25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 20232024
☐ | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to__________
Commission File Number: 333-260902
Bubblr, Inc.
(Exact name of registrant as specified in its charter)
86-2355916 | ||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
21 West 46th Street
New York, New York 10036
(Address of principal executive offices)
(646(646)) 814 7184
(Registrant’s telephone number)
(Former name, former address, and former fiscal year, if changed since last report)
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.
[X]☒ Yes[ ] ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). [X]☒ Yes [ ]☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
☐ Large accelerated filer | ☐ Accelerated filer | ||
☐ Non-accelerated filer | ☒Smaller reporting company | ||
☒Emerging growth 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 [X] ☒No
Securities registered pursuant to Section 12(b) of the Act: None
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common stockequity, as of the latest practicable date: common shares asAs of May 12, 2023.7, 2024, there were outstanding shares of the registrant’s Common Stock, $.01 par value.
TABLE OF CONTENTS
INDEX
2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our consolidated financial statements included in this Form 10-Q are as follows:
These unaudited consolidated financial statements are condensed and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 20232024, are not necessarily indicative of the results that can be expected for the full year endedending December 31,2023.31, 2024.
3 |
BUBBLR INC.
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
F-1 |
BUBBLR INC.
Consolidated Balance Sheets
March 31, 2024 and December 31, 2023
(Unaudited)
March 31, | December 31, | |||||||
2024 | 2023 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 951 | $ | 7,668 | ||||
Other receivables | 88,937 | 87,503 | ||||||
Total current assets | 89,888 | 95,171 | ||||||
Non-current Assets: | ||||||||
Property and equipment, net | 2,349 | 31,302 | ||||||
Intangible assets, net | 1,409,681 | 1,456,628 | ||||||
Total non-current assets | 1,412,030 | 1,487,930 | ||||||
TOTAL ASSETS | $ | 1,501,918 | $ | 1,583,101 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 398,365 | $ | 373,606 | ||||
Accrued liabilities | 1,106,074 | 943,007 | ||||||
Loan payable, current | - | 12,611 | ||||||
Loan payable - related party, current | 263,970 | 158,247 | ||||||
Loan payable | 263,970 | 158,247 | ||||||
Total current liabilities | 1,768,409 | 1,487,471 | ||||||
Non-current liabilities: | ||||||||
Loan payable - related party, non-current | 548,341 | 552,639 | ||||||
Warrant derivative liability | 40,367 | 39,116 | ||||||
Total non-current liabilities | 588,708 | 591,755 | ||||||
Total Liabilities | 2,357,117 | 2,079,226 | ||||||
Stockholders’ Equity (Deficit) | ||||||||
Series C Convertible Preferred Stock, $ | par value, authorized, shares issued and outstanding1 | 1 | ||||||
Common stock, $ | par value, shares authorized; shares issued and outstanding at March 31, 2024, and December 31, 20231,596,904 | 1,596,904 | ||||||
Additional paid-in capital | 13,277,905 | 13,168,915 | ||||||
Accumulated deficit | (16,095,315 | ) | (15,612,775 | ) | ||||
Accumulated other comprehensive income | 365,306 | 350,830 | ||||||
Total Stockholders’ Equity (Deficit) | (855,199 | ) | (496,125 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 1,501,918 | $ | 1,583,101 |
(Unaudited)
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 35,115 | $ | 32,533 | ||||
Other receivables | 6,240 | 9,884 | ||||||
Total current assets | 41,355 | 42,417 | ||||||
Non-current Assets: | ||||||||
Property and equipment, net | 45,800 | 47,956 | ||||||
Intangible assets, net | 1,306,093 | 1,325,995 | ||||||
Total non-current assets | 1,351,893 | 1,373,951 | ||||||
TOTAL ASSETS | $ | 1,393,248 | $ | 1,416,368 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 393,973 | $ | 141,605 | ||||
Accrued liabilities | 96,331 | 50,094 | ||||||
Loan payable, current portion | 12,225 | 11,987 | ||||||
Loan payable - related party | 636,261 | 392,170 | ||||||
Total current liabilities | 1,138,790 | 595,856 | ||||||
Non-current liabilities: | ||||||||
Loan payable, non-current portion | 8,205 | 10,465 | ||||||
Loan payable, related party, non-current portion | 535,709 | 525,291 | ||||||
Warrant derivative liability | 270,998 | 198,479 | ||||||
Total non-current liabilities | 814,912 | 734,235 | ||||||
Total Liabilities | 1,953,702 | 1,330,091 | ||||||
Stockholders' Equity (Deficit) | ||||||||
Series C Convertible Preferred Stock, | par value, authorized, shares issued and outstanding at March 31, 2023 and December 31, 20221 | 1 | ||||||
Common stock, | par value, shares authorized; and shares issued and outstanding at March 31, 2023 and December 31, 20221,559,488 | 1,543,093 | ||||||
Additional paid-in capital | 10,638,631 | 11,006,607 | ||||||
Accumulated deficit | (13,151,445 | ) | (12,875,437 | ) | ||||
Accumulated other comprehensive income | 392,871 | 412,013 | ||||||
Total Stockholders' Equity (Deficit) | (560,454 | ) | 86,277 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 1,393,248 | $ | 1,416,368 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-2 |
BUBBLR INC.
Consolidated Statement of Operations and Comprehensive Loss
For the three months ended March 31, 2024, and 2023
(Unaudited)
2024 | 2023 | |||||||
For the Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Revenue | $ | $ | ||||||
Sales | 1,504 | - | ||||||
Cost of sales | 622 | - | ||||||
Gross profit | 882 | - | ||||||
Operating Expenses | ||||||||
General and administrative | $ | 310,068 | $ | 16,289 | ||||
Professional fees | 8,028 | (225,570 | ) | |||||
Sales and marketing | 18,173 | 312,463 | ||||||
Amortization and depreciation | 53,991 | 59,627 | ||||||
Research and development | 47,865 | 39,152 | ||||||
Total operating expense | 438,125 | 201,961 | ||||||
Operating loss | (437,243 | ) | (201,961 | ) | ||||
Other income (expense) | ||||||||
Other income | 1,478 | 98 | ||||||
Interest expense | (3,592 | ) | (1,129 | ) | ||||
Disposal of fixed assets | (9,355 | ) | - | |||||
Gain (loss) on change in fair value of warrant derivative liability | (1,251 | ) | (72,519 | ) | ||||
Foreign currency transaction (loss) gain | (10,904 | ) | 21,175 | |||||
Total other income (expense) | (23,624 | ) | (52,375 | ) | ||||
Net loss before income tax | $ | (460,867 | ) | $ | (254,336 | ) | ||
Provision for income tax | - | - | ||||||
Net loss after income tax | $ | (460,867 | ) | $ | (254,336 | ) | ||
Other comprehensive income (loss) | ||||||||
Foreign currency translation gain (loss) | 14,476 | (19,142 | ) | |||||
Total other comprehensive income (loss) | 14,476 | (19,142 | ) | |||||
Net comprehensive loss | $ | (446,391 | ) | $ | (273,478 | ) | ||
Net loss per common share, basic and diluted | $ | $ | ||||||
Weighted average number of common shares outstanding, basic, and diluted |
|
March 31, | ||||||||
2023 | 2022 | |||||||
Operating Expenses | ||||||||
General and administrative | $ | 47,625 | $ | 11,119 | ||||
Professional fees | (225,570 | ) | 192,829 | |||||
Market and regulation costs | 312,463 | 37,593 | ||||||
Compensation | (31,336 | ) | 140,944 | |||||
Amortization and depreciation | 59,627 | 107,595 | ||||||
Research and development | 39,152 | 61,261 | ||||||
Total operating expense | 201,961 | 551,341 | ||||||
Operating loss | (201,961 | ) | (551,341 | ) | ||||
Other income (expense) | ||||||||
Interest income | 98 | 452 | ||||||
Interest expense | (1,129 | ) | (414,844 | ) | ||||
Loss on change in fair value of warrant derivative liability | (72,519 | ) | (23,891 | ) | ||||
Foreign currency transaction gain (loss) | 21,175 | (40,707 | ) | |||||
Total other income (expense) | (52,375 | ) | (478,990 | ) | ||||
Net loss before income tax | $ | (254,336 | ) | $ | (1,030,331 | ) | ||
Provision for income tax | — | |||||||
Net loss after income tax | $ | (254,336 | ) | $ | (1,030,331 | ) | ||
Other comprehensive income (loss) | ||||||||
Foreign currency translation gain (loss) | (19,142 | ) | 13,373 | |||||
Total other comprehensive income (loss) | (19,142 | ) | 13,373 | |||||
Net comprehensive loss | $ | (273,478 | ) | $ | (1,016,958 | ) | ||
Net loss per common share, basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares outstanding, basic and diluted | 154,904,171 | 140,499,144 |
BUBBLR INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the three months ended March 31, 2024, and 2023
(Unaudited)
Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Income (Loss) | Equity (Deficit) | |||||||||||||||||||||||||
Series C Preferred Stock | Common Stock | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Income (Loss) | Equity (Deficit) | |||||||||||||||||||||||||
Balance -December 31, 2022 | 903 | $ | 1 | 154,309,318 | $ | 1,543,093 | $ | 11,006,607 | $ | (12,875,437 | ) | $ | 412,013 | $ | 86,277 | |||||||||||||||||
Issuance of common shares for Services - Consulting | 1,455,784 | 14,558 | 270,780 | 285,338 | ||||||||||||||||||||||||||||
Forfeit of restricted stock units | (659,052 | ) | (659,052 | ) | ||||||||||||||||||||||||||||
Issuance of common shares for Series C Preferred Shares Dividend | 183,676 | 1,837 | 20,296 | 22,133 | ||||||||||||||||||||||||||||
Dividend Series C Preferred Shares | (21,672 | ) | (21,672 | ) | ||||||||||||||||||||||||||||
Net Loss | - | (254,336 | ) | (254,336 | ) | |||||||||||||||||||||||||||
Other comprehensive income | (19,142 | ) | (19,142 | ) | ||||||||||||||||||||||||||||
Balance -March 31, 2023 | 903 | $ | 1 | 155,948,778 | $ | 1,559,488 | $ | 10,638,631 | $ | (13,151,445 | ) | $ | 392,871 | $ | (560,454 | ) | ||||||||||||||||
Balance December 31, 2023 | 903 | $ | 1 | 159,690,447 | $ | 1,596,904 | 13,168,915 | $ | (15,612,775 | ) | $ | 350,830 | $ | (496,125 | ) | |||||||||||||||||
Balance | 903 | $ | 1 | 159,690,447 | $ | 1,596,904 | 13,168,915 | $ | (15,612,775 | ) | $ | 350,830 | $ | (496,125 | ) | |||||||||||||||||
Vesting of Share Options | 108,990 | 108,990 | ||||||||||||||||||||||||||||||
Dividend Series C Preferred Shares | (21,673 | ) | (21,673 | ) | ||||||||||||||||||||||||||||
Net Loss | - | - | (460,867 | ) | (460,867 | ) | ||||||||||||||||||||||||||
Other comprehensive income | 14,476 | _14,476 | ||||||||||||||||||||||||||||||
Balance -March 31, 2024 | 903 | $ | 1 | 159,690,447 | $ | 1,596,904 | $ | 13,277,905 | $ | (16,095,315 | ) | $ | 365,306 | $ | (855,199 | ) | ||||||||||||||||
Balance | 903 | $ | 1 | 159,690,447 | $ | 1,596,904 | $ | 13,277,905 | $ | (16,095,315 | ) | $ | 365,306 | $ | (855,199 | ) |
F-4 |
BUBBLR INC.
Consolidated Statement of Cashflows
For the Three months ended March 31, 2024 and 2023
(Unaudited)
2024 | 2023 | |||||||
March 31, | ||||||||
2024 | 2023 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (460,867 | ) | $ | (254,336 | ) | ||
Adjustments for: | ||||||||
Net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | - | 285,338 | ||||||
Forfeit of restricted stock units | - | (659,052 | ) | |||||
Vesting of stock-based compensation | 108,990 | |||||||
Change in fair value of warrant derivative liability | 1,251 | 72,519 | ||||||
Disposal of fixed assets | 9,355 | - | ||||||
Amortization of intangible asset | 51,489 | 56,521 | ||||||
Depreciation | 2,502 | 3,106 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase) decrease in other receivables | (2,121 | ) | 3,778 | |||||
Increase in accounts payable | 25,674 | 336,901 | ||||||
Increase in accrued liabilities | 145,563 | (3,156 | ) | |||||
Net cash used in operating activities | (118,164 | ) | (158,381 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of intangible assets | (15,566 | ) | (11,138 | ) | ||||
Proceeds on the sale of fixed assets | 16,960 | - | ||||||
Net cash used in investing activities | 1,394 | (11,138 | ) | |||||
Cash flows from financing activities | ||||||||
Repayment of loans payable | (12,611 | ) | (2,430 | ) | ||||
Repayment of loans payable - related party | - | (18,228 | ) | |||||
Proceeds from loans payable - related party | 105,076 | 223,777 | ||||||
Net cash provided by financing activities | 92,465 | 203,119 | ||||||
Effects of exchange rate changes on cash | 17,588 | (31,018 | ) | |||||
Net Change in Cash | (6,717 | ) | 2,582 | |||||
Cash - Beginning of Period | 7,668 | 32,533 | ||||||
Cash - End of Period | $ | 951 | $ | 35,115 | ||||
Supplemental information: | ||||||||
Cash paid for interest | $ | 301 | $ | 4,774 | ||||
Cash paid for taxes | $ | - | $ | - |
The accompanying notes are an integral part of these unaudited consolidated financial statements.statements
F-5 |
BUBBLR INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the three months ended March 31, 2023 and 2022
(Unaudited)
2019 Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||
Balance - December 31, 2021 | 1 | $ | — | — | $ | — | — | $ | — | 140,186,096 | $ | 1,401,861 | $ | 5,478,801 | �� | $ | (8,385,496 | ) | $ | 377,244 | $ | (1,127,590 | ) | |||||||||||||||||||||||||
Issuance of common shares for Services - Advisory Board | — | — | — | — | — | — | 147,960 | 1,480 | 73,980 | — | — | 75,460 | ||||||||||||||||||||||||||||||||||||
Issuance of common shares for Services - Consulting | — | — | — | — | — | — | 19,250 | 193 | 8,787 | — | — | 8,980 | ||||||||||||||||||||||||||||||||||||
Issuance of common shares for Equity Finance Agreement Incentive | — | — | — | — | — | — | 793,039 | 7,930 | 371,884 | — | — | 379,814 | ||||||||||||||||||||||||||||||||||||
Issuance of Series C Preferred Stock | — | — | — | — | 503 | 1 | — | — | (1 | ) | — | — | — | |||||||||||||||||||||||||||||||||||
Dividend Series C Preferred Stock | — | — | — | — | — | — | — | — | — | (3,272 | ) | — | (3,272 | ) | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (1,030,331 | ) | — | (1,030,331 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | — | — | 13,373 | 13,373 | ||||||||||||||||||||||||||||||||||||
Balance -March 31, 2022 | 1 | $ | — | $ | — | $ | — | 503 | $ | 1 | 141,146,345 | $ | 1,411,464 | $ | 5,933,451 | $ | (9,419,099 | ) | $ | 390,617 | $ | (1,683,566 | ) | |||||||||||||||||||||||||
Balance - December 31, 2022 | — | $ | — | — | $ | — | 903 | $ | 1 | 154,309,318 | $ | 1,543,093 | $ | 11,006,607 | $ | (12,875,437 | ) | $ | 412,013 | $ | 86,277 | |||||||||||||||||||||||||||
Issuance of common shares for Services – Consulting | — | — | — | — | — | — | 1,455,784 | 14,558 | 270,780 | — | — | 285,338 | ||||||||||||||||||||||||||||||||||||
Forfeit of restricted stock units | — | — | — | — | — | — | — | — | (659,052 | ) | — | — | (659,052 | ) | ||||||||||||||||||||||||||||||||||
Issuance of common shares for Series C Preferred Shares Dividend | — | — | — | — | — | — | 183,676 | 1,837 | 20,296 | — | — | 22,133 | ||||||||||||||||||||||||||||||||||||
Dividend Series C Preferred Stock | — | — | — | — | — | — | — | — | — | (21,672 | ) | — | (21,672 | ) | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (254,336 | ) | — | (254,336 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | — | — | — | — | (19,142 | ) | (19,142 | ) | ||||||||||||||||||||||||||||||||||
Balance -March 31, 2023 | — | $ | — | $ | — | $ | — | 903 | $ | 1 | 155,948,778 | $ | 1,559,488 | $ | 10,638,631 | $ | (13,151,445 | ) | $ | 392,871 | $ | (560,454 | ) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
|
March 31, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (254,336 | ) | $ | (1,030,331 | ) | ||
Adjustments for: | ||||||||
Net loss to net cash used in operating activities: | ||||||||
Stock based compensation | 285,338 | 84,440 | ||||||
Stock based finance incentive | — | 379,814 | ||||||
Forfeit of restricted stock units | (659,052 | ) | — | |||||
Loss on change in fair value of warrant derivative liability | 72,519 | 23,891 | ||||||
Amortization of debt discount | — | 22,429 | ||||||
Amortization of intangible asset | 56,521 | 101,193 | ||||||
Depreciation | 3,106 | 4,223 | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease in accounts receivable | 3,778 | 2,581 | ||||||
Increase (decrease) in accrued liabilities | (3,156 | ) | 10,985 | |||||
Increase (decrease) in accounts payable | 336,901 | (3,523 | ) | |||||
Net cash used in operating activities | (158,381 | ) | (404,298 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of intangible assets | (11,138 | ) | (11,684 | ) | ||||
Net cash used in investing activities | (11,138 | ) | (11,684 | ) | ||||
Cash flows from financing activities | ||||||||
Repayment of loans payable | (2,430 | ) | (3,322 | ) | ||||
Repayment of loans payable - related party | (18,228 | ) | (52,556 | ) | ||||
Proceeds from loans payable - related party | 223,777 | 19,709 | ||||||
Net proceeds from issuance of Series C Preferred stock | — | 421,000 | ||||||
Proceeds from issuance of convertible notes payable | — | 15,000 | ||||||
Net cash provided by financing activities | 203,119 | 399,831 | ||||||
Effects of exchange rate changes on cash | (31,018 | ) | 46,676 | |||||
Net Change in Cash | 2,582 | 30,525 | ||||||
Cash - Beginning of Period | 32,533 | 62,967 | ||||||
Cash - End of Period | $ | 35,115 | $ | 93,492 | ||||
Supplemental information: | ||||||||
Cash paid for interest | $ | 4,774 | $ | 5,712 | ||||
Cash paid for taxes | $ | — | $ | — | ||||
Non-cash investing and financing activities | ||||||||
Warrant liability | $ | — | $ | 449,043 | ||||
Declared dividends | $ | 21,672 | $ | 3,272 | ||||
Common stock issued in satisfaction of dividend payable | $ | 22,133 | $ | — |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BUBBLR INC.
Notes to the Unaudited Consolidated Financial Statements
March 31, 20232024, and 20222023
NOTE 1 - ORGANIZATION, BUSINESS AND LIQUIDITY
Organization and Operations
On March 26, 2020, Bubblr Holdings Ltd. (a UK company formed on February 18, 2016) merged into U.S. Wireless Online, Inc. (“UWRL”), a Wyoming corporation formed on October 22, 2019, and became a 100% 100% subsidiary of UWRL. On March 30, 2021, the Company’s corporate name was changed to Bubblr, Inc. (“the Company”).
Bubblr, Inc. is a Mobile Applicationan application software company that is currently developing its disruptive Internet Search MechanismEthical Web platform. This WEB.Ɛ platform will provide a holistic view of progress in developing digital products, services, and seeking license opportunities for a next-generation solutionteams — designed to create an alternative economic model.inform our ability to use our in-house code and that of our partners, lead advances in development criteria, and respond quickly to shifts in trends and applications.
Going Concern Matters
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates the Company’s continuation as a going concern. The Company incurred a net comprehensive loss of $$273,478 446,391during the three months ended March 31, 20232024, and has an accumulated deficit of $$13,151,445 16,095,315as of March 31, 2023.2024. In addition, current liabilities exceed current assets by $$1,097,435 1,678,521as of March 31, 2023.2024.
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings, and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings, and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be required to curtail or cease its operations.
Due to uncertainties related to these matters, there exists substantial doubt about the ability of the Company to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
COVID-19
A novel strain of coronavirus (COVID-19) was first identified in December 2019 and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in the markets served. The Company has instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its employees and minimize business disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position as at March 31, 2023. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company, including the timing and ability of the Company to collect accounts receivable and the ability of the Company to continue to provide high-quality services to its clients. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities at the date of issuance of these financial statements. These estimates may change as new events occur, and additional information is obtained.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated interim financial statements have been prepared in accordance with GAAP. The Company’s fiscal year-end is December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Bubblr Holdings Ltd., Bubblr Ltd., and Bubblr CLN Ltd. All significant inter-company balances and transactions have been eliminated in consolidation.
F-6 |
Use of Estimates
The preparation of consolidated 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. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.
Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The carrying value of the Company’s current assets and liabilities are deemed to be their fair value due to the short-term maturity and realization. During the year ended December 31, 2022, the Company acquired warrant derivative liabilities, which are Level 3 financial instruments that are adjusted to fair market value on reporting dates. At March 31, 20232024 and December 31, 20222023 the warrant liabilities balances were $$270,998 40,367and $$198,47939,116 respectively. There were no changes in the fair value hierarchy leveling during the three months ended March 31, 2023.2024.
We follow The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation–“Compensation–Stock Compensation,” which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenseexpenses in the financial statements based on the stock awards’ fair values of the stock awards on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period)period).Restricted stock units (“RSUs”) issued as compensation in accordance with the Company’s 2022 Equity Incentive Plan are deemed to be unissued until fully vested. RSU compensation is recognized as expense over the vesting period. Upon repurchase of the award any unrecognized compensation, net of cash payments are expensed immediately. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense and any previously recognized costs are reversed in the period of forfeiture.
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
F-7 |
Pursuant to ASC 260, “Earnings Per Share,” basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
March 31, | ||||||||
2023 | 2022 | |||||||
(Shares) | (Shares) | |||||||
Series C Preferred Stock | 3,384,135 | 1,885,072 | ||||||
Warrants | 2,358,101 | 1,413,804 | ||||||
Convertible Notes | — | 2,007,994 | ||||||
Total | 5,742,236 | 5,306,870 |
SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE
2024 | 2023 | |||||||
March 31, | ||||||||
2024 | 2023 | |||||||
(Shares) | (Shares) | |||||||
Series C Preferred Stock | 3,384,135 | 3,384,135 | ||||||
Warrants | 2,358,101 | 2,358,101 | ||||||
Total | 5,742,236 | 5,742,236 | ||||||
Anti-dilutive shares | 5,742,236 | 5,742,236 |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British poundsPounds (GBP). Local currency assets and liabilities are translated at the exchange rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at weighted average exchange rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
March 31, | December 31, | |||||||||||
2023 | 2022 | 2022 | ||||||||||
Period-end GBP£:US$ exchange rate | 1.2341 | 1.3139 | 1.2101 | |||||||||
Weighted average GBP£:US$ exchange rate | 1.2152 | 1.3412 | 1.2430 |
SCHEDULE OF FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
2024 | 2023 | 2023 | ||||||||||
March 31, | December 31, | |||||||||||
2024 | 2023 | 2023 | ||||||||||
Period-end GBP£: U.S.$ exchange rate | 1.2632 | 1.2341 | 1.2199 | |||||||||
Weighted average GBP£: U.S.$ exchange rate | 1.2684 | 1.2152 | 1.2447 |
Aggregate transaction gains or losses, including gains or losses related to foreign-denominated cash and cash equivalents and the re-measurement of certain inter-company balances, are included in the statement of operations as other income and expense. Gains on foreign exchange transactions totaling $$21,175 5,210and losses of $$40,707 19,142were recognized during the three months ended March 31, 2024, and 2023, and 2022, respectively.
F-8 |
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”.Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
As of March 31, 20232024, and December 31, 2022,2023, the Company did not have any amounts recorded pertaining to uncertain tax positions.
UK Taxes
We do not consider ourselves to be engaged in a trade or business in the UK and, as such, do not expect to be subject to UK corporate income taxation. We have subsidiaries based in the UK that are subject to the tax laws of that country. Under current law, those subsidiaries are taxed at the applicable corporate income tax rates. Should any UK subsidiaries be deemed to undertake business activities in the US, they would be subject to US corporate income tax in respect of their US activities only. Relief would then be available against the UK tax liabilities in respect of the overseas taxes arising from US activities. At present, this is not applicable as our UK subsidiaries only undertake activities in the UK. Our UK subsidiaries file separate UK income tax returns.
UK Tax Risk
Companies that are incorporated outside the UK may become subject to UK taxes in a number of circumstances, including circumstances in which (1) they are deemed resident in the UK for tax purposes by reason of their central management and control being exercised from the UK or (2) they are treated as carrying on a trade, investing or carrying on any other business activity in the UK, whether or not through a UK Permanent Establishment (“PE”).
In addition, the Finance Act 2015 introduced a new tax known as the diverted profits tax (“DPT”), which is charged at 25% of any “taxable diverted profit.”. The DPT has had an effect since April 1, 2015, and may apply in circumstances including (1) where arrangements are designed to ensure that a non-UK resident company does not carry on a trade in the UK through a PE; and (2) where a tax reduction is obtained through the involvement of entities or transactions lacking economic substance. We intend to operate in such a manner that none of our companies should be subject to the UK DPT and that none of our companies (other than those companies incorporated in the UK) should: (1) be treated as resident in the UK for tax purposes; (2) carry on a trade, invest or carry on any other business activity in the UK (whether or not through a UK PE).
However, this result is based on certain legal and factual determinations, and since the scope and the basis upon which the DPT will be applied by HM Revenue & Customs (“HMRC”) in the UK remains uncertain and since applicable law and regulations do not conclusively define the activities that constitute conducting a trade, investment or business activity in the UK (whether or not through a UK PE), and since we cannot exclude the possibility that there will be a change in law that adversely affects the analysis, HMRC might successfully assert a contrary position. The terms of an income tax treaty between the UK and the home country of the relevant Bubblr subsidiary, if any, could contain additional protections against UK tax.
Any arrangements between UK-resident entities of Bubblr and other entities of Bubblr are subject to the UK transfer pricing regime. Consequently, if any agreement between a UK resident entity of Bubblr and any other Bubblr entity (whether that entity is resident in or outside of the UK) is found not to be on arm’s length terms and, as a result, a UK tax advantage is being obtained, an adjustment will be required to compute UK taxable profits as if such an agreement were on arm’s length terms. Any transfer pricing adjustment could adversely impact the tax charge incurred by the relevant UK resident entities of Bubblr.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
F-9 |
Reclassifications
Certain accounts have been reclassified in prior periods to conform to current period presentation. Compensation expense that was previously reported separately has been combined with general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented.
NOTE 3 – OTHER RECEIVABLES
As of March 31, 20232024, and December 31, 2022,2023, accounts receivable consisted of the following:
SCHEDULE OF OTHER RECEIVABLES
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Deposit | $ | 200 | $ | 200 | ||||
UK VAT Receivable | 6,040 | 9,684 | ||||||
Other receivables | $ | 6,240 | $ | 9,884 |
Any nominal change in the deposit value is due to exchange rate fluctuation.
March 31, | December 31, | |||||||
2024 | 2023 | |||||||
Deposit | $ | 200 | $ | 200 | ||||
UK R&D credit | 79,582 | 80,205 | ||||||
UK VAT receivable | 9,155 | 7,098 | ||||||
Total other receivables | $ | 88,937 | $ | 87,503 |
NOTE 4 - PROPERTY AND EQUIPMENT
As of March 31, 20232024, and December 31, 2022,2023, property and equipment consisted of the following:
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT
Motor Vehicles | Computer Equipment | Office Equipment | Total | Motor Vehicles | Computer Equipment | Office Equipment | Total | |||||||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||||||
At December 31, 2022 | $ | 56,875 | $ | 28,179 | $ | 563 | $ | 85,617 | ||||||||||||||||||||||||
At December 31, 2023 | $ | 53,470 | $ | 29,646 | $ | - | $ | 83,116 | ||||||||||||||||||||||||
Additions | — | — | — | — | - | - | - | - | ||||||||||||||||||||||||
Disposals | (53,054 | ) | (3,502 | ) | - | (56,556 | ) | |||||||||||||||||||||||||
Effects of currency translation | 1,128 | 558 | 11 | 1,697 | (416 | ) | (231 | ) | - | (647 | ) | |||||||||||||||||||||
At March 31, 2023 | $ | 58,003 | $ | 28,737 | $ | 574 | $ | 87,314 | ||||||||||||||||||||||||
At March 31, 2024 | - | 25,913 | - | 25,913 | ||||||||||||||||||||||||||||
Less accumulated depreciation | ||||||||||||||||||||||||||||||||
At December 31, 2022 | $ | 18,659 | $ | 18,636 | $ | 366 | $ | 37,661 | ||||||||||||||||||||||||
At December 31, 2023 | $ | 25,997 | $ | 25,817 | $ | - | $ | 51,814 | ||||||||||||||||||||||||
Depreciation expense | 1,543 | 1,535 | 28 | 3,106 | 1,053 | 1,449 | - | 2,502 | ||||||||||||||||||||||||
Disposals | (26,847 | ) | (3,502 | ) | - | (30,349 | ) | |||||||||||||||||||||||||
Effects of currency translation | 370 | 370 | 7 | 747 | (203 | ) | (200 | ) | - | (403 | ) | |||||||||||||||||||||
At March 31, 2023 | $ | 20,572 | $ | 20,541 | $ | 401 | $ | 41,514 | ||||||||||||||||||||||||
At March 31, 2024 | - | 23,564 | - | 23,564 | ||||||||||||||||||||||||||||
Net book value | ||||||||||||||||||||||||||||||||
At March 31, 2023 | $ | 37,431 | $ | 8,196 | $ | 173 | $ | 45,800 | ||||||||||||||||||||||||
At December 31, 2022 | $ | 38,216 | $ | 9,543 | $ | 197 | $ | 47,956 | ||||||||||||||||||||||||
At March 31, 2024 | - | 2,349 | - | 2,349 | ||||||||||||||||||||||||||||
At December 31, 2023 | $ | 27,473 | $ | 3,829 | $ | - | $ | 31,302 |
During the three months ended March 31, 2023 and 2022,2024, the Company recorded depreciation expenseexpenses of $$3,106 2,502and $4,223, respectively. There were no purchases, impairment, or disposalsa loss of property and equipment.$9,317 on the disposal of a motor vehicle.
NOTE 5 - INTANGIBLE ASSETS
Patents
A Patent on the Internet-Search Mechanism (“IBSM”) has been granted in the United States, South Africa, New Zealand, Canada, and New Zealand. A Notice of Approval has also been issued for Canada.Australia. The patent is currently pending in the following areas: Australia, European Union, and the United Kingdom.
Patents on Contextual Enveloping of Dynamic Hypertext Links and Real-Time Data Processing are pending in the United States
Patents are reported at cost, less accumulated amortization, and accumulated impairment loss. Costs include expenditure that is directly attributable to the acquisition of the asset. Once a patent is providingprovides economic benefit to the Company, amortization is provided on a straight-line basis on all patents over their expected useful lives of 20 years.
F-10 |
Intellectual Property
Intellectual Property capitalizes costs of the Company’s qualifying internal research and developments costs. Intellectual property is amortized over its useful life of 7 years and reported at cost less accumulated amortization and accumulated impairment loss.
Trademarks
The Company has the following trademarks.
Mark | Category | Proprietor | Country | Class(es) | Status | Reg. Date. | File No. | |||||||
CITIZENS JOURNALIST | Words | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206382.EM.01 | |||||||
CITIZENS JOURNALIST | Word | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206382.GB.01 | |||||||
CITIZENS JOURNALIST | Words | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206382.GB.02 | |||||||
CITIZENS JOURNALIST | Word | Bubblr Limited | United States | 9 38 41 42 | REGD-DEC USE | 08-Feb-2022 | 206382.US.01 | |||||||
Words and Color Device | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206383.EM.01 | ||||||||
Series of Logos | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206383.GB.01 | ||||||||
Words and Color Device | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206383.GB.02 | ||||||||
Words and Device | Bubblr Limited | United States | 9 38 41 42 | ACCEPTED | 206383.US.01 | |||||||||
BAU NOT OK/BAU Not OK | Series of Marks | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 11-Oct-2019 | 208674.GB.01 | |||||||
NEWZMINE/NewzMine | Series of Marks | Bubblr Limited | United Kingdom | 9 38 42 | REGISTERED | 25-Dec-2020 | 227753.GB.01 |
The Company capitalizes trademark costs where the likelihood of acceptance is expected. Each trademark has been determined to have an infinite useful life and is assessed each reporting period for impairment. If there has been a reduction in the value of the trademark or if the trademark is not successfully registered, the assetassets will be impaired and charged to expense in the period of impairment.
As of March 31, 20232024, and December 31, 2022,2023, trademarks consisted of the following:
SCHEDULE OF TRADEMARKS
March 31, | December 31, | March 31, | December 31, | |||||||||||||
2023 | 2022 | 2024 | 2023 | |||||||||||||
Trademarks: | ||||||||||||||||
NewzMineTM | $ | 9,920 | $ | 9,920 | $ | 13,421 | $ | 12,994 | ||||||||
Citizens Journalist™ | 25,367 | 25,367 | 25,367 | 25,367 | ||||||||||||
Effects of currency translation | (2,830 | ) | (3,461 | ) | (2,088 | ) | (1,804 | ) | ||||||||
$ | 32,457 | $ | 31,826 | $ | 36,700 | $ | 36,558 |
As of March 31, 20232024, and December 31, 2022,2023, intangible assets consisted of the following:
Cost | Patents | Trademarks | Intellectual Property | Capitalized Acquisition Costs | Total | |||||||||||||||
At December 31, 2022 | $ | 168,300 | $ | 31,826 | $ | 2,764,198 | $ | 45,745 | $ | 3,010,069 | ||||||||||
Additions | 11,138 | — | — | — | 11,138 | |||||||||||||||
Effects of currency translation | 3,337 | 631 | 54,822 | — | 58,790 | |||||||||||||||
At March 31, 2023 | $ | 182,775 | $ | 32,457 | $ | 2,819,020 | $ | 45,745 | $ | 3,079,997 | ||||||||||
Less accumulated amortization | ||||||||||||||||||||
At December 31, 2022 | $ | 4,947 | $ | — | $ | 1,674,551 | $ | 4,576 | $ | 1,684,074 | ||||||||||
Amortization expense | 12,569 | — | 43,380 | 572 | 56,521 | |||||||||||||||
Effects of currency translation | 98 | — | 33,211 | — | 33,309 | |||||||||||||||
At March 31, 2023 | $ | 17,614 | $ | — | $ | 1,751,142 | $ | 5,148 | $ | 1,773,904 | ||||||||||
Net book value | ||||||||||||||||||||
At March 31, 2023 | $ | 165,161 | $ | 32,457 | $ | 1,067,878 | $ | 40,597 | $ | 1,306,093 | ||||||||||
At December 31, 2022 | $ | 163,353 | $ | 31,826 | $ | 1,089,647 | $ | 41,169 | $ | 1,325,995 |
SCHEDULE OF INTANGIBLE ASSETS
Patents | Trademarks | Intellectual Property | Capitalized Acquisition Costs | Total | ||||||||||||||||
Cost | ||||||||||||||||||||
At December 31, 2023 | $ | 220,926 | $ | 36,558 | $ | 3,109,540 | $ | 45,745 | $ | 3,412,769 | ||||||||||
Cost, beginning | $ | 220,926 | $ | 36,558 | $ | 3,109,540 | $ | 45,745 | $ | 3,412,769 | ||||||||||
Additions | 15,139 | 427 | - | - | 15,566 | |||||||||||||||
Effects of currency translation | (1,718 | ) | (285 | ) | (24,180 | ) | - | (26,183 | ) | |||||||||||
At March 31, 2024 | $ | 234,347 | $ | 36,700 | $ | 3,085,360 | $ | 45,745 | $ | 3,402,152 | ||||||||||
Cost, ending | $ | 234,347 | $ | 36,700 | $ | 3,085,360 | $ | 45,745 | $ | 3,402,152 | ||||||||||
Less accumulated amortization | ||||||||||||||||||||
At December 31, 2023 | $ | 8,541 | $ | - | $ | 1,940,736 | $ | 6,864 | $ | 1,956,141 | ||||||||||
Less accumulated amortization, beginning | $ | 8,541 | $ | - | $ | 1,940,736 | $ | 6,864 | $ | 1,956,141 | ||||||||||
Amortization expense | 1,630 | - | 49,287 | 572 | 51,489 | |||||||||||||||
Effects of currency translation | (70 | ) | - | (15,089 | ) | - | (15,159 | ) | ||||||||||||
At March 31, 2024 | $ | 10,101 | $ | - | $ | 1,974,934 | $ | 7,436 | 1,992,471 | |||||||||||
Less accumulated amortization, ending | $ | 10,101 | $ | - | $ | 1,974,934 | $ | 7,436 | 1,992,471 | |||||||||||
Net book value | ||||||||||||||||||||
At March 31, 2024 | $ | 224,246 | $ | 36,700 | $ | 1,110,426 | $ | 38,309 | $ | 1,409,681 | ||||||||||
At December 31, 2023 | $ | 212,385 | $ | 36,558 | $ | 1,168,804 | $ | 38,881 | $ | 1,456,628 |
F-11 |
During the three months ended March 31, 2023 and 2022,2024, the Company purchased $$11,138 15,566and $11,684, respectively, in intangible assetassets and recorded amortization expenses of $$56,521 51,489and. $101,193No, respectively. During the three months ended March 31, 2023 and 2022, impairment of $0 and $0was recorded. Based on the carrying value of definite-lived intangible assets as of March 31, 2023 we estimate our amortization expense for the next five years will be as follows:
Three months ended March 31, | Patents | Intellectual Property | Capitalized Acquisition Costs | Total | ||||||||||||||
9 months remaining 2023 | $ | 6,194 | $ | 114,416 | $ | 1,716 | $ | 122,326 | ||||||||||
2024 | 8,258 | 152,554 | 2,288 | 163,100 | ||||||||||||||
2025 | 8,258 | 152,554 | 2,288 | 163,100 | ||||||||||||||
2026 | 8,258 | 152,554 | 2,288 | 163,100 | ||||||||||||||
2027 | 8,258 | 152,554 | 2,288 | 163,100 | ||||||||||||||
2028 | 8,258 | 152,554 | 2,288 | 163,100 | ||||||||||||||
Thereafter | 117,677 | 190,692 | 27,441 | 335,810 | ||||||||||||||
$ | 165,161 | $ | 1,067,878 | $ | 40,597 | $ | 1,273,636 |
NOTE 6 – ACCRUED LIABILITIES
As of March 31, 20232024, and December 31, 2022,2023, accrued liabilities consisted of the following:
SCHEDULE OF ACCRUED LIABILITIES
March 31, | December 31, | |||||||||||||||
March 31, | December 31, | 2024 | 2023 | |||||||||||||
2023 | 2022 | |||||||||||||||
Accrued interest | $ | — | $ | 3,143 | ||||||||||||
Director fees | $ | 120,000 | $ | 90,000 | ||||||||||||
Dividends payable | 21,672 | 22,133 | 86,688 | 65,016 | ||||||||||||
Payroll payable | 74,659 | 24,818 | ||||||||||||||
Other accruals | 49,892 | 76,945 | ||||||||||||||
Settlement payable | 166,986 | 166,986 | ||||||||||||||
Wages and salaries | 682,508 | 544,060 | ||||||||||||||
Total Accrued liabilities | $ | 96,331 | $ | 50,094 | $ | 1,106,074 | $ | 943,007 |
NOTE 7 – LOAN PAYABLE
On February 4, 2022, the Company issued a promissory note for the principal sum of $20,000 to White Lion Capital, LLC, a Nevada company. The note had an original issue discount of 25%. The principal of $20,000 was repaid in full on April 26, 2022. The net proceeds received by the Company totaled $15,000, and the $5,000 debt discount was amortized to interest expense during the period the loan was outstanding.
In November 2019, the Company purchased a vehicle under a capital finance arrangement. The term of this loan iswas 5 years,, and the annual interest rate is6.90% 6.90%. At March 31, 20232024, and December 31, 2022, loan payable obligations included in current liabilities were $ and $ , respectively, and loan payable obligations included in long-term liabilities were $ and $ , respectively.
During the three months ended March 31, 20232024, and 2022, the Company made $$2,4301,691 and $$3,3222,430, respectively, in loan payments.
At March 31, 2023 future minimum payments under the loan are as follows: The vehicle was sold in February 2024.
Total | ||||
2023 (nine months remaining in 2023) | $ | 7,403 | ||
2024 | 9,870 | |||
17,273 | ||||
Less: Imputed interest | 3,157 | |||
Loan payable | 20,430 | |||
Loan payable – current | 12,225 | |||
Loan payable - non-current | $ | 8,205 |
F-12 |
NOTE 8 - RELATED PARTY TRANSACTIONS
Loans from Related Parties
The Company had received a loan from a minority shareholder of in February 2022 that bore interest at the rate of per annum. The principal of , plus accrued interest of , totaling was repaid on February 15, 2023. Of the related party loan of borrowed in Q4 2021, which bore interest, there was an outstanding balance of at March 31, 2022, which was repaid by April 30, 2022.
Activity on this loan to arrive at March 31, 2023 and December 31, 2022, balances is as follows:
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Beginning Balance | $ | $ | ||||||
Effects of currency translation | 76 | (4,779 | ) | |||||
Loan Payable | $ | 18,228 | $ | 76,383 | ||||
Addition | $ | 19,709 | ||||||
Repayment | $ | (18,228 | ) | $ | (77,940 | ) | ||
Ending Balance | $ | $ |
During the three months ended March 31, 2023 and 2022, the Company received proceeds on these loans of $0 and , respectively, made repayments of and , respectively, and accrued interest of and , respectively. The Loans from related parties were received in GBP, and any difference deduced is due to fluctuation in the exchange rate.
The Company has loans from our founder, Stephen Morris, with a balance of $$1,171,970 1,316,435and $$899,309 678,549at March 31, 20232024 and December 31, 2022, respectively as follows:2023, respectively:
Loan 1.1 - Stephen Morris, Founder, CTO and Chair.
The loan is non-interest bearing and repayable on demand.
On May 23, 2022, the Company entered an amendment to the Loan Agreement between Bubblr Limited and Mr. Morris to change the loan from a demand loan to have a maturity date on the earlier of (i) the completion of an offering by Bubblr, Inc., in the amount of no less than $7,500,000 in a public offering, or (ii) two years from the date of the amendment.
In addition, on a date no later than five (5) business days from the completion of bridge financing of no less than $1.5 million USD, the Company shall pay to Mr. Morris an amount equal to £115,000 GBP as an installment payment on the principal of the Loan, and the balance of the principal of the Loan shall be paid at the Maturity Date
On September 6, 2022, the Company entered into a second amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to add $$60,000(£52,088)52,088) to the principal of the loan in exchange for Mr. Morris canceling his Special 2019 Series A Preferred Stock, which has super-voting rights.
On December 20, 2022, the Company entered into a third amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to reduce the outstanding principal amount of the loan by $$71,540(£59,543)59,543) in exchange for the Company assigning advances receivables of $$71,540(£59,543)59,543) whereon Mr. Morris is entitled to amounts received pursuant to such receivables and will bear the risk of non-payment with respect to such receivables. After this assignment, the Company will have no right to receive any amounts collected with respect to such receivables and will have no liability for non-payment of the receivables or any costscollections costs.
On December 27, 2023, Stephen Morris converted $821,431.87 in principal amount of collections. promissory notes payable and due to him from the Company into shares of Common Stock. The conversion price for the Common Stock was $0.33 per share.
At March 31, 2024, and December 31, 2023, Loan 2.1 payable obligations included in current liabilities were $229,575 and $125,910, respectively.
Loan 2 - Stephen Morris, Founder, CTO and Chair.
On September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”) with Mr. Morris for $$501,049(£434,060)434,060). The Loan Agreement is unsecured, carries no interest, is non-convertible, and is due upon maturity, which is 3three years after the date of the agreement.
In aggregate the Company received $223,777 and $0 proceeds and made repayments of $0 and $66,000 during the three months endedAt March 31, 2024, and December 31, 2023, Loan 2 payable obligations included in current liabilities were $552,639and 2022, respectively, on the loans with Mr. Morris.$548,341, respectively.
Activity on this loan toLoan 1 and Loan 2 arrive at March 31, 20232024, and December 31, 2022,2023, balances is as follows:
SCHEDULE OF RELATED PARTY TRANSACTION SHARE HOLDERS LOANS
Three Months Ended March 31, | Year Ended December 31, | |||||||
2024 | 2023 | |||||||
Beginning balance loan 1 current | $ | 125,910 | 374,018 | |||||
Effects of currency translation | (980 | ) | 62,356 | |||||
Additions | 104,930 | 510,968 | ||||||
Loan resolution agreement – Stephen Morris | - | (821,432 | ) | |||||
Ending balance – loan 1 current | $ | 229,575 | $ | 125,910 | ||||
Beginning balance loan 2 non-current | $ | 552,639 | $ | 525,291 | ||||
Effects of currency translation | (4,298 | ) | 27,348 | |||||
Ending balance loan 2 non-current | $ | 548,341 | 552,639 | |||||
Ending balance loan 1 and loan 2 current and non-current | $ | 777,916 | $ | 678,549 |
Three Months Ended March 31, | Year Ended December 31, | |||||||
2023 | 2022 | |||||||
Beginning balance current | $ | 374,018 | $ | 428,117 | ||||
Effects of currency translation | 38,466 | (42,619 | ) | |||||
Loan Payable | 412,484 | 385,558 | ||||||
Additions | 223,777 | |||||||
Conversion from preferred stock | — | 60,000 | ||||||
Assignment of advances receivable | — | (71,540 | ) | |||||
Ending balance – Current | $ | 636,261 | $ | 374,018 | ||||
Beginning balance non-current | $ | 525,291 | $ | — | ||||
Additions | — | 501,049 | ||||||
Effects of currency translation | 10,418 | 24,242 | ||||||
Ending balance non-current | $ | 535,709 | $ | 525,291 | ||||
Ending balance current and non-current | $ | 1,171,970 | $ | 899,309 |
Related Party Loan – Professor Paul Morrissey, Director.
On September 8, 2022, the Company entered into a new loan agreement (the “Loan Agreement”) with Professor Paul Morrissey for $32,337 (£25,401). The Loan had an original issue discount of $6,954 (£5,700). The Loan Agreement is unsecured, non-convertible and carries a fixed interest rate of 2.85% every four weeks on the original principal, is non-convertible, and was payable in 4 weeks after the date of the agreement. The debt discount is amortized to interest expense during the loan’s outstanding period. The loan outstanding at March 31, 2024, and December 31, 2023, is $34,395 (£27,229) and $32,337 (£25,401) respectively.
NOTE 9 - WARRANT LIABILITY
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instruments should be classified as a liability due to reset provisions and variability in exercise price resulting in there being no fixed value or explicit limit to the number of shares to be delivered upon exercise. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
F-13 |
The Company determined our warrant liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of March 31, 2023.2024. The Black Scholes model requires sixthree basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model.
For the period ended March 31, 20232024, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:follows:
SCHEDULE OF ESTIMATED FAIR VALUES OF WARRANT LIABILITIES MEASURED ON A RECURRING BASIS
Three Months Ended | ||||
March 31, | ||||
2024 | ||||
Expected term | ||||
Expected average volatility | 177 – | % | ||
Expected dividend yield | % | |||
Risk-free interest rate | 1.50– | % |
The following table summarizes the changes in the warrant liabilities during the periodthree months ended March 31, 20232024, and year ended December 31, 2022:2023:
SUMMARY OF CHANGES IN WARRANT LIABILITIES
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
Warrant liability as of December 31, 2022 | $ | 198,479 | ||
Addition of new warrants | $ | — | ||
Additional day-one loss | — | |||
Change in fair value of warrant liability | 72,519 | |||
Warrant liability as of March 31, 2023 | $ | 270,998 |
Warrant liability as of December 31, 2021 | $ | — | ||
Addition of new warrants | $ | 721,000 | ||
Additional day-one loss | (28,043 | ) | ||
Change in fair value of warrant liability | (494,753 | ) | ||
Warrant liability as of December 31, 2022 | $ | 198,479 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
Warrant liability December 31, 2022 | $ | 198,479 | ||
Addition of new warrants | - | |||
Change in fair value of warrant liability | (159,363 | ) | ||
Warrant liability as of December 31, 2023 | $ | 39,116 | ||
Addition of new warrants | $ | - | ||
Change in fair value of warrant liability | 1,251 | |||
Warrant liability as of March 31, 2024 | $ | 40,367 |
NOTE 10 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized preferred shares with a par value of $ per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
Series C Convertible Preferred Stock
On March 4, 2022,2023, the Company filed a Certificate of Designation with the Wyoming Secretary of State, which established shares of the Company’s Series C Convertible Preferred Stock, with a Stated Value of $ per share.
The Company has the right to redeem the Series C Convertible Preferred Stock in accordance with the following schedule:
● | The Company shall pay |
F-14 |
The Series C Convertible Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forth in the Certificate of Designation).
Each share of the Series C Convertible Preferred Stock is convertible, at any time and from time to time from and after the issuance at the option of the Holder thereof, into that number of shares of Common Stock (subject to Beneficial Ownership Limitations) determined by dividing the Stated Value of $$1,200 of such share by the Conversion Price of $$0.3202.
On March 4, 2022, the Company entered into a Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to $$700,000of the Company’s Series C Convertible Preferred Stock in exchange for shares of Series C Convertible Preferred Stock.
On March 4, 2022, the Company issued to GHS the first tranche of 75% 75% of the number of shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock (the “GHS Warrant Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series C Convertible Preferred Stock and the GHS Warrant Shares. shares of Series C Convertible Preferred Stock, as well as commitment shares of shares of Series C Convertible Preferred Stock and warrant shares (the “GHS Warrant”). Warrant shares represent
GHS delivered gross proceeds of $$266,000to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On March 9, 2022, the Company entered a Securities Purchase Agreement with Proactive Capital Partners LP (“Proactive”), whereby Proactive agreed to purchase shares of Series C Preferred Stock. .
The Company agreed to issue Proactive commitment shares of 75% 75% of the number of shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock (the “Warrant Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series C Convertible Preferred Stock and the Warrant Shares. shares of Series C Convertible Preferred Stock and warrant shares (the “Warrant”). Warrant shares represent
On March 9, 2022, the Company issued shares of Series C Convertible Preferred stock to Proactive Capital Partners LP as per the Securities Purchase Agreement. Proactive delivered gross proceeds of $$155,000 290,000to the Company (excluded were legal fees).
On April 24, 2022, the Company issued the second tranche of shares shares of Series C Convertible Preferred Stock and warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $$184,000to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On May 25, 2022, the Company issued the third tranche of shares shares of Series C Convertible Preferred Stock and warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $$92,000to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On JuneSeptember 24, 2022, the Company issued the fourth tranche of shares shares of Series C Convertible Preferred Stock and warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $$92,000to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”) with Mr. Morris for £434,060 (£$535,709 434,060 (US$550,468USD at March 31, 2023)2024). In order to enter into the new loan, GHS Investments, LLC agreed to waive a prohibition on borrowing over $200,000$200,000 found in our Certificate of Designation for the Series C Preferred Stock, in exchange for our company issuing shares of common stock: shares of common stock to GHS and shares of common stock to Proactive. The resulting common shares were valued at $$71,703, which was recorded as interest expense.expense.
As a result of the above transactions, the Company received total net proceeds of $$789,000, of which $$721,275has been allocated to the warrants and Series C Preferred Stock based on the warrants’ fair market values on each contract date, with the residual loss of $$28,043 allocated to day-one loss on warrant liability associated with the March 2022 issuances, and excess proceeds of $$95,768allocated to the Series C Preferred Stock associated with the April, May, and JuneSeptember 2022 issuances.
As at March 31, 20232024 and December 31, 2022,2023, the Company had shares of Series C Preferred Stock issued and outstanding.
F-15 |
Common Stock
The Company has authorized common shares with a par value of $ per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
During the three months ended March 31, 2023, and 2022, the Company issued common shares as follows:
Three months ended March 31, 2022; the Company issued the following unregistered securities.securities:
Three months ended March 31, 2023; the Company issued the following unregistered securities.
shares for dividend due of Series C Preferred Stock |
● | shares for Investor Relations services valued at $ |
During the three months ended March 31, 2024, the Company did not issue unregistered securities.
As at March 31, 20232024, and December 31, 2022,2023, the Company had and shares of common stock issued and outstanding, respectively.outstanding.
The above securities were issued in reliance on the exemption from registration provided by Section 4.(a)(2) of the Securities Act of 1933, as amended, and/or in reliance on the exception from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.
Warrants
The Company identified conversion features embedded within warrants issued during the three months ended March 31, 2022.2023. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision which could cause adjustments in redemption value and the number of shares issued upon exercise (see Note 9 - Warrant Liability).
A summary of activity during the three-month period ended March 31, 20232024, follows:
SUMMARY OF WARRANTS ACTIVITY
Warrants Outstanding | Warrants Outstanding | Weighted Average | ||||||||||||||||||||||
Number of | Weighted Average | Remaining life | ||||||||||||||||||||||
Number of | Weighted Average | Weighted Average Remaining life | Warrants | Exercise Price | (years) | |||||||||||||||||||
Warrants | Exercise Price | (years) | ||||||||||||||||||||||
Outstanding, December 31, 2022 | $ | 0.32 | ||||||||||||||||||||||
Outstanding, December 31, 2023 | 2,538,101 | $ | 0.32 | |||||||||||||||||||||
Granted | - | - | - | |||||||||||||||||||||
Exercised | - | - | - | |||||||||||||||||||||
Forfeited/canceled | - | - | - | |||||||||||||||||||||
Outstanding, March 31, 2023 | $ | 0.32 | ||||||||||||||||||||||
Exercisable Warrants, March 31, 2023 | $ | 0.32 | ||||||||||||||||||||||
Outstanding, March 31, 2024 | 2,538,101 | $ | 0.32 | |||||||||||||||||||||
Exercisable Warrants, March 31, 2024 | 2,538,101 | $ | 0.32 |
The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2023:2024:
SUMMARY OF INFORMATION RELATING TO OUTSTANDING AND EXERCISABLE WARRANTS
Warrants Outstanding | Warrants Outstanding | Warrants Exercisable | Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||||||||
Number of Warrants | Number of Warrants | Weighted Average Remaining Contractual life (in years) | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual life (in years) | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | ||||||||||||||||||||||||||
$ | 0.34 | $ | 0.34 | ||||||||||||||||||||||||||||||||
0.34 | 0.34 | ||||||||||||||||||||||||||||||||||
0.35 | 0.35 | ||||||||||||||||||||||||||||||||||
0.22 | 0.22 | ||||||||||||||||||||||||||||||||||
0.22 | 0.22 | ||||||||||||||||||||||||||||||||||
$ | 0.32 | $ | 0.32 | ||||||||||||||||||||||||||||||||
941,599 | $ | 0.34 | 941,599 | $ | 0.34 | ||||||||||||||||||||||||||||||
472,205 | 0.34 | 472,205 | 0.34 | ||||||||||||||||||||||||||||||||
562,149 | 0.35 | 562,149 | 0.35 | ||||||||||||||||||||||||||||||||
281,074 | 0.22 | 281,074 | 0.22 | ||||||||||||||||||||||||||||||||
281,074 | 0.22 | 281,074 | 0.22 | ||||||||||||||||||||||||||||||||
2,538,101 | $ | 0.32 | 2,538,101 | $ | 0.32 |
F-16 |
As at March 31, 20232024, the intrinsic value of the warrants is $ , as the price of the Company’s stock was below the warrant exercise price.
2022 Equity Incentive Plan
On April 1, 2023, the Company granted options for purchasing our Common stock to executives, management, and a non-executive director as consideration for time served. The Board of Directors determine the terms of the stock option grants that are consistent with our 2022 Equity Incentive Plan.
Our stock option grant general policy is that options vest 40% after 90 days of service, and the remaining options vest monthly over two years. The maximum term is ten years.
SUMMARY OF STOCK OPTION ACTIVITY
Number of Shares | Weighted-Average Exercise Price (per share) | |||||||
Outstanding as of December 31, 2023 | 14,400,000 | $ | 0.1560 | |||||
Granted | - | - | ||||||
Exercised | - | - | ||||||
Forfeited or expired | - | - | ||||||
Outstanding at March 31, 2023 | 14,400,000 | $ | 0.1560 | |||||
Exercisable at March 31, 2024 | 10,788,000 | |||||||
Weighted-average fair value of options granted in the period | $ | 0.1560 |
The total intrinsic value of options on March 31, 2023, is zero because the closing stock price was below the weighted average exercise value.
SCHEDULE OF THE WEIGHTED AVERAGE FAIR VALUE OF STOCK OPTIONS
Three Month | ||||
March 31, 2024 | ||||
Expected life in years | ||||
Risk-free interest rate | % | |||
Annual forfeiture rate | % | |||
Volatility | % | |||
Expected dividend yield | % |
SCHEDULE OF NON-VESTED SHARES
Number of Shares | Weighted-Average | |||||||
Non-vested as of December 31, 2023 | 14,400,000 | $ | 0.1560 | |||||
Granted | - | - | ||||||
Forfeited or expired | - | - | ||||||
Vested | (10,788,000 | ) | 0.1560 | |||||
Non-vested as of March 31, 2024 | 3,612,000 | $ | 0.1560 |
F-17 |
SUMMARY OF STOCK OPTION ACTIVITY OUTSTANDING AND EXERCISABLE
On May 25, 2022, our board
Options | Options | |||||||
Outstanding | Exercisable | |||||||
Number of shares | ||||||||
Weighted-average contractual life in years | ||||||||
Weighted-average exercise price | $ | $ | ||||||
Intrinsic value | $ | $ |
As of directors and majority shareholders approved the adoption of the Bubblr, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”) and, unless earlier terminated, will continue until May 25, 2032. A total of shares of common stock may be issued under the 2022 Equity Incentive Plan. The purpose of the 2022 Equity Incentive Plan is to foster and promote our long-term financial success and increase stockholder value by motivating performance through incentive compensation. The 2022 Equity Incentive Plan is intended to encourage participants to acquire and maintain ownership interests in our company and to attract and retain the services of talented individuals upon whose judgment and special efforts the successful conduct of our business is largely dependent.
If the employee is terminated for cause, the employee will forfeit the Restricted Stock Units (“RSUs”) awarded to date.
March 31,
During the year ended December2022,2024, the Company issued pursuantrecognized $108,990 in compensation costs. There were $517,783 of unrecognized compensation costs related to the 2022 Equity Incentive Plan, a total of RSUs to two Company executives pursuant to their employment agreements. (See Note 11 - Commitments and Contingencies) shares of performance-based stock compensation were scheduled to vest on each of June 1, 2023 and June 1, 2024, respectively. The Company had elected to treat the award as a single award of shares that vests ratablynon-vested share options, which we will recognize over the vesting period.
The RSUs were valued at , based on the market price of the Company’s common stock on the respective grant dates of the agreements, which was per share, and were to be recognized as compensation expense over their two-year vesting period on a straight-line basis. During the year ended December 31, 2022, the Company recorded stock-based compensation of $659,052 and had unrecognized stock compensation of $1,600,548 as of December 31, 2022.
On January 31, 2023 (the “Termination Date”), the award of RSUs was forfeited by the executives upon their termination of employment. Pursuant to ASC-718-10-30-12, no compensation cost is recognized for instruments that employees forfeit for no cash or other consideration because a service condition or a performance condition is not satisfied. Further, the value of instruments for which the requisite service is not rendered prior to the award being fully vested is not recognized as an expense, and any previously recognized costs are reversed upon forfeiture. As a result, the remaining unvested stock compensation of $1,600,548 was not recognized, and prior year recognition of $659,052 in compensation was reversed on the Termination Date.next 15 months.
Equity Financing Agreements
On February 1, 2022, Bubblr, Inc. entered into a Stock Purchase Agreement (the “SPA”) and Registration Rights Agreement with White Lion Capital LLC (“WLC”). Pursuant to the SPA, the Company had the right, but not the obligation, to cause WLC to purchase up to $10 million of our common stock during the period beginning on February 1, 2022, and ending on the earlier of (i) the date on which the WLC had purchased $10 million of our common stock pursuant to the SPA, or (ii) December 31, 2022.
In consideration for entering into the SPA, on February 1, 2022 the Company issued shares of common stock to WLC valued at $93,792.
On March 22, 2022, the Company entered into a Termination and Release Agreement with WLC to extinguish the SPA and Registration Rights Agreement in exchange for the issuance of shares of common stock. The stock was issued on March 22, 2022, and was valued at $51,500.
On March 4, 2022, the Company entered into an Equity Financing Agreement (the “EFA”) and Registration Rights Agreement with GHS Investments LLC (“GHS”). Under the terms of the EFA, GHS agreed to provide the Company with up to $15 million upon effectiveness of a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission.
The registration statement on Form S-1 was effective as of June 24, 2022. During the year ended December 31, 2022 GHS has provided $0 under the EFA.
In consideration for entering the EFA, on March 4, 2022 the Company issued shares of common stock to GHS valued at $234,522.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Premises
Lease
During the three months ended March 31, 2023 and 2022, the Company paid $0 and
$1,969 for its rented premises in Dunfermline, Scotland. The 12-month lease was not renewed in March 2021, and they vacated the premises on July 14, 2022. The Company currently rents virtual office space on a month-by-month rolling contractmonth-to-month at a21 West 46th St, New York, NY 10036. The monthly rate of is $$100200. ThisDue to its short term, this lease is exempt from ASC 842 lease accounting due to its short term.
During the three months ended March 31, 2023 and 2022, the Company paid $600 and $600 for use of premises in New York, New York. The 12-month agreement was signed in August 2021 for twelve months, after which it became a rolling monthly contract at a monthly rate of $200 and is exempt from ASC 842 lease accounting due to its short term.
On March 25, 2022, the Company entered into a service agreement with PCG Advisory, Inc. The term was six months, commencing April 1, 2022. PCG Advisory, Inc. received cash of $7,000, plus stock compensation per month. The number of shares will be determined based on the closing price on the last trading day of the previous month. The contract was terminated effective February 28, 2023.
Service Contracts
Investor Relations
On February 14, 2023, the Company entered into a service agreementConsulting Agreement with Beyond Media SEZC. The termagreement is for twelve months, commencing February 14, 2023.months. Beyond Media will receive $ monthly in cash and will be issued shares of common stock valued at $180,000 for entering into the agreement.
On June 15, 2023, the Company entered a Consulting Agreement with Launchpad LLC. The agreement is for six months. Launchpad LLC will receive $7,0003,000 in cash per month.
Steven Saunders, Former Chief Commercial Officer, and Director
On January 31, 2023, the Company entered Separation Agreements with Steven Saunders. He is no longer an officer or director of our Company, and all prior agreements are terminated. To satisfy all amounts due, Mr. Saunders and the Company agreed to a settlement totaling $116,000. As of March 31, 2024, the amount due to Mr. Saunders was $79,250.
Rik Willard, Former Chief Executive Officer, and Director
On January 31, 2023, the Company entered into Separation Agreements with Rik Willard, our then-Chief Executive Officer. Mr. Willard is no longer an officer or director of our Company, and all prior agreements are terminated in their entirety. To satisfy all amounts due, Mr. Willard and the Company agreed to a settlement total sum of $112,418. As of March 31, 2024, the amount due to Mr. Willard was $86,811.
Stephen Morris, Founder, Chief Technical Officer, and Director
On April 1, 2023, the Company entered into an Amended Employment Agreement with Stephen Morris, Founder, Chief Technical Officer, and Chair. The Company will compensate Mr. Morris with $450,000 base pay per annum, with payments reduced by 60% to $180,000 per monthannum until the Company has secured $5,000,000 in debt or equity financing.
F-18 |
On April 1, 2023, the . The options were fully vested as Mr. Morris completed two years and has received stock compensation valued at $180,000.
On February 23,December 31, 2023, the Company entered into a service agreementSecond Amended Employment Agreement with Milestone Management Services, LLC.Stephen Morris to reduce his base pay from $ to $ per annum and forfeit $270,000 of deferred compensation.
David Chetwood, Chief Financial Officer, and Director
On April 1, 2023, the Company entered into an Amended Employment Agreement, effective February 10, 2023, with David Chetwood, Chief Financial Officer, and Director. The term is Company will compensate Mr. Chetwood with a base pay of $six months, commencing February 23, 2023. Milestone Media Services, LLC received stock compensation valued atper annum, with payments reduced by 60% to $84,338180,000.
per annum until the Company has secured $5,000,000 in debt or equity financing.
Employment Agreements
On May 31, 2022, our board of directors approved amended and restated employment agreements in favor of our then-Chief Executive Officer, Rik Willard, and our then-Chief Commercial Officer, Steven Saunders.
The employment agreement with Mr. Saunders was amended as follows. In addition to his cash compensation, the Company agreed to further compensate Mr. Saunders in accordance with our May 25, 2022, Equity Incentive Plan with 3,000,000 restricted stock units, which vests 1,500,000 annually over a period of two years. He was also entitled to health and vacation benefits and six-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. He was also entitled to vesting of the restricted stock units upon any termination of employment by the Company. Mr. Saunders agreed to a two-year non-solicit restrictive covenant.
On JanuaryDecember 31, 2023, Steven Saunders and Rik Willardthe Company entered into a separation agreement with the Company regarding the terms and conditions of their departures from the Company.
Pursuant to the provisions of the SeparationSecond Amended Employment Agreement with Mr. SaundersDavid Chetwood to reduce his base pay from $ to $ per annum and in consideration for a complete releaseforfeit $236,200 of claims, we agreed as follows:
Mr. Saunders forfeited 3,000,000 non-vested Restricted Stock Units awarded on May 31, 2022, under the 2022 Equity Incentive Plan.deferred compensation.
Pursuant to the provisions of the Separation Agreement with Mr. Willard and in consideration for a complete release of claims, we agreed as follows:
Mr. Willard forfeited 5,400,000 non-vested Restricted Stock Units awarded on May 31, 2022, under the 2022 Equity Incentive Plan.
Timothy Burks, Chief Executive Officer, and Director
On February 10,April 1, 2023, The the
On July 1, 2023, the , under the 2022 Incentive Plan. As of March 31, 2024, there were non-vested share options, which we will recognize over the next 15 months.
On December 31, 2023, the Company entered into an Amended Employment Agreement with Timothy Burks to reduce his base pay from $270,000 of deferred compensation. to $ per annum and forfeit $
Paul Morrissey, Director
On April 6, 2023, the
102,040 restricted
On July 6, 2023, the , under the 2022 Incentive Plan. As of March 31, 2024, there were non-vested share options, which we will recognize over the next 15 months.
On December 31, 2023, the Company entered into an Amended Non-Executive Director Agreement with Morrissey to reduce his initial perioddirector fee from $ to $ per annum and forfeit $270,000 of 90 days. He is also entitled to health and vacation benefits and two-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. Mr. Chetwood agreed to a two-year non-solicit restrictive covenant.deferred compensation.
NOTE 12 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 7, 2024 when the date of issuance of these consolidated financial statements and noted the followingwere available to be issued. The Company has concluded no subsequent events requiring disclosure:have occurred that require disclosure.
Marketing Services
On May 1, 2023 the Company entered into a consulting agreement with Out of the Box Capital Inc. The term is six months commencing May 1, 2023. Out of the Box Capital Inc. is entitled to 625,000 shares of common stock valued at $100,000 in consideration for entrance into the agreement. 325,000 shares of common stock were issued May 01, 2023, with the balance of 325,000 due August 1, 2023.
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Employment Agreements
On April 1, 2023 our board of directors approved an employment agreement and stock option grant in favor of our Chief Executive Officer, Mr. Burks. The employment agreement with Mr. Burks provides that we will compensate him with a yearly salary of $600,000, with payment reduced to $240,000 per annum upon securing $5million in debt or financing. We also agreed to grant Mr. Burks an option to purchase 4,800,000 shares of common stock, at $0.17 per share, with 40% vesting after 90 days of service and 60% vesting monthly over the following two years. He is also entitled to health and vacation benefits and, after 90 days of employment, six-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. Mr. Burks agreed to a two-year non-solicit restrictive covenant.
On April 1, 2023 our board of directors approved amended and restated employment agreements in favor of our Chief Technical Officer, Stephen Morris, and our Chief Financial Officer, David Chetwood.
The amended employment agreement with Mr. Chetwood provides that we will compensate him with a yearly salary of $450,000, with payments reduced to $180,000 per annum until securing $5million in debt or financing. We also agreed to grant Mr. Chetwood 3,360,000 Stock Options with 40% vesting after 90 days of service and 60% vesting monthly over the following two years. He is also entitled to health and vacation benefits and, after 90 days of employment, six-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. Mr. Chetwood agreed to a two-year non-solicit restrictive covenant.
The amended employment agreement with Mr. Morris provides that we will compensate him with a yearly salary of $450,000, with payments reduced to $180,000 per annum until securing $5m in debt or financing. We also agreed to grant Mr. Morris an option to purchase 3,360,000 shares of common stock at $0.187 per share, fully vested. He is also entitled to health and vacation benefits and six-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. Mr. Morris agreed to a two-year non-solicit restrictive covenant.
On April 6, 2023 our board of directors approved a Non-Executive Board Agreement and Stock Option Grant in favor of Mr. Morrissey. The agreement with Mr. Morrissey provides that we will compensate him with a yearly fee of $300,000, paid monthly but reduced to $120,000 until securing $5million in debt or financing. We also agreed to grant Mr. Morrissey an option to purchase 1,920,000 shares of common stock, at $0.155 per share, with 40% vesting after 90 days of service and 60% vesting monthly over the following two years. He is also entitled to six-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. Mr. Morrissey agreed to a two-year non-solicit restrictive covenant.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
CertainSome of the statements contained in this Quarterly Report on Form 10-Q of Bubblr, Inc. (hereinafter the “Company,” “Bubblr,” “BBLR,” “Ethical Web.AI,” “we,” “us” or “our”) discuss future expectations, contain projections of our plan of operation or financial condition or state other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which thoseforward-looking information. In this Annual Report, forward-looking statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,such as “anticipate,” “plan,” “may,“believe,” “will,“expect,” “would,” “will be,” “will continue,” “will likely result,”“estimate”, and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions.like. Forward-looking statements involve future risks and uncertainties, and there are based on current expectations and assumptionsfactors that could cause actual results or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties, and uncertaintiesother factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on numerous factors and is derived using numerous assumptions. A reader should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report. Key factors that may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our operations and future prospects on a consolidated basisprojections include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.for example:
Business Overview
Bubblr, Inc is a company founded on the principles of digital disruption, innovation and the emerging importance of ethical internet applications. We call this emergent global movement, the “Ethical Web.”
The 5 pillars of the Ethical Web are:
Bubblr’s Mission
Our goal is to fix a broken internet model that currently suffers from the following failures:
Bubblr brings a holistic approach to the above problems in a fundamentally unique way. Building on its patented alternative online search mechanism and engaging with the global digital developer community, we plan to build a new economic platform that we believe will be sustainable and fair to users, online businesses, and all online stakeholders. Our mission is twofold:
our strategies, prospects, plans, expectations, forecasts, or objectives; | |||
● | our ability to achieve marketable products and the | ||
● | acceptance of | ||
● | our ability to raise additional financing when needed and | ||
● | our ability to | ||
● | our future operations, financial position, revenues, costs, expenses, uses of cash, capital requirements, our need for additional financing or the period for which our existing cash resources will be sufficient to | ||
● | our analysis of the target market for our platform; | ||
● | the impact of COVID-19 and/or other future pandemics and other adverse public health developments on our operations and our industry; | ||
● | regulatory developments in the | ||
● | our compliance with all applicable laws, rules, and regulations, including those of the Securities and Exchange Commission, or SEC; | ||
● | our ability to compete in the United States and internationally with larger and more substantial companies; | ||
● | general economic, business, political and social conditions; | ||
● | our reliance on and our ability to retain (and if necessary, timely recruit and replace) our officers, directors and key employees and their ability to timely and competently perform; | ||
● | our ability to generate significant revenues and achieve profitability; | ||
● | our ability to manage the growth of our business; | ||
● | our commercialization of our platform and marketing capabilities and strategies; | ||
● | our ability to expand, protect and maintain our intellectual property position; | ||
● | the success of competing third-party platforms; | ||
● | our ability to fully remediate our identified internal control material weaknesses; | ||
● | our ability to comply with regulatory requirements relating to our business, and the costs of compliance with those requirements; |
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● | the specific risk factors discussed under the heading “Risk Factors” set forth in this Annual Report; and | |
● | various other matters, many of which are beyond our control. |
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-K to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of our public disclosure practices. Additionally, the discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Form 10-Q.
Open-Code Ecosystem
Business
Understanding
Except as otherwise indicated herein or as the context otherwise requires, references in this Quarterly Report to “Bubblr,” the “Company,” “Ethical Web.AI,” “we,” “us,” and “our” refer to Bubblr, Inc. and its wholly-owned subsidiaries, including Bubblr Limited and Bubblr Holdings Limited, which are a non-trading company and IP holding company, respectively, both formed and existing under the laws of the United Kingdom.
Overview
Bubblr, Inc., d/b/a Ethical Web.AI is an artificial intelligence or AI company that the Ethical Web concept is larger than any one entity, requiring various layers of technologies across multiple business sectors.has patent protected intellectual properties. We are building an Open-Code Platform (OCP) to engage and incentivize the world’s developers and engineers in our mission for a more equitable internet, at the DNA level.
With our own intellectual property at its core, we will endeavor to construct our OCPcompete with economic incentives for the developer community in mind, incorporating a number of related digital tools that supportlarge companies who include AI in their suite of product offerings – companies such as Amazon, AI Brain, C3.ai, Data Robot, Inc., Google, IBM, Open AI and Anthropic. All of those companies have far greater financial resources and more populated human assets in the ethical development of AI technology, training data and algorithms than our Company has.
The AI industry also has numerous smaller companies that compete in the AI space without owning any protected intellectual property and that rely heavily, if not totally, on access or linkage to third party search engines and AI.
Here is a simple explanation of Generative AI
Generative artificial intelligence (AI) is a branch of computer science focused on creating programs that can generate new, mobile applicationsoriginal content. This technology harnesses the power of AI to produce outputs that adherea human might otherwise create, ranging from written text to complex code and reflectfrom stunning images to original music compositions. At its core, generative AI works by synthesizing new forms from familiar elements, drawing from a vast array of data on which it has been trained.
For the highest standardsuninitiated, it might help to think of the Ethical Web.
We believe that our softwaregenerative AI as a service (SAAS) Open-Code Platform will allowsophisticated assistant capable of crafting entirely new creations based on a set of learned patterns and examples. For instance, you could ask this AI to draft an essay, compose a piece of music, or even generate a computer program. It is not just rehashing what it has seen before; it is creating something new from the open-source community, companiespieces it knows.
The concept of generative AI is not novel—it has been around for some time. Consider Google Translate, which has been translating text since 2006, and not-for-profit organizationsSiri, Apple’s voice assistant introduced in 2011. These are early examples of generative AI in action, responding to human queries with generated language that seeks to be able to build their own mobile applications using templates downloadable from a central code repository. We intend to focus on Low-Code and No-Code applications as muchclose as possible to attractnatural human speech or text. As these technologies have evolved, they have become more integrated into our daily lives, often functioning in the background, and smoothing out our interactions with the digital world.
Recent advancements have been groundbreaking. OpenAI’s GPT-4, released in 2023, claimed capabilities surpassing the performance of most humans in standardized tests like the LSAT. This is a larger pooltestament to how far AI has come in understanding and generating human-like text. GPT-4 can write essays, debug code, create summaries, and even compose music, demonstrating a breadth of developers. As partners registercapabilities that were once thought to be solely within the realm of human expertise.
The process that allows generative AI to perform these feats is called language modelling. This process involves the AI examining a sequence of words (the context) and predicting what comes next. This is not done through a simple count of word frequencies, but through the use of neural networks—complex mathematical models that can learn patterns in data. By training on a massive corpus of text data from diverse sources like Wikipedia, books, and websites, these neural networks learn to anticipate the next word in a sequence with our platform, they are provisioned with online dashboards that allow thema high degree of accuracy.
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Training a generative AI model involves a careful and resource-intensive process. The AI is fed enormous amounts of text, and during training, it tries to utilize the SAAS platform fully and will have their own sandbox provisioned to test their apps.
Mobile-First
Allpredict parts of the consumer-based products subsequently developedtext that are intentionally omitted. This training is iterative and can take months or even years as the model constantly refines its predictions to match reality more closely. Once trained, the model has parameters—essentially, learned weights and biases that guide its predictions. These parameters are fine-tuned through additional training to specialize in the AI for particular tasks, a process known as fine-tuning.
Despite the impressive capabilities of generative AI, there are significant considerations and challenges. The technology’s rapid development has sparked discussions about its energy usage, potential to displace jobs, and ability to perpetuate or even create biases and misinformation. For example, the training of large models like GPT-4 requires substantial computational resources, which translates to significant energy consumption and associated carbon emissions. Moreover, as generative AI continues to excel at tasks traditionally performed by our registered partners are designedhumans, there’s concern over job displacement, particularly in fields like customer service, content creation, and programming.
Generative AI also raises questions about the authenticity of content and the propagation of biases. Since the AI learns from existing data, any historical biases present in that data can be reflected in the AI’s outputs. This has led to deliver the presentation layer through mobile-first consumer experiences.development of methods to align AI’s behavior with ethical standards and societal values. OpenAI, for instance, has focused on making GPT helpful, honest, and harmless by fine-tuning it with human feedback to avoid toxic, biased, or offensive content.
While we areIn sum, generative AI is a mobile-first company, we understand the need for flexibility in order to maximize market penetration. To this end, we plan to develop relationshipstransformative technology with the potential to change how we interact with machines and automate the creation of content. It is a field that is evolving rapidly, offering tremendous benefits while also posing new wavechallenges that society must address responsibly. As we continue to harness its power, it is crucial to balance innovation with ethical considerations, ensuring that generative AI serves as a tool for positive change rather than a source of security-first browsers such as Brave, TORharm.
Finally, it is not cheap. Building the training data for Chat GPT 4 was estimated to cost $100 million. It costs even more to process the queries. It is not Skynet, and others.it will not take over the world. It is simply an incredibly powerful tool to massively enhance productivity for most office-based professionals.
MonetizationOur Current Business
Bubblr, Inc., d/b/a Ethical Web.AI, stands at the forefront of a technological revolution committed to remedying the fragmented landscape of the current Internet through its advanced, ethically focused artificial intelligence software platforms. Our Company, fortified by robust patent protections, embodies integrity and Market-Makinginnovation in technology, aspiring to mend the dysfunctional aspects of online experiences while promoting digital wellness and ethical engagement.
We are developing our platform by concentrating on proven value methodologies designed to exponentially increaseOur product ecosystem, at the adoptionheart of our IP throughvalue proposition, features two trailblazing solutions poised to redefine user interaction within the following four-tiered process:digital realm:
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Advanced Tools and Future Services
We have developed a data-driven conversations (DDC) capability that is in the process of being implemented into our platform and app technologies. This generic application can be used by developers with access to our toolkit and will allow Bubblr to build and alter conversation search dialogues to optimize searching for information and content.
Additionally, we are building complex AI and machine learning to optimize search results regarding relevance and salience for searching for critical information. Our plans include adding these algorithms to the Open-Code platform and development ecosystems and to our overall Software Development Kit (SDK).
The systems architecture to support these innovations continues to evolve and our plan is designed to evolve with it. Our belief is that a collection of technologies, geared to incentivize developed and create multiple revenue streams for Bubblr, is the perfect strategy to create exponential value for our company and significantly enhance our shareholders’ interests.
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Ethical Web AI thrives on a business model characterized by low operational costs, yet significant revenue and margin potential, reflective of the SaaS open-source framework’s inherent scalability and profitability. In comparison to peer entities, many of which boast market capitalizations exceeding $1 billion, our Company signifies a compelling investment proposition given our ethical technology differentiation, robust intellectual property suite, and foreseeable market demand.
Bubblr’s Mission
Mission
At Ethical Web AI, our mission transcends the norms of technological advancement; we are dedicated to fostering a new era of the internet, rooted in the principles of ethical engagement, consumer privacy, and communal prosperity. We champion these ideals by demonstrating the commercial viability and success of our products, which are designed not merely as tools of technology but as extensions of community values and enablers of equitable digital ecosystems.
Our suite of heavily patent-protected products upholds the sanctity of user anonymity, standing as testaments to the possibility of achieving commercial success without relying on invasive online advertising tactics. These offerings are emblematic of our commitment to real decentralization, a principle that forms the bedrock of our design philosophy and operational paradigm.
We endeavor to decentralize profits and authority, channeling control back into the hands of local communities that engage with our technology. This approach disrupts traditional power structures in the digital economy, dismantling monopolistic barriers and facilitating an environment where businesses, irrespective of their scale, can compete fairly and thrive collectively. Such a landscape not only contributes to local economic vibrancy, but also empowers communities, providing them with substantial new revenue streams, thereby promoting self-sufficiency and innovation at a grassroots level.
Our mission then, in essence, is to promulgate the principles of the ethical web throughout the digital world. By showcasing the success of our business model, we intend to inspire a ripple effect, catalyzing an industry-wide shift towards practices that honor consumer privacy, champion true decentralization, and promote equitable access and opportunity for all entities within the digital space.
In this journey, we remain steadfast in our belief that technology should be a force for communal good, a platform for fair economic participation, and a space that respects and protects individual privacy. Through our innovative products and their principled underpinnings, Ethical Web AI is pioneering this transformative vision for a balanced and conscientious digital future.
Products
The AI Seek App
In the dynamic realm of artificial intelligence, the advent of generative AI applications has marked a significant milestone, challenging even formidable industry giants like Google. One such revelation has been the emergence of Chat GPT models, which, despite their advanced capabilities, have shown certain limitations in adaptability, cost-effectiveness, and data contemporaneity. Ethical Web AI, leveraging its innovative spirit and strategic intellectual property assets, has introduced AI Seek, a state-of-the-art generative AI app crafted to transcend these limitations and offer a superior, consumer-friendly alternative.
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Technological Edge and Consumer Anonymity
AI Seek, built on the foundations of our proprietary patents, presents a significant upgrade over existing technologies such as Chat GPT-4. Our version stands out not only in terms of enhanced performance but also in its cost structure, being 25% more affordable. Upholding our commitment to user privacy, AI Seek operates with complete consumer anonymity. This commitment is reflected in its no-registration process, absence of cookies, and a staunch policy against behavioral data tracking, setting a new standard for user privacy in the AI space.
Contemporaneous Data Integration
One of AI Seek’s groundbreaking features is its patented ability to incorporate up-to-date information beyond the constraints of the app’s initial training data. This functionality starkly contrasts with models like Chat GPT-4, which possesses data only up until September 2021. Especially for queries requiring current financial figures or trending data, AI Seek proves invaluable, offering precise, real-time insights. This feature significantly enriches the user experience, particularly for professionals and entities requiring the latest information.
Dynamically generated hypertext links
Another groundbreaking feature of AI Seek, which is patented and unique, is that each prompt query result is delivered in a unique web page which includes dynamically generated hypertext links. These hypertext links may include multimedia such as videos and images along with text links to other salient web pages, making it a far superior research tool.
Commercial Strategy and University Collaboration
While AI Seek’s initial phase focuses on direct consumer engagement, our strategic vision extends to licensing partnerships with educational institutions. The plan involves universities adopting a branded version of AI Seek, thereby opening a new revenue channel by offering this advanced tool to their students, faculty, and benefactors. Furthermore, this strategy assists academic institutions in maintaining integrity standards by enabling them to assess the extent of AI-generated content in student submissions, thereby limiting the possibility of plagiarism and misattribution.
Revenue Generation and User Feedback
AI Seek, though in its infancy, has already begun to generate revenue, with a small dedicated user base of individuals. The continuous engagement and constructive feedback from these early adopters have been instrumental in refining the app’s functionalities. With a marketing campaign set to launch this year, we anticipate a significant uptick in adoption, forecasting that each app instance could contribute at least $15 monthly.
In conclusion, AI Seek represents not just a product but a pivotal step toward reshaping the interaction between humans and artificial intelligence. By balancing superior technology with ethical practices and user empowerment, AI Seek is poised to lead the new wave of generative AI applications, carving a niche for itself in the market.
The licensed version will just take 20% of the net margin generated by each University. Our initial estimate indicates this will remain significant.
Ethical Web AI Licensed Open-Source Platform
In the rapidly evolving digital landscape, Ethical Web AI is pioneering a transformative approach to online interactions and transactions with its Licensed Open-Source Platform. This platform, a direct innovation from our first granted patent, US Patent No. 10977387, entitled “Internet Search Mechanism,” stands as a beacon of technological advancement and community empowerment.
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Innovation Valuation and Global Recognition
Our unique internet search mechanism, granted by the USPTO in April 2021, has not only been recognized in the United States but has also been awarded patents in four other key territories. In an independent valuation, the potential of this patented technology was highlighted, estimating its worth at an impressive $4.7 billion in a hypothetical acquisition scenario by an internet conglomerate. This value underscores the platform’s transformative potential in reshaping the internet’s commercial landscape.
Technological Advancement and Open-Source Capabilities
The complexity and breadth of the platform are testament to recent advancements in technology, enabling its rich feature set and extensive scalability. At its core, the platform offers open-source app templates, allowing licensees to construct community-centric super apps tailored to their local needs and economic contexts. Unlike conventional single-purpose applications like Uber Eats or Hotels.com, these super apps present a comprehensive marketplace, accommodating an unlimited array of products and services within a single digital ecosystem.
Revolutionizing Commercial Interactions
What distinguishes our platform further is its revolutionary approach to e-commerce. Businesses, rather than surrendering a high percentage of their transaction value, are charged a fixed monthly listing fee determined by the community licensees. This structure not only fosters a fair, competitive environment for smaller enterprises but also ensures that more revenue remains within local economies.
Anonymity, User Control, and the Future of Search
These community super apps are set to redefine internet search and e-commerce, areas that have seen little fundamental change in the past quarter-century. One of the platform’s innovative features is the “concierge search,” where users can anonymously leave requests for goods or services not immediately available, enabling future transaction fulfilment.
Furthermore, Ethical Web AI takes user privacy and control seriously. Our platform ensures user anonymity and places consumers in full control of communication channels, transforming the way they interact with online marketplaces.
Community Impact and Invitation to Explore
Beyond commercial benefits, our platform represents a new avenue for significant community revenue, fostering local development and self-sustainability. We invite interested parties to explore the diverse potential of our platform through five distinct use-case scenarios detailed on our website. Each illustrates the platform’s versatility and its adaptability to various market sectors.
Conclusion
In conclusion, the Ethical Web AI Licensed Open-Source Platform is more than a technological breakthrough; it is a new paradigm for online commerce, community growth, and digital privacy. By decentralizing the Internet marketplace, we are building a more equitable, prosperous digital future for communities and especially small businesses alike.
Intellectual Property
We have created a new search mechanism, ‘AN“AN INTERNET-BASED SEARCH MECHANISM’,MECHANISM,” which has been granted a patent in South Africa (2016/06947), New Zealand (725014), the United States of America (‘Utility Patent No. US 10977387,10977387), Canada (2962520), and Australia (2015248619) and we have patents pending on the same processes in Australia (2015248619), the European Union (15723990.6) and the United Kingdom (PCT/GB2015/051130), creating an alternative economic ecosystem to tackle the current broken model and better serve all main participant groups. This utility patent defines a profoundly unique way for internet users to search the internet for goods or services rather than text-based search engine solutions. The technical manifestation of this utility patent is the Ethical Web ATI Open-Source Platform.
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Bubblr is currently in the process of filing
We have filed a sister patent to our approved INTERNET SEARCH MECHANISM. This patent will define an alternative mobile search system purelythat is specifically for searching for information rather than goods and service, which our originalor services. US Patent Application No. 17/980298 was filed in the USA in November 2022. It is titled “Contextual enveloping via dynamically generated hypertext links.” This utility patent covers. This newdefines a radically unique way for consumers to search mechanism is designed to radically change the way search is conducted for information only, which again is radically different from traditional search engines. The technical manifestation of this patent is the AI Seek AI LLM (Large Language Model) as it works exceptionally well with AI LLMs such as Chat GPT 4 and will bear little resemblance toClaude 2. It is the established search model. Details of the mobile search application will become available upon formal filing.
GPT Dynamic
GPT Dynamic is a new mobile app developed by Bubblr that is a technical implementationconfident opinion of our patent US Patent Application No 17/980298, titled "Contextual Enveloping of Dynamic Hypertext Links.". In effect,agents, Murgatroyd’s, that this patent representswill be granted in November 2024.
We have also recently filed another patent with the Bubblr mechanism for searching forU.S. Patent Office (application number 18/376,101), which currently has a generic title of “computer-implemented method and system.” Again, this is a utility patent that resolves a significant issue with existing foundation AI LLM, such as Chat GPT and Claude 2, whereby they are unable to provide information only.
Itthat needs contemporaneous data. This is widely accepted that consumers would not pay for online searches, no matter how poorly they were served bybecause the established search engines, which are corrupted by advertising and search engine optimization. However, ChatGPT has gained 1m users in five days and over 100m users in two months. ChatGPT is an expensive search engineAI LLMs have a training data database that is more effective than Google, where people are happylimited to pay $20 a month (or $0.04c per query)some point in the past. For example, Chat GPT’s training data only goes up to use it,September 2021. Claude 2 will be updating their training data to January 2023. This utility patent uses an internally trained AI LLM that identifies those search prompts that require contemporaneous data (for example, stock prices and there are no ads in sight.
Consequently,sports data) and augments the Company has built a prototype app called GPT Dynamic that allows usersprompt with the necessary contemporaneous data to access ChatGPT anonymously (no registration is requiredradically improve AI LLM’s output to use the app) and also delivers the results in web pages that can be shared. These web pages have dynamically known named entities highlighted with salient hypertext links that go to relevant web pages. The foot of the page also contains a tag cloud of these known named entities, which, when tapped, will instigate another ChatGPT query that includes the original query with specific relevanceinclude references to the tapped named known entity.necessary contemporaneous data. The technical manifestation of this patent is delivered in version 4 and beyond of our AI Seek consumer app.
The main advantages over regular ChatGPT are:Competition
Competition
The space for online marketplaces and ad networks is rapidly evolving. The Advertising Technology (Ad-tech) industry includes all kinds of tools, software platforms (Google, Facebook), agencies, data-brokers, etc. It facilitates targeted advertisements that have become exponentially more invasive over the past decade due to massive amounts of personal data collection. It'sIt is a complex and opaque ecosystem that tracks, profiles, discriminates (both personal and business) and manipulates for profit. It'sIt is a multi-billion-dollar industry that is now facing litigation, investigations, and new regulations to curb its practices.
We face intense competition from companies with much larger capital resources than us, and, as a result, we could struggle to attract users and gain market share. Many of our existing or future competitors have greater financial resources and greater brand name recognition than we do and, as a result, may be better positioned to adapt to changes in the industry or the economy as a whole. We will strive to advance our technology in each of these sectors ahead of our competitors to gain market share. We also face intense competition in attracting and retaining qualified employees. Our ability to continue to compete effectively will depend upon our ability to attract new employees, retain, and motivate our existing employees and to compensate employees competitively. We face significant competition in several aspects of our business, and such competition might increase, particularly in the market for networks and online marketplaces. A key advantage against better resourced competitors is provisioning our technology and related acquisitions as an Open Source SAAS platform. This pushes all of the consumer and merchant marketing responsibility to the registered partners.
Our competitors may announce new products, services, or enhancements that better address changing industry standards or the needs of users, such as mobile access or different market focus. Any such increased competition could cause pricing pressure, loss of business or decreased user activity, any of which could adversely affect our business and operating results.
We believe that we have competitive strengths and protection via our IP which is defensible under the umbrella protection of our granted patents.
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Government Regulation
We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business online, many of which are evolving and could be interpreted in ways that could harm our business. In the United States and abroad, laws and regulations relating to the liability of providers of online services for activities of their users and other third parties are being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, or the content provided by users. Further, some countries impose regulations regarding or require licenses to conduct various aspects of our business, including employee recruiting and news related services. Any court ruling or other governmental action that imposes liability on providers of online services for the activities of their users or other third parties could harm our business. In addition, rising concern about the use of social networking technologies for illegal conduct, such as the unauthorized dissemination of national security information, money laundering or supporting terrorist activities, may in the future produce legislation or other governmental action that could require changes to our website platform, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our platform.
In the area of information security and data protection, most states have enacted laws and regulations requiring notification to users when there is a security breach of personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. The costs of compliance with these laws and regulations may increase in the future as a result of amendments or changes in interpretation. Furthermore, any failure on our part to comply with these laws and regulations may subject us to significant liabilities.
We are also subject to federal, state, and foreign laws and regulations regarding privacy and protection of data. Our privacy policies describe our practices concerning the use, storage, transmission, and disclosure of personal information, including visitor and user data. Any failure by us to comply with these terms or privacy-related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of privacy and data protection laws and regulations and their application to online services are unclear, evolving and in a state of flux. For example, in October 2015, the highest court in the European Union invalidated reliance on the US-EU Safe Harbor regime as one of the legally recognized mechanisms under which the personal data of European citizens could be transferred to the United States. There is a risk that these laws and regulations may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner that is not consistent with our current data protection practices or that new laws or regulations will be enacted. In addition, because our platform will be accessible worldwide, certain foreign governments may claim that we are required to comply with their laws and regulations, including with respect to the storage, use and disclosure of user information, even in jurisdictions where we have no local entity, employees, or infrastructure. Complying with these varying domestic and international requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our users’ privacy and data could result in a loss of user confidence in our services and ultimately in a loss of users, which could adversely affect our business.
Employees
As of May 7, 2024, we have five full-time employees. Our employees are not represented by any labor union.
Legal Proceedings
From time to time, we may become party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation if determined adversely to us.
Smaller Reporting Company
The Company is a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company,” these exemptions will continue to be available to us.
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Implications of Being an Emerging Growth Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 or “JOBS Act.”
As an emerging growth company, we may take advantage of reduced or “scaled” disclosure requirements that are otherwise applicable to public companies. These reduced or scaled disclosure requirements include, but are not limited to:
1. | being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report; | |
2. | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; | |
3. | being able to take advantage of the reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and | |
4. | being exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We elected to take advantage of certain of the reduced disclosure obligations in this Annual Report and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies that are not emerging growth companies.
The JOBS Act also provides that an emerging growth company may take advantage of an extended transition period to comply with new or revised accounting standards. We have irrevocably elected to not avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Compliance after Termination of Emerging Growth Company Status
After our emerging growth company status is terminated, we will not be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 1. and 4., above. However, in the event we are a “smaller reporting company,” as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, after our emerging growth company status has terminated, we will still be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 2. and 3., above, for as long as we continue to have smaller reporting company status.
Available Information
We make available, free of charge, on or through our website, at www.ethicalweb.ai, our Annual Report on Form 10-K, which includes our audited financial statements, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC maintains a website that contains these reports and other information at www.sec.gov. Our website and the information contained therein or connected thereto are not intended to be, and are not incorporated into this Annual Report on Form 10-K.
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Results of Operation for Three and Three Months Ended March 31, 2023 and 2022
Revenues
Three Months Ended March 31, 2024 and 2023 | ||||||||||||||||
2024 | 2023 | Change | ||||||||||||||
Sales | $ | 1,504 | $ | - | $ | 1,504 | 100 | % | ||||||||
Total revenue | $ | 1,504 | $ | - | $ | 1,504 | 100 | % |
We did not achieve revenues from our current operations forIn the three months ended March 31, 2023 or 2022.2024, revenues were $1,504.We did not achieve revenues from operations in 2023. We will not achieve higher revenues unless we are able to develop, market, support, and deliver our productproducts and service offerings. There can be no assurances that we willcan achieve significant revenues despite our efforts.
Operating Expenses
Three Months Ended March 31, | ||||||||||||||||
2024 | 2023 | Change | ||||||||||||||
General and administrative | $ | 310,068 | $ | 16,289 | $ | 293,779 | 1,804 | % | ||||||||
Professional fees | 8,028 | (225,570 | ) | 233,598 | (104 | ) | ||||||||||
Sales and marketing | 18,173 | 312,463 | (294,290 | ) | (94 | ) | ||||||||||
Amortization and depreciation | 53,991 | 59,627 | (5,636 | ) | (9 | ) | ||||||||||
Research and development | 47,865 | 39,152 | 8,713 | 22 | ||||||||||||
Total operating expenses | $ | 438,125 | 201,961 | $ | 236,164 | 117 | % |
Our operations for the three months ended March 31, 2023 and 2022 are outlined below:
Three Months Ended March 31, | ||||||||||||||||||
2023 | 2022 | Change | % | |||||||||||||||
General and administrative | $ | 47,625 | $ | 11,119 | $ | 36,506 | 328% | |||||||||||
Professional Fees | $ | (225,570) | $ | 192,829 | $ | (418,399 | ) | (217)% | ||||||||||
Market and regulation costs | $ | 312,463 | $ | 37,593 | $ | 274,870 | 731% | |||||||||||
Compensation | $ | (31,336 | ) | $ | 140,944 | $ | (172,280 | ) | (122)% | |||||||||
Amortization and depreciation | $ | 59,627 | $ | 107,595 | $ | (47,968 | ) | (45)% | ||||||||||
Research and development | $ | 39,152 | $ | 61,261 | $ | (22,109 | ) | (36)% | ||||||||||
Total | $ | 201,961 | $ | 551,341 | $ | (349,380 | ) | (63)% |
General and administrative
General and administrative expenses consist mainly of compensation and costs associated with non-specific costs of running the business. These include, but are not limited to, theoffice costs, of office provision, computer software, not associated with research and development, travel, and telecoms.
The increase in general and administrative costs was primarily due to accrued compensation, director fees for new executives, and stock options awarded offset by the costs from 2022 to 2023 is an increaseforfeiture of restricted stock units reducing expenses in our one-off Information Technology license costs.the three months ended March 31, 2023.
Professional fees
Professional fees consist of costs in relation to legal, accounting, and marketing matters as well as the costs of consultants for our executive and advisory boards.consultants.
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The decrease in professional fees from 2022 to 2023 iswas primarily due to the reduction in Executive Board Consultancy fees for independent contractors and the forfeiture of their restricted stock units pursuant to their separation agreement resultingreducing expenses in reversal of prior year vesting expense.the three months ended March 31, 2023.
Sales and Marketing
Market
Sales and regulation expenses
Market and regulationmarketing costs are costs incurred specifically in relation to fees and expenses for investor relations, our transfer agent, compliance consultancy, and/or marketadvertising, marketing, press releases, and public relations firm.
relations. The increase in costs from 2022 to 2023 isdecrease was due to the cost of investor relations fees due on the inception of various new contracts undertakena decrease in funding in the three months ended March 31, 2023 as compared to2024 and new investor relations services contracts paid for by issuing shares of common stock in the three months ended March 31, 2022, which were paid with the issuance of common stock.2023.
Compensation
Compensation costs are costs incurred by the Company in relation to its employees and include salaries, health insurance, pension costs, stock compensation and any taxes due on employment.
The decrease in costs from 2022 to 2023 is mainly due to a forfeiture of restricted stock units pursuant to a separation of employment agreement with executives, and the reduction of staff from 2022 to 2023.
Amortization and depreciation
A significantsizable portion of the costs recorded by the Company in regards amortization and depreciation costs are from the amortization of patents and intellectual property. Most of theThe patents and intellectual property are held in the UK subsidiary, Bubblr Ltd.
The reduction in costs from 2022 to 2023 is mainly due to lower amortization of Intellectual Property as IP added in 2016 of $1.68m (£1.3m) is fully amortized.
Research and Development
Costs incurred in relation to the development of the Company’s platform include costs associated with development staff and specialist software for product development and deployments.
The reduction in costs from 2022 to 2023 resulted from lower charges for production staff and production-specific software due to the reduction of personnel in 2022.
Other Income (Expenses)(Expense), Net
Three Months Ended March 31, | ||||||||||||||||
2024 | 2023 | Change | ||||||||||||||
Other income | $ | 1,478 | $ | 98 | $ | 1,380 | 1,408 | % | ||||||||
Interest expense | (3,592 | ) | (1,129 | ) | (2,463 | ) | 218 | |||||||||
Disposal of fixed assets | (9,355 | ) | - | (9,355 | ) | 100 | ||||||||||
Gain on change in fair value of warrant derivative liability | (1,251 | ) | (72,519 | ) | 71,268 | (98 | ) | |||||||||
Foreign currency transaction (gain) loss | (10,904 | ) | 21,175 | (32,079 | ) | (151 | ) | |||||||||
$ | (23,624 | ) | $ | (52,375 | ) | $ | 28,751 | (55 | )% |
Our other income for the three months ended March 31, 2023 and 2022 are outlined below:
Three Months Ended March 31, | |||||||||||||||||||
2023 | 2022 | Change | % | ||||||||||||||||
Interest income | $ | 98 | $ | 452 | $ | (354 | ) | (78)% | |||||||||||
Interest expense | $ | (1,129 | ) | $ | (414,844 | ) | $ | 413,715 | (100)% | ||||||||||
Gain on change in fair value of warrant derivative liability | $ | (72,519 | ) | $ | (23,891 | ) | $ | (48,628 | ) | 204% | |||||||||
Foreign currency transaction (gain)/loss | $ | 21,175 | $ | (40,707 | ) | $ | 61,882 | (152)% | |||||||||||
Total | $ | (52,375 | ) | $ | (478,990 | ) | $ | 426,615 | (89)% |
InterestOther Income
The Company earns interest income from its cash reserves and advances receivable.The decrease of interest is due to the loss of interest from the Company’s advances receivables, which were repaid in 2022. The interest from cash was due to cashback bonuses on the Company’s debit card.receivable.
As of March 31, 2023 and 2022, interest income was received on the following sources:
Three Months Ended March 31, | ||||||||||||||||||
2023 | 2022 | Change | % | |||||||||||||||
Advances receivable | $ | — | $ | 432 | $ | (432 | ) | (100)% | ||||||||||
Cash | $ | 98 | $ | 20 | $ | 40 | 390% | |||||||||||
Total | $ | 98 | $ | 452 | $ | (354 | ) | (78)% |
Interest Expense
Interest expense consists mainly of interest theon borrowings, a Company has to pay on its borrowingsvehicle, and on a vehicle, financing held by the Company. In November 2019 the Company entered into a financing arrangement with Alphera Financial Services with which the Company purchased a vehicle. The term of this loan is 5 years, and the annual interest rate is 6.90%.
As of March 31, 2023 and 2022, interest expense was derived from the following sources:
Three Months Ended March 31, | ||||||||||||||||||
2023 | 2022 | Change | % | |||||||||||||||
Interest expense – convertible notes | $ | — | $ | 11,437 | $ | (11,437 | ) | (100 | )% | |||||||||
Interest expense – promissory note | $ | — | $ | 5,000 | $ | (5,000 | ) | (100 | )% | |||||||||
Interest expense – related party | $ | 490 | $ | 452 | $ | 38 | 8 | % | ||||||||||
Finance Lease | $ | 580 | $ | 640 | $ | (60 | ) | (9 | )% | |||||||||
ELOC | $ | — | $ | 379,814 | $ | (379,814 | ) | 100 | % | |||||||||
Other | $ | 59 | $ | 72 | $ | (13 | ) | (18 | )% | |||||||||
Amortization of debt discount | $ | — | $ | 17,429 | $ | (17,429 | ) | 100 | % | |||||||||
Total | $ | 1,129 | $ | 414,844 | $ | (413,715 | ) | (100 | )% |
related party loans.
The principal amounts outstanding for the Company’s borrowings as of March 31, 2023 and December 31, 2022 are as follows:
December 31, | ||||||||||||||||
2023 | 2022 | Change | % | |||||||||||||
Vehicle Financing | $ | 20,430 | $ | 22,452 | $ | (2,022 | ) | (9)% | ||||||||
Loans Payable - Related Party (interest bearing) | $ | — | $ | 18,152 | $ | (18,152 | ) | (100)% | ||||||||
Loans Payable - Related Party | $ | 1,171,970 | $ | 899,309 | $ | 272,661 | 30% | |||||||||
Total | $ | 1,192,400 | $ | 939,913 | $ | 252,487 | (27)% |
The decrease in interest expense during the three months ended March 31, 2023 compared to 2022, is due to the Company converting its convertible notes during 2022. On December 15, 2022, noteholders approved a second amendment to the convertible notes for the conversion price to be reduced to $0.50 from $1.15 and immediately elected to voluntarily request for their notes to be converted to common shares at a conversion rate of $0.50; as a result, the Company issued 4,706,096 shares of common shares.
Funds raised via the issuance of convertible notes as of December 15, 2022, was $2,287,780, of which $2,112,150 was issued in June 2021, which is less an original issuance discount of $104,572, which was amortized over the length of the note to maturity of 18 months, and $175,630 issued on November 30, 2021.
The Company received a loan from a minority shareholder of $19,709 in February 2022 that bears interest at a rate of 20%per annum and was repaid before February 15, 2023.
We also borrowed a further $501,049 from our founder in Q4 2022. The loan is due for repayment in 3 years and is non-interest bearing. The remaining loan of $399,947 is non-interest bearing and is due for repayment on demand where the maturity date is the earlier of (i) the completion of an offering by Bubblr, Inc., in the amount of no less than $7,500,000 in a public offering, or (ii) May 23, 2024. On September 6, 2022, the loan principal was increased by $60,000 in exchange for Mr. Morris canceling his Special 2019 Series A Preferred Stock, which has super-voting rights. On December 20, 2022, the sum of $71,540 was deducted from the loan principal as a result of the assignment of Advance receivables of $71,540 to our founder. We borrowed a further $223,777 in Q1 2023. The Loans from related parties were received in GBP, and any difference deduced is due to fluctuation in the exchange rate.
Gain on change in fair value of warrant derivative liabilityliability.
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 11) for derivative accounting consideration under ASC 815, Derivatives and Hedging. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense items.
For the three months ended March 31, 2023 the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:
The following tables summarizes the changes in the warrant liabilities during the three months ended March 31, 2023 and 2022:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | |||
Warrant liability as of December 31, 2022 | $ | 198,479 | |
Change in fair value of warrant liability | 72,519 | ||
Warrant liability as of March 31, 2023 | $ | 270,998 |
Warrant liability as of December 31, 2021 | $ | — | |
Addition of new warrant liabilities | 421,000 | ||
Day-one loss | 28,043 | ||
Change in fair value of warrant liability | (4,152) | ||
Warrant liability as of March 31, 2022 | $ | 444,891 |
The market price of the common stock has decreased from the initial award of warrants in the period ending March 31, 2022.2024. If the warrants were exercised at March 31, 20232024, at their respective exercise price determined at issue, the Company would realize a gain due to the difference between the cash received on conversion and the issue cost to the Company of $0.17$0.04 per share, the fair value market price of the common stock at March 31, 2023.2024.
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Foreign currency translation gain (loss)
The gains and losses in foreign currency translation are due to fluctuations in the exchange rates of the U.S. dollar and British pound sterling.
Net Loss after income tax
The net loss after income tax was $254,336$460,867 and $1,030,331$254,336 for the three months ended March 31, 2024, and 2023, and 2022, respectively.
Liquidity and Capital Resources
Working Capital
The following table provides selected financial data about our company as ofCompany on March 31, 20232024, and December 31, 2022.2023.
Three Months | Year Ended | ||||||||||||||||||||||||||||||
March 31, | December 31, | Ended March 31, 2024 | December 31, 2023 | Change | |||||||||||||||||||||||||||
2023 | 2022 | Change | % | ||||||||||||||||||||||||||||
Current Assets | $ | 41,355 | $ | 42,417 | $ | (1,062) | (3)% | $ | 89,888 | $ | 95,171 | $ | (5,283 | ) | (6 | )% | |||||||||||||||
Current Liabilities | $ | 1,138,790 | $ | 595,856 | $ | 542,934 | 91% | 1,768,409 | 1,487,471 | 280,938 | 19 | ||||||||||||||||||||
Working Capital Deficit | $ | (1,097,435 | ) | $ | (553,439 | ) | $ | (543,996 | ) | 98% | $ | (1,678,521 | ) | $ | (1,392,300 | ) | $ | (286,221 | ) | 21 | % |
Current Assets
We require
Current assets consist of cash and other receivable which is primarily a R&D credit in the UK.
Current Liabilities
Current Liabilities consist of accounts payable, accrued liabilities, and loans.
The increase in current liabilities was primarily due to fund our operating expensesincreases of $24,759 in accounts payable, $30,000 in accrued director fees, $138,448 in accrued wages and salaries, and $101,426 in additional related-party loans in the three-month period ended March 31, 2024.
Working Capital Deficit
The working capital requirements, including outlays for capital expenditure. We had $35,115 and $32,533 cash, $6,240 and $9,844 other receivables on March 31, 2023 and December 31, 2022, respectively.deficit increased by $286,221.
Liquidity
During the last two years, and through the date of this Report, we have faced an increasingly challenging liquidity situation that has limited our ability to execute our operating plan. We will need to obtain capital to continue operations. There is no assurance that we will be able tocan secure such funding on acceptable terms.
We had $41,355 and $42,417 current assets, $1,138,790 and $595,856 current liabilities, and $1,097,435 and $553,439 working capital deficit on March 31, 2023 and December 31, 2022, respectively.
As no revenues are generated from our current operations, we will require additional debt or capital to continue to operate our businessoperating and to further expandexpanding our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans, related-party loans, or revolving credit facilities. We may not be successful in locating suitable financing transactions in the period required or at all, and we may not obtain the capital we require by other means. Unless we can attract additional investment, our operating as a going concern is in doubt.
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We are now obligated tovoluntarily file annual, quarterly, and current reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board (“PCAOB”) have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costly. To meet the needs to comply with the requirements of the Exchange Act, we will need an investment of capital.
If we are unable tocannot obtain sufficient additional capital, we may have to cease filing the requiredour SEC reports and cease operations completely. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, and stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.
Cash Flow
Three months ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||||||
2023 | 2022 | Change | 2024 | 2023 | Change | % | |||||||||||||||||||||
Cash used in Operating Activities | $ | (158,381 | ) | $ | (404,298 | ) | $ | 245,917 | |||||||||||||||||||
Cash used in Investing Activities | $ | (11,138 | ) | $ | (11,684 | ) | $ | 546 | |||||||||||||||||||
Cash used in Operating activities | $ | (118,164 | ) | $ | (158,381 | ) | $ | 40,217 | (25 | )% | |||||||||||||||||
Cash provided (used) in Investing Activities | 1,394 | (11,138 | ) | 12,532 | (113 | ) | |||||||||||||||||||||
Cash provided by Financing Activities | $ | 203,119 | $ | 399,831 | $ | (196,712) | 92,465 | 203,119 | (110,654 | ) | (54 | ) | |||||||||||||||
Cash on Hand | $ | 35,115 | $ | 93,492 | $ | (58,377) | $ | 951 | $ | 35,115 | $ | (34,164 | ) | (97 | )% |
Operating Activities
Cash usedThe decrease in operating activities was $158,381 and $404,298 during the three months ended March 31, 2023 and 2022, respectively. The reduction ofnet cash used in operating activities was primarily due to the adjustment for the forfeit of deferred stock compensation and the increase in accounts payable.increased accrued liabilities.
Investing Activities
CashNet cash used in investing activities was $11,138on Patents and $11,684 duringTrademarks offset by the three months ended March 31, 202, and 2022, respectively.sale of a motor vehicle fixed asset.
Financing Activities
During the three months ended March 31, 2023 we raised $203,119 as follows: $205,549 fromThe reduction in net cash provided by financing activities was primarily due to a decrease in related party loans offset by $2,430 in repayment2024.
Cash on Hand
The Company is currently exploring future fundraising options, including equity, debt, the sale of/or the licensing of vehicle financing. By comparison, in the three months ended March 31, 2023 we raised $399,831 as follows: $421,000 fromCompany’s Patent(s) and/or IP, with a holdback of the issuance of Series C Preferred Stock, $15,000 promissory note, and $19,709 from a loan from a related party; these inflows were offset by repayment of $52,556Company’s rights to a related party and $3,322 to vehicle financing.
We also plan to seek additional financing in a private or public equity offeringuse the IP to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able tocannot secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
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Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation ofPreparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, as well asand the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this prospectus,Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe our most critical accounting policies and estimates relate to the following:
Foreign Currency Translations | ||
Intangible Assets | ||
Long-lived Assets | ||
Income Taxes | ||
Stock-based Compensation | ||
Common Stock Purchase Warrants and Derivative Financial Instruments | ||
Convertible Financial Instruments | ||
Fair Value of Financial Instruments |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British poundsPounds (GBP). Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at weighted average rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line basis over the estimated periods benefited. Patents, technology, and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.
Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison ofcomparing the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, theThe asset is written down to its estimated fair value.value if an impairment is indicated.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax bases of assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards.carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. TheThese criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Stock BasedStock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718 Compensation–Compensation - Stock Compensation which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenseexpenses in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Restricted stock units (“RSUs”) issuedStock Options awarded as compensation in accordance withper the Company’s 2022 Equity Incentive Plan are deemed to be unissued until fully vested. RSUStock Option compensation is recognized as an expense over the vesting period. Upon repurchase of the award any unrecognized compensation, net of cash payments are expensed immediately. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense, and any previously recognized costs are reversed in the period of forfeiture.
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Recent Accounting Pronouncements
For discussion of recently issued and adopted accounting pronouncements, please see Note 2 to the unaudited consolidated financial statements as of and for the quarterquarters ended March 31, 20232024, and 20222023 included herein.
Off BalanceOff-Balance Sheet Arrangements
As of March 31, 20232024, there were no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk
A smaller reporting company is not required to provide the information required by this Item.Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. However, our chief executive officer and our chief financial officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period being reported by this Form 10-Q and have concluded that we have material weaknesses and significant deficiencies in our internal control over financial reporting as described below. Accordingly, our disclosure controls and procedures were not effective or sufficient to accomplish their objectives at the reasonable assurance level as of March 31, 2023.2024.
Management’s Report of Internal Control over Financial Reporting
Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. An evaluation was performed of the effectiveness of our internal control over financial reporting. The evaluation was based on the framework in the 2013 Internal Control — IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness toin future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Based on our evaluation under the criteria set forth in the 2013 Internal Control-Integrated Framework, our management concluded that as of March 31, 20232024, our internal control over financial reporting was not effective because of the identification of material weaknesses described as follows:
We did not have controls designed to validate the completeness and accuracy of underlying data used in the determination of accounting transactions. Accordingly, | ||
We have limited written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act, which is applicable to us. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. | ||
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, separate individuals should perform the initiation of transactions, the custody of assets, and the recording of | ||
We have | ||
We do not have a functioning audit committee |
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our Management is committed to improving its internal controls when we have adequate resources to do so, and we appointed a full-time chief financial officer in February 2023.resources. We will appoint outsideindependent directors and establish an audit committee.committee in 2024. Due to the nature of these material weaknesses, it is reasonably possible that misstatements that could be material to the annual or interim consolidated financial statements could occur that would not be prevented or detected during our financial close and reporting process.
Our companyCompany plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been ableunable to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2023:changes: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management, and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediationRemediation efforts may be adverselymaterially affected in a material manner.if we do not secure such funds.
Changes in Internal Control over Financial Reporting
We have appointed a chief financial officer duringIn the three months toended March 31, 2023. However2024, there was not sufficient time to make anywere no material changes in our internal control over financial reporting , that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pendedpending legal proceeding.proceedings. We are not awareunaware of any pendedpending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities that are adverse to us or have a material interest adverse to us.
Item 1A: Risk Factors
See risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 29, 2023.Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.
In the three months ended March 31, 20232024, the Company issued the following unregistered securities:
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view toward distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.unregistered securities.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
NoneNot applicable
Item 5. Other Information
None
Item 6. Exhibits
See Exhibit Index below for exhibits required by Item 601 of Regulation S-K.
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SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BUBBLR, INC. | ||
Date: | May | |
/s/ Timothy Burks | ||
Timothy Burks | ||
President and Chief Executive Officer | ||
/s/ David Chetwood | ||
David Chetwood | ||
Chief Financial Officer (Principal Accounting and Financial Officer) | ||
Date: May 7, 2024 | /s/ Stephen Morris | |
Stephen Morris | ||
Chief |
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