, 2023 and $8,768 of cash paid for patent activities comparted $0 compared to the same period in 2023.
Financing Activities
Financing activities during the nine months ended September 30, 2024 consisted of $5,325,000 of proceeds from related party convertible notes compared to $400,000 in the nine months ended September 30, 2023 In addition, there was $0 proceeds from conversion of warrants compared to $5,195,487 additional paid in capital from a warrant conversation to common stock in the nine months ended September 30, 2023. In the nine months ended September 30, 2024, payments of $7,035 were made on notes payable compared to $20,004 in the same period in 2023.
Critical Accounting Estimates
We have adopted various accounting policies to prepare the our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgments, and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the accompanying notes to the condensed consolidated financial statements. There were no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2024.
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.
| 24 |
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 Principal Executive Officer and Interim 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 Principal Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our Principal Executive Officer and Interim Chief Financial Officer, concluded that as of September 30, 2024 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, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 25 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
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 the Company 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 the Company’s motion to dismiss. The matter has been under submission with the Court of Appeals 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.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), which could materially affect our business, financial condition or future results. There have been no material changes in the risk factors disclosed in the Form 10-K
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
During
the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
| 26 |
Item 6. Exhibits
* Filed electronically herewith
| 27 |
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 26, 2024 | By: | /s/ Bryce D. Daniels |
| Bryce D. Daniels | ||
President |
||
| (Principal Executive Officer) | ||
| Date: November 26, 2024 | By: | /s/ Skye Fossey-Tomaske |
| Skye Fossey-Tomaske | ||
|
Interim Chief Financial Officer (Principal Accounting Officer) |
||
| 28 |