PART I –FINANCIAL INFORMATION

Item 1. Financial Statements

Mobivity Holdings Corp.

Condensed Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

Mobivity Holdings Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

See accompanying notes to consolidated financial statements (unaudited).

Mobivity Holdings Corp.

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)Deficit

(Unaudited)

See accompanying notes to consolidated financial statements (unaudited).

Mobivity Holdings Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

Mobivity Holdings Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Nature of Operations and Basis of Presentation

Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets, PCs, and Point of Sale (“POS”) systems, allow resellers, brands, and enterprises to market their products and services to consumers through text messages sent directly to consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. On November 14,2018, we completed the acquisition of certain operating assets relating to Belly, Inc.’s proprietary digital customer loyalty platform, including client contracts, accounts receivable, and intellectual property. We generate revenue by charging the resellers, brands, and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q10-Q and Rule 8-038-03 of Regulation S-XS-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-K10-K for the year ended December 31, 20212022 filed with the SEC on March 30,2022.April 3, 2023.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of SeptemberJune 30, 2022,2023, and for the three and ninesix months ended SeptemberJune 30, 2022 2023 and 2021.2022. The results of operations for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the operating results for the full year ending December 31,2022. 2023.

2.Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates used are those related to stock-based compensation, asset impairments, the valuation and useful lives of depreciable tangible and certain intangible assets, the fair value of common stock used in acquisitions of businesses, the fair value of assets and liabilities acquired in acquisitions of businesses, the fair value of options issued with related party debt, and the valuation allowance of deferred tax assets. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.

Reclassifications

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

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

Cash and Cash Equivalents

We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.

Accounts Receivable, Allowance for Doubtful Accounts and Concentrations

Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.

As of SeptemberJune 30, 2022,2023, and December 31, 2021,2022, we recorded an allowance for doubtful accounts of $59,190$9,423 and $56,340$34,446 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.

We conducted our annual impairment tests of goodwill as of December 31, 2021.2022. As a result of these tests, we had a total impairment charge of $85,169.$963,659.

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 year to twenty years years. . No significant residual value is estimated for intangible assets.

The Company’s evaluation of its long-livedgoodwill and intangible assets resulted in $238,143 and $8,286 of intangibleno impairment expenses duringcharges for the ninesix months ended ended SeptemberJune 30, 20222023 and 2021,2022, 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"(“FASB”) guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20,985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”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-fourtwenty-four-month-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 noimpairment charges of $0 for the quarterthree months ended SeptemberJune 30, 20222023 and $0 for the year ended December 31, 2021.2022, 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 830-10,830-10, Foreign Currency Matters (“ASC 830-10”830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.

Revenue Recognition and Concentrations

Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.

Accounting Standards Update (“ASU”) No.2014-09, 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:

During the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, two customers accounted for 50%51% and 54%49% of our revenues, respectively.

Comprehensive Income (Loss)

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the ninethree months ended SeptemberJune 30, 2023 and 2022 and 2021, the comprehensive loss was $6,810,412,$2,272,219, and $4,132,347$1,939,473 respectively. For the six months ended June 30, 2023 and 2022, the comprehensive loss was $4,718,892 and $3,885,467 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 $315,540$114,978 and $698,761$188,825 for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively. The decrease in advertising expense is due to lower engagement and content creation costs.

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 ninesix months ended SeptemberJune 30, 2022 2023 and 2021,2022, we had securities outstanding which could potentially dilute basic earnings per share in the future. ThoseStock 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 2020-06,2020-06, Accounting for Convertible Instruments and Contracts in an Entity'sEntity’s Own Equity (“ASU 2020-06”2020-06”). ASU 2020-062020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-062020-06 on January 1,2022.

3.Going Concern

We had $1.0 millioin$529,471 of cash as of SeptemberJune 30, 2022. 2023. We had a net loss of $6.7 million$4,750,257 for the ninesix months then ended June 30, 2023, and we used $5.0 million$3,486,777 of cash in our operating activities during that time. In 2021,the six months ended June 30, 2022 we had a net loss of $4.1 million$3,884,833 and used $3.2 million$3,519,680 of cash in our operating expenses. We raised $2.6$3.6 million in cash from the exercise of warrants in February 2022 andof 2023. In addition, we have raised $2.1$1.1 million in Private Placement financingcash from the exercise in August 2023. There is substantial doubt that our additional cash from our warrant conversion along with our expected cash flow from operations, will be sufficient to date.fund our 12-month plan of operations, 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 $114.6$122.6 million as of SeptemberJune 30, 2022.2023. 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.

4.Goodwill and Purchased Intangibles

Goodwill

Goodwill

The carrying value of goodwill at each of SeptemberJune 30, 20222023 and December 31, 20212022 was $411,183.$0.

The following table presents details of our purchased intangible assets as of SeptemberJune 30, 20222023 and December 31, 2021:2022:

Intangible assets

Schedule of Goodwill and Intangible Assets

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

Amortization expense for intangible assets was $35,724$17,942 and $35,738$71,478 for the threesix months ended SeptemberJune 30, 2023 and 2022, respectively, and 2021, respectively.is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for intangible assets was $107,211$8,972 and $107,478$32,590 for the ninethree months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively.

The estimated future amortization expense of our intangible assets as of SeptemberJune 30, 20222023 is as follows:

Schedule of Finite Lived Intangible Assets Future Amortization Expense

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 activitiesactivities.

The following table presents details of our software development costs as of SeptemberJune 30, 20222023 and December 31, 2021:2022:

Schedule of Software Development Costs

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

Amortization expense for software development costs was $61,764$35,629 and $104,870$71,974 for the three months ended SeptemberJune 30, 2023 and 2022, respectively, and 2021, respectively.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 $207,027$77,574 and $309,618$145,263 for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively.

The estimated future amortization expense of software development costs as of SeptemberJune 30, 20222023 is as follows:

Schedule of Finite Lived Intangible Assets Future Amortization Expense

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$25,953 to $28,733.$28,733. The firsttwelve months of the lease included a 50% abatement period and a deposit of $110,000$110,000 was required. The lessor contributed $110,000$110,000 towards the purchase of office furniture as part of the lease agreement. As of SeptemberJune 30, 2022,2023, we have an operating lease asset balance of $1,032,132$878,380 and an operating lease liability balance of $1,247,395$1,065,155 recorded in accordance with ASC 842, Leases (ASC "842"“842”).

The following are additional details related to leases recorded on our balance sheet as of SeptemberJune 30, 2022:2023:

Schedule of Additional Details Related to Leases

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:

Schedule of Lessee, Operating Lease Liability

Schedule of Lease Cost

7.Notes Payable and Interest Expense

The following table presents details of our notes payable as of SeptemberJune 30, 20222023 and December 31, 2021:2022:

Schedule of Debt

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$3,000 CAD increased to $3,500$3,500 CAD beginning on November 1,2019, $4,000 $4,000 CAD on August 1,2021, $4,500 $4,500 CAD on August 1,2022, and $2,215$2,215 CAD during the remaining term of the agreement. Payments from April- December April-December of 2020 were voluntarily deferred by ACOA due to COVID-19.COVID-19.

During the ninesix months ended SeptemberJune 30, 20222023 we repaid $32,263$16,684 USD of principal.

Chase Loan

On April 10,2020, we entered into a commitment loan with Chase Bank, N.A. under the CARES act and SBA Paycheck Protection Program, in the principal aggregate amount of $891,103, which is due and payable two years after issuance. This note bears interest on the unpaid balance at the rate of one percent (1%) per annum. The note contains a deferral period of six months, for which no interest or principal payments are due. Forgiveness of the loan may be obtained by meeting certain SBA requirements. The entire loan was forgiven on July 21, 2021, at which time the company recorded a gain on extinguishment of debt in the amount of $891,103.

TD Bank Loan

On April 22,2020, we entered into a commitment loan with TD Bank under the Canadian Emergency Business Account (“CEBA”), in the principal aggregate amount of $40,000 $40,000 CAD, which is due and payable on December 31,2023. This note bears interest on the unpaid balance at the rate of zero percent (0%(0%) per annum during the initial term. Under this note, no interest or principal payments are due until December 31,2023. Under the conditions of the loan, thirty-three percent (33%(33%) of the loan will be forgiven if sixty-seven percent (67%(67%) is repaid prior to the initial term date.

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"“Lender”). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $6,000,000$6,000,000 under thisthe Credit Agreement amended on September 30, 2022. As of December 31, 2021, (“the company has drawn a total of $3,478,125 including cash in the amount of $3,206,250 and $271,875 of principal and accrued interest under the above-described Note that was rolled into the“Credit Facility”).

The Credit Facility and paid a total of $200,000 toward the principal balance of the loan,

The loan is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on the unpaid balance at the rate of fifteen percent (15%(15%) per annum. The Company may prepay this loan without notice, penalty, or charge. In consideration of the lender’sLender’s agreement to provide the facility,Credit Facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67$1.67 per share in connection with the issuance of funds under thisthe 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 lenderLender additional warrants entitling the lenderLender to purchase a number of shares of the Company'sCompany’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"“VWAP”). Each warrant will be exercisable over a three-yearthree-year period at an exercise price equal to the VWAP.

Under the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in 24 equal monthly installments commencing on June 30, 2022, and ending on June 30, 2024. On August 13,November 11, 2022, the Lender agreed to postpone the 24-month repayment period to a later period commencing on January 31,2022, and further agreed that interest accrued on the loan between July 1, 2022 and December 31, 2022 is to be settled in shares of the Company’s common stock.

On June 10, 2022, The Company took a draw of an additional $500,000 under the Credit Agreement. 

On August 09, 2022 the Company took a draw of an additional $300,000 under the credit agreement.

During the nine months period ending September 30, 2022, the Company issued warrants to purchase an aggregate of 177,571 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under the Credit Agreement. The estimated aggregate fair value of the warrants issued is $73,469 using the Black-Scholes option valuation model as of September 30, 2022.

As of September 30, 2022, the Company has drawn a total of $4,078,125 including cash in the amount of $3,806,250, and $271,875 of principal and accrued interest under the above-described UP Notes which were rolled into the Credit Agreement, and we have accrued interest of $387,918. A total of $151,398 of accrued interest was settled into 140,185 shares of common stock and the Company recorded a loss on debt settlement of interest payable $2,259.