As filed with the Securities and Exchange Commission on October 19, 2021February 8, 2023
Registration Statement No. 333-269293
Registration No. 333-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1S-1/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOBIQUITY TECHNOLOGIES, INC.Mobiquity Technologies, Inc.
(Exact name of registrant as specified in its charter)
New York | 7373 | 11-3427886 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification |
| ||
35 Torrington Lane Shoreham, NY11786 (516)246-9422 (Address and telephone number of registrant’s principal executive offices) |
Registrant’s telephone number, including area (516) 246-9942
Dean L. Julia
Chief Executive Officer
Mobiquity Technologies, Inc.
35 Torrington Lane
Shoreham, NY 11786
(516) 246-9942246-9422
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Gavin C. Grusd, Esq. David F. Durso, Esq. Ruskin Moscou Faltischek P.C. 1425 RXR Plaza East Tower, 15th Floor Uniondale, NY 11556 Tel: (516) 663-6514 |
Tel: |
Approximate date of commencement of proposed sale to the public:
From time to timeAs soon as practicable after the effective date of this registration statement is declaredbecomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: þ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated | ☐ Accelerated | ☒ Non-accelerated filer | ☒ Smaller reporting company | |
☐Emerging growth |
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 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Share (1) | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee | ||||
Common stock, par value $0.0001 per share (2) | 2,108,334 | $6.00 | $12,650,004(2) | $1,172.66(3) | ||||
Representative’s Warrants to purchase Common Stock (3) | 168,667 | - | ||||||
Shares of Common Stock issuable upon exercise of the Representative’s Warrants (4)(5)(6) | 168,667 | $6.60 | $1,113,202 | $103.19 | ||||
Common stock, par value $0.0001 per share (6)(7) | 281,250 | $6.00 | $1,687,500 | $153.43 | ||||
Total: | 2,558,251 | $15,450,706 | $1,432.28 |
Under Rule 429 of the Securities Act, this Registration Statement also acts as a post-effective amendment to Registration Statement File Number 333-260364 covering 2,807,937 shares of common stock issuable upon the exercise of outstanding publicly held five-year warrants exercisable at $4.98 per share which warrants were issued in December 2021.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement contains two prospectuses, as set forth below.
The Resale Prospectus is substantively identical to the Public Offering Prospectus, except for the following principal points:
The Registrant has included in this Registration Statement a set of alternate pages after the back cover page of the Public Offering Prospectus (the “Alternate Pages”) to reflect the foregoing differences in the Resale Prospectus as compared to the Public Offering Prospectus. The Public Offering Prospectus will exclude the Alternate Pages and will be used for the public offering by the Registrant. The Resale Prospectus will be substantively identical to the Public Offering Prospectus except for the addition or substitution of the Alternate Pages and will be used for the resale offering by the selling shareholders.
Subject to completion | Preliminary Prospectus dated February 8, 2023 |
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Mobiquity Technologies, Inc.PRELIMINARY PROSPECTUS
________ Shares of Common Stock
and accompanying Series 2023 Warrants to Purchase ______Shares of Common Stock
________ Pre-funded Warrants to Purchase _______ Shares of Common Stock
and accompanying Series 2023 Warrants to Purchase _______ Shares of Common Stock
Representative Warrants to Purchase ________Shares of Common Stock
SUBJECT TO COMPLETION DATED OCTOBER 19, 2021
MOBIQUITY TECHNOLOGIES, INC.
We are offering in a firm commitment offering a number of shares of our common stock, par value $0.0001 per share, estimated to be between 6,000,000 and 9,000,000 shares, together with warrants to purchase a number of shares of common stock, estimated to be between 9,000,000 and 13,500,000 shares, (the “Series 2023 Warrants”) at a combined aggregate public offering price of $4,500,000, or a combined price per share and Warrant of $_____, pursuant to this prospectus. The common stock and Series 2023 Warrants will be sold in a fixed combination, with each share of common stock accompanied by one Series 2023 Warrant to purchase one and one-half shares of common stock The shares of common stock and Series 2023 Warrants are immediately separable and will be issued separately in this offering, but must be purchased together in this offering. Each Series 2023 Warrant has an exercise price of $_____ per share, will be exercisable upon issuance and will expire on ________, 2028. Additionally, on or after _____, 2023 (i.e. 180 days after the date of this prospectus), in the event that the Nasdaq Capital Market (“Nasdaq CM”) closing price of our common stock equals or exceeds $___ per share (i.e. 400% of the combined public offering price per common share and 2023 Warrant) for a period of at least ten consecutive trading days, then, provided that a current registration statement covering the resale of the shares underlying the 2023 Warrants is in effect, we have the right to redeem the 2023 Warrants on ten days prior written notice at a redemption price of $.001 per 2023 Warrant, subject to the warrant holder’s right to convert at any time through the close of business on the trading date prior to the redemption date.
1,833,334 SHARES OF COMMON STOCKWe are also offering to certain purchasers whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, pre-funded warrants, in lieu of shares of common stock that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock. The purchase price of each pre-funded warrant will be equal to the price at which a share of common stock is sold to the public in this offering, minus $0.0001, and the exercise price of each pre-funded warrant will be $0.0001 per share. The pre-funded warrants will be immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. The shares of common stock and pre-funded warrants can only be purchased together in this offering but will be issued separately and will be immediately separable upon issuance.
Mobiquity Technologies, Inc. is offering 1,833,334We are also seeking to register the issuance of warrants to purchase a number of shares of its common stockCommon Stock to the underwriters, estimated to be between 345,000 and 517,500 shares, as a portion of the underwriting compensation payable in connection with this offering, as well as the number of shares of Common Stock, estimated to be between 345,000 and 517,500 shares, issuable upon exercise by the Underwriters of the Representative’s warrants at an exercise price of $___ per share (110% of public offering price). We will receive proceeds from the sale of the securities being registered in this offering which are sold on a firm commitment basis. ItSee “Use of Proceeds” for information about how we will use the proceeds of this offering.
There is currently estimated thatno established public trading market for the offering priceSeries 2023 Warrants, pre-funded warrants and the Representative’s warrants and we do not expect a market to develop. Without an active trading market, the liquidity of these warrants will be between $5.00 and $7.00 per share, with an estimated offering price of $6.00 per share. Our common stock is currently quotedlimited. In addition, we do not intend to list the Series 2023 Warrants, pre- funded warrants or the Representative’s warrants on the OTCQB market, operated by OTC Markets Group, under the symbol “MOBQ.”The Nasdaq Capital Market (“Nasdaq CM”), any other national securities exchange or any other trading system. On October 18, 2021,February 6, 2023, the last quoted price of our common stock as reported on the OTCQBNasdaqCM was $7.99$0.68 per share. The final offering price may be at a discount to the trading price of our common stock on the OTCQB. This price will fluctuate based on the demand for our common stock. There is a limited public trading market for our common stock.
The final combined public offering price per share and Series 2023 Warrant will be determined through a negotiation between us and the underwriters in the offering and will take into account the recent market price of our common stock, the general condition of the securities market at the time of the offering, the history of, and the prospects for, the industry in which we compete, and our past and present operations and our prospects for future revenues. The final combined offering price for the securities may be at a discount to the trading price of our common stock on the NasdaqCM. This price will fluctuate based on the demand for our common stock. The assumed public offering price used throughout this prospectus may not be indicative of the actual final offering price. The final number of shares, Series 2023 Warrants, pre-funded warrants, Representative warrants and shares underlying the warrants being offered in this prospectus will be determined based on the final combined offering price.
This Prospectus also relates to the possible issuance of 2,807,937 shares upon exercise of five year warrants, exercisable at $4.98 per share, which we issued in a public offering December 2021 (the “2021 Warrants”) along with other securities. The registration statement, of which this prospectus is a part, also registers for sale warrants (the “Representative’s Warrants”)acts as a post-effective amendment to purchase 168,667 shares of ourRegistration Statement which registered 2021 Warrants and underlying shares. Our common stock (8% of the shares of common stock sold in this offering) to the underwriters, as a portion of the underwriting compensation payable in connection with this offering.
We have applied to list our common stockand 2021 Warrants are listed on the NASDAQ Capital MarketThe NasdaqCM under the symbol “MOBQ.”
We will receive proceeds from the sale of the shares being registered in this offering. See “Use of Proceedssymbols “MOBQ” and “MOBQW”, respectively.” for more information about how we will use the proceeds from this offering.
An investmentInvesting in our common stock is speculative and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described in this prospectus before purchasing our common stock. See “Risk Factors” beginning on page 7.6 of this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL, ACCURATE, OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per Share and Series 2023 Warrants | Per Warrant and Series 2023 Warrants | Total | |||||
Public offering price | 4,500,000 | ||||||
Proceeds to us, before expenses(2) | |||||||
(1) We have agreed to pay the underwriters a total cash fee equal to 8% of the gross proceeds raised in this offering. We have also agreed to reimburse the underwriters for certain of its offering-related expenses of up to $200,000 plus 1% of the gross proceeds of this offering. In addition, we have agreed to issue the Representative Warrants to purchase up to a number of shares of our common stock equal to 5% of the aggregate number of shares of common stock and pre-funded warrants being offered at an exercise price equal to 110% of the public offering price of the shares common stock. See “Underwriting” on page 69“Plan of Distribution” for additional disclosure regarding underwriting discountsinformation and commissions, overallotments, and reimbursementa description of expenses.the compensation payable to the underwriters.
(2) We estimate the total expenses of this offering payable by us, excluding the underwriters’ discount, will be approximately $500,000.
We have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional 275,000 number of shares of common stock (or pre-funded warrants in lieu of shares), estimated to be between 900,000 and 1,350,000 shares (or pre-funded warrants in lieu of shares), together with Series 2023 Warrants to purchase a number of shares of common stock estimated to be between 1,350,000 and 2,025,000 shares, at a combined offering price of $___ per share and Series 2023 Warrant (110% of the combined public offering price per share and warrants), less the underwriting discount.discount, solely to cover over-allotments, if any.
We anticipate that delivery of the sharessecurities against payment will be made on or about [__], 2021.________, 2023.
Prospectus dated , 2023
The date of this prospectus is ●, 2021.
TABLE OF CONTENTS
AVAILABLE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-1 (together with all amendments and exhibits thereto, the “Registration Statement”) filed by us with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”). As permitted by the rules and regulations of the SEC, this prospectus omits certain information contained in the Registration Statement, and reference is made to the Registration Statement and related exhibits for further information with respect to Mobiquity Technologies, Inc.We and the securities offered hereby. With regardunderwriters have not authorized anyone to provide any statements contained herein concerning the provisions ofinformation or to make any document filed as an exhibit to the Registration Statement or otherwise filed with the SEC, in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference.
You should rely only on informationrepresentations other than those contained in this prospectus or in any free writing prospectusprospectuses prepared by or on behalf of us or to which we may authorize to be delivered or made available tohave referred you. We have not,take no responsibility for, and can provide no assurance as to the underwriters have not, authorized anyone to provide you with additionalreliability of, any other information or information different from that contained in this prospectus or in any free writing prospectus. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus.others may give you. This prospectus is not an offer to sell oronly the solicitation of an offershares offered hereby, but only under circumstances and in jurisdictions where it is lawful to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted.
do so. The information contained in this prospectus is accurate only as of its date regardless of the date on the front covertime of delivery of this prospectus and the information inor of any free writing prospectus that we may provide you in connection with this offering is accurate only assale of the date of that free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.
No person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.common stock.
Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. YouPersons who come into possession of this prospectus and any free writing prospectus in jurisdictions outside the United States are required to inform yourselfthemselves about and to observe any restrictions relatingas to this offering and the distribution of this prospectus and any free writing prospectus applicable to that jurisdiction.
This prospectus contains market data and industry statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe that these sources are reliable, we do not guarantee the accuracy or completeness of this information and we have not independently verified this information. Although we are not aware of any misstatements regarding the market and industry data presented, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and any related free writing prospectus. Accordingly, investors should not place undue reliance on this information.
TABLE OF CONTENTS
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. You should read this entire prospectus and should consider, among other things, the matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus before making your investment decision. This prospectus contains forward-looking statements and information relating to Mobiquity Technologies, Inc. See “Cautionary NoteStatement Regarding Forward-Looking Statements” on page 23.27.
Our Company
We are a next-generation marketing and advertising technology, data compliance and data intelligence company whowhich operates through our three proprietary software platforms in the programmatic advertising space, which has grown to over a $100 billion industry in approximately the last decade. industry.
The Programmatic Advertising Industry
Programmatic advertising isrefers to the automated buying and selling of digital advertising space using algorithms and software applications, inad space. In contrast to manual advertising, which relies on human interaction and negotiation between publishers and marketers.marketers, programmatic ad buying harnesses technology to purchase digital display space. This use of software and algorithms helps streamline ad buying processes, which is why programmatic has become one of the most indispensable digital marketing tools worldwide. According to Statista, in 2021, global programmatic ad spend reached an estimated 418.4 billion U.S. dollars, with spending set to surpass 493 billion by 2022. The United States remains the leading programmatic advertising market worldwide.
Our Mission
Our mission is to help advertisers targetenterprises in the deliveryprogrammatic industry become more efficient and effective regarding the monetization of their messages to the right person at the right time using our proprietary single-source end-to-end programmatic advertising, audience segments and data compliance. We do this by offering three proprietary solutions: Our ATOS platform for brands and agencies, our data intelligence technology platforms more efficientlyplatform for audience segments and effectively than a stacked multi-vendor system.
The Programmatic Advertisingtargeting, and Data Markets
According to Statista, in 2020, global programmatic advertising spending reached an estimated $129 billion, with spending expected to surpass $150 billion by the end of 2021. In today’s competitive advertising landscape, marketers are increasingly using programmatic advertisingour publisher platform for privacy compliance and automation solutions to target audiences based on user data. Statista has forecasted that the marketing automation software market is on track to reach $17 billion by 2025, almost a threefold increase as compared to 2019.
According to MarketsandMarkets, the so-called big data market will grow to $229.4 billion by 2025. The proliferation of data from businesses in every industrial category, and all company sizes, has created a massive amount of data that is forcing many companies to adopt solution to manage data consumption, analysis and distribution. This modern era of data is essential for organizations to be efficient, stay competitive, and ultimately grow their businesses.publisher monetization.
Our Opportunity
We perceived a problem inDue to the advertising technology industryrecent changes to Privacy Laws, such as it has rapidly grown over the last 10 years. We viewed the technology in the industryGDPR and CCPA, along with Apple and Google’s removal of Identifiers, we believe Publishers are facing two significant issues: increasing costs due to be highly fragmentedprivacy compliance laws and thus inefficient. Many advertisers have had to mix multiple vendors’ different technologies, or bolt-on third-party technology to legacy technology, in an effort to create an integrated solution. This has leddecreasing revenue, due to the lack of audience targeting. We believe there is a central sourcemajor paradigm shift occurring in the market, where user data and the targeting intelligence to address problemsuse it must shift from middlemen directly to the content publishers. Publishers must own their first party data and manage their audiences segments in-house. We believe that irrespective of whether a publisher chooses to work with an integrated systemus or not, they need to find a solution that arise.allows advertisers to buy directly from them.
We saw the opportunity to provide end-to-end global programmatic advertising solutions, integrating the required components from a single source that work together because they are built together, in an effective and cost-efficient way.
Our Solutions
Programmatic Advertising Platform
Our advertising technology operating system (or ATOS) platform is a single-vendor end-to-end solution that blends artificial intelligence (or AI) and machine learning (or ML)-based optimization technology that automatically serves advertising and manages digital advertising campaigns. Our ATOS platform engages with approximately 2010 billion advertisement opportunities per day.
As an automated programmatic ecosystem, ATOS increases speed and performance, by providing dynamic technology that scales in real-time. It is this proprietary cloud-based architecture that keeps costs down and allows us to pass along savings to our customers. Also, by offering more of the features inherent in a digital advertising campaign, and removing the need for third-party integration of those features, we believe that our ATOS platform can generally be 30-40%substantially more time efficient and generally 20-30% more cost efficient than other Demand-Side Platforms (or DSPs). Our ATOS platform also decreases the effective cost basis for users by integrating all the necessary capabilities at no additional cost:cost as compared to the costs to outsource these capabilities to one or more providers in a fragmented ecosystem. DSP and bidding technologies, AdCop™ Fraud Protection, rich media and ad serving, attribution, reporting dashboard and DMP are all included.included in our ATOS platform.
Data Intelligence Platform
Our data intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research. Our management believes, based on its internal researchour experience in the industry, that we provide one of the most accurate and scaled solution for data collection and analysis, utilizing multiple internally developed proprietary technologies.
We provide our data intelligence platform to our customers on a managed services basis, and also offer a self-service alternative through our MobiExchange product, which is a software-as-a-service (or SaaS) fee model. MobiExchange is a data-focused technology solution that enables users to rapidly build actionable data and insights for its own use or for resale.use. MobiExchange’s easy-to-use, self-service tools allow anyone to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk, among other things.
Publisher Platform for Monetization and Compliance
Our content publisher platform is a single-vendor ad tech operating system that allows publishers to better monetize their opt-in user data and advertising inventory. The platform includes tools for: consent management, audience building, a direct advertising interface and inventory enhancement. Our publisher platform provides content publishers the functionality to use its user identifier data to create inventories of profiled data segments and to target audiences with advertising using that data, in a data privacy compliant manner.
Our Revenue Sources
We target publishers, brands, advertising agencies and other advertising technology companies as our audience for our ATOSthree platform products. Our sales and marketing strategy is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for small and medium sized advertisers. We generate revenue from our ATOS platformplatforms through threetwo verticals:
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Our data intelligence revenue is driven by managed services for advertising agencies, brands, market researchers, university research departments, healthcare, financial, sports, pet, civil planning, transportation and other data and technology companies and our MobiExchange self-service product. Often-times sales to users of our data intelligence platform will lead to those users using our ATOS platform as well.
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Risk Factors
Investing in our securities involves risks. You should carefully consider the risks described in the “Risk Factors” section beginning on page 76 before making a decision to invest in our securities. If any of these risks actually occur, our business, financial condition and/or results of operations would likely be materially adversely affected. In each case, the trading price of our securities would likely decline, and you may lose all or part of your investment. We have engaged Spartan Securities Capital LLC, as Representative of the underwriters, to act as our underwriters in connection with this offering on a firm commitment basis. We will bear all costs associated with the offering. See “Plan of Distribution” on page __ of this prospectus for more information regarding these arrangements. The following is a summary of some of the additional principal risks we face:
· | We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the past several fiscal |
· | We cannot predict our future capital needs and we may not be able to secure additional financing. |
· | The Company’s financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic. |
· | The reliability of our product solutions is dependent on data from third-parties and the integrity and quality of that data. |
· | Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection. |
· | We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share. |
· | The market for programmatic advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected. |
· | If we fail to innovate and make the right investment decisions in our offerings and platform, we may not attract and retain advertisers and publishers and our revenue and results of operations may decline. |
· | We need to protect our intellectual property or our operating results may suffer. |
· | Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection. |
· | Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our operations. |
· | Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, and make payments on our indebtedness. |
· | We currently have identified significant deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements. |
· | There is a very limited public trading market for our common stock | |
· | We will likely need to seek additional equity or debt financing even following this offering to provide the capital required to maintain or expand our operations and to satisfy indebtedness. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we could be substantially harmed, and it could lead to the termination of our business. |
Corporate Information
We are based in New York and were incorporated in New York on March 16, 1998.
Our principal executive offices are located at 35 Torrington Lane, Shoreham, NY 11786. Our telephone number is (516) 246-9422, and our website is www.mobiquitytechnologies.com.
Our website and the information contained therein, or connected thereto, are not intended to be incorporated into this Registration Statement on Form S-1.
THE OFFERING
Securities Offered by Us
_______ shares of common stock and accompanying Series 2023 Warrants to purchase _______ shares of common stock, and ________ pre-funded warrants to purchase shares of common stock and accompanying Series 2023 Warrants to purchase _______ shares of common stock. The shares of common stock or pre-funded warrants, respectively, and accompanying Series 2023 Warrants are immediately separable and will be issued separately in this offering, but must initially be purchased together in this offering. Each Series 2023 Warrant has an exercise price of $______ per share of common stock, is immediately exercisable and will expire five years from the date of the issuance. Additionally, on or after _____, 2023 (i.e. 180 days after the date of this prospectus), in the event that the Nasdaq CM closing price of our common stock equals or exceeds $___ per share (i.e. 400% of the combined public offering price per common share and 2023 Warrant) for a period of at least ten consecutive trading days, then, provided that a current registration statement covering the resale of the shares underlying the 2023 Warrants is in effect, we have the right to redeem the 2023 Warrants on ten days prior written notice at a redemption price of $.001 per 2023 Warrant, subject to the warrant holder’s right to convert at any time through the close of business on the trading date prior to the redemption date. See “Description of Securities sold in the Offering”. We are also registering ______ shares of common stock issuable upon exercise of the pre-funded warrants and the Series 2023 Warrants. This Prospectus also covers the possible exercise of five-year 2021 Warrants to purchase 2,807,937 shares exercisable at $4.98 per share which were issued in December 2021under Registration Statement File Number 333-260364.
Pre-Funded Warrants Offered
We are also offering to certain purchasers whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock immediately following the closing of this offering, the opportunity to purchase, if such purchasers so choose, pre-funded warrants to purchase shares of common stock, in lieu of shares of common stock that would otherwise result in any such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock. Each pre-funded warrant will be exercisable for one share of our common stock. The purchase price of each pre-funded warrant and accompanying Series 2023 Warrants (as described below) will be equal to the price at which a share of common stock and accompanying Series 2023 Warrants is being sold to the public in this offering, minus $0.0001, and the exercise price of each pre-funded warrant will be $0.0001 per share. The pre-funded warrants will be exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full. This offering also relates to the shares of common stock issuable upon exercise of any pre-funded warrants sold in this offering. For each pre-funded warrant we sell, the number of shares of our common stock we are offering will be decreased on a one-for-one basis. See “Description of Securities sold in the Offering”.
Firm Commitment Basis
We are offering the shares of common stock (and pre-funded warrants to purchase shares of common stock in lieu of shares of common stock) and Series 2023 Warrants on a firm commitment basis at a combined public offering price of $__ per share and Series 2023 Warrant We have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional _____ shares of common stock (or pre-funded warrants in lieu thereof) together with Series 2023 Warrants to purchase _______ shares of common stock at a combined offering price of $___ per share and Series 2023 Warrant (110% of the combined public offering price per share), less the underwriting discount, solely to cover over-allotments, if any.
Common Stock Outstanding Prior to this Offering
9,834,366 shares as of February 6, 2023
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Common Stock to be outstanding prior to and afterOutstanding After this Offering
______ shares assuming full exercise or non-issuance of the pre-funded warrants, but no exercise of the Series 2023 Warrants issued in this offering is based on 3,667,586or the Representative Warrants issued to the underwriters or the exercise of the 2021 Warrants. The foregoing number of shares of our common stock do not include the possible exercise of other outstanding asoptions and warrants or the conversion of September 30, 2021, and excludes the following:outstanding preferred stock. Unless we indicate otherwise, all information in this prospectus:
· | excludes 1,162,721 shares of our common stock issuable upon exercise of outstanding stock options by the members of our board of directors and third parties at a weighted average exercise price of |
· | ||
· | excludes 2,807,937 shares of our common stock issuable upon exercise of outstanding | |
· | excludes 74,458 shares of common stock issuable upon the full exercise of the warrants at an exercise price of $5.1875 per share we granted to Spartan as an underwriter of our 2021 public offering; | |
· | excludes 1,800,155 shares of our common stock issuable upon the exercise of other warrants that are outstanding as of the date of this prospectus exercisable at an average exercise price of $25.86 per share; and | |
· | excludes 162,073 shares issuable upon conversion of outstanding Preferred Stock. |
Except as otherwise indicated herein, all information in this prospectus assumes, no exercise of the warrants or Representative Warrants issued in this offering, and no exercise of options issued under our Plans or of warrants described above.
Use of Proceeds
We estimate that our net proceeds from this offering, assuming all securities offered by means of this prospectus are sold, will be approximately $_____ million, after deducting the estimated underwriters’ fees and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering for continuing operating expenses and general working capital.
Risk Factors
See “Risk Factors” beginning on page 6 of this prospectus, as well as other information included in this prospectus, for a discussion of factors you should read and consider carefully before investing in our securities.
NasdaqCMs Symbols
Our common stock and 2021 Warrants are listed on The NasdaqCM under the symbols “MOBQ” and “MOBQW”, respectively. There is no established trading market for the Series 2023 Warrants or the pre-funded warrants, and we do not expect a trading market to develop. We do not intend to list the Series 2023 Warrants or the pre-funded warrants on any securities exchange or other trading market. Without a trading market, the liquidity of the Series 2023 Warrants and pre-funded warrants will be extremely limited.
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Unless otherwise indicated, this prospectus assumes no exercise by the representatives of the underwriters of its option to purchase up to an additional 275,000 shares of common stock from us to cover over-allotments.
RISK FACTORS
An investment in our common stocksecurities is highly speculative, involves a high degree of risk and should be made only by investors who can afford a complete loss. You should carefully consider the following risk factors, together with the other information in this prospectus, including our financial statements and the related notes, before you decide to buy our common stock. If any of the following risks actually occurs, then our business, financial condition or results of operations could be materially adversely affected, the trading of our common stock and 2021 Warrants could decline, and you may lose all or part of your investment therein. In addition to the risks outlined below, risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. Potential risks and uncertainties that could affect our operating results and financial condition include, without limitation, the following:
Risks Relating to our Business Operations
We have a history of operating losses, and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the past several fiscal years ended December 31, 2020 and 2019.years.
To date, we have not been profitable and have incurred significant losses and cash flow deficits. For the nine months ended September 30, 2022 and the fiscal years ended December 31, 20202021, and 2019,2020, we reported net losses of $15,029,395$ 5,721,201, $18,333,383 and $43,747,375,$11,745,835 (as restated), respectively, and negativenet cash flow fromused in operating activities of $4,750,443$5,502,991, $6,717,324 and $8,342,506,$3,286,764 (as restated), respectively. For the six months ended June 30, 2021, we reported a net loss of $5,089,241 and had negative cash flow from operating activities of $2,712,694. As of June 30, 2021,September 30,2022, we had an aggregate accumulated deficit of $190,992,325.$208,236,095. Our operating losses for the past several years are primarily attributable to the transformation of our company into an advertising technology corporation. We can provide no assurances that our operations will generate consistent or predictable revenue or be profitable in the foreseeable future. Our managementmanagement has concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on private equity and other financings raise substantial doubt about our ability to continue as a going concern, and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the past several fiscal year ended December 31, 2020 and 2019. years.
Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments. In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired. Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing, including funds to be raised in this offering. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering is successful. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Ability to Continue as a Going Concern.”liquidity.
We cannot predict our future capital needs and we may not be able to secure additional financing.
From January 2013 through September 2021,December 2022, we raised a total of over $40$60 million in private equity and debt financing to support our transformation from an integrated marketing company to a technology company. Since we might be unable to generate recurring or predictable revenue or cash flow to fund our operations, we will likely need to seek additional (perhaps substantial) equity or debt financing even following this offering to provide the capital required to maintain or expand our operations. We expect that we will also need additional funding for developing products and services, increasing our sales and marketing capabilities, and acquiring complementary companies, technologies and assets (there being no such acquisitions which we have identified or are pursuing as of the date of this prospectus), as well as for working capital requirements and other operating and general corporate purposes. We cannot predict our future capital needs with precision, and we may not be able to secure additional financing on terms satisfactory to us, if at all, which could lead to termination of our business.
If we elect to raise additional funds or additional funds are required, we may seek to raise funds from time to time through public or private equity offerings, debt financings or other financing alternatives. Additional equity or debt financing may not be available on acceptable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing operational development and commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed.
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If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected, and we may be unable to continue our operations. Failure to secure additional financing on favorable terms could have severe adverse consequences to us.
Our previously issued December 31, 2021 consolidated financial statements and related disclosures as filed on Form 10-K/A and quarterly periods within fiscal years 2021 and 2020 as filed on Form 10-Q were restated in December 2022.
On December 1, 2022, we filed Amendment No. 2 to our Form 10-K for the fiscal year ended December 31, 2021, and we reached a determination to restate our previously issued December 31, 2021 consolidated financial statements and related disclosures as filed on Form 10-K/A and quarterly periods within fiscal years 2021 and 2020 as filed on Form 10-Q. The restatement primarily related to the following:
· | The recording of expense for common stock and warrants issued in equity financings. The warrants were a direct offering cost and should have been recorded as a reduction in additional paid-in capital; | |
· | The recording of the sale of warrants for cash that should have increased additional paid-in capital and not other income; | |
· | The recording of a mark to market adjustment for stock sold to a third party. The Company recognized a gain as a part of other income and a decrease to additional paid-in capital, this entry was made in error as the Company was not a holder of an investment of its own stock; and | |
· | Various reclassifications throughout our balance sheets, statements of operations, stockholders’ equity and cash flows to better reflect the nature or classification of each transaction. |
The restatement of the consolidated financial statements does not affect the Company’s previously reported total assets, total liabilities or revenues. Additionally, there are no compliance matters with any lender or other third parties as a result of the restatement. In addition, management has concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2021 and that the Company’s internal control over financial reporting was not effective as of December 31, 2021 solely as a result of a material weakness in controls related to the aforementioned. As a result, we have incurred unanticipated costs for accounting and legal fees in connection with or related to the restatement and may become subject to additional risks and uncertainties related to the restatement, such as a negative impact on investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business.
We could become subject to shareholder litigation and other risks as a result of the restatement and material weakness in our internal control over financial reporting.
We may be come subject to shareholder litigation as a result of the Restatement if stockholders assert that the trading price of our common stock was adversely affected by the Restatement. In addition, as part of the Restatement, we identified material weaknesses in our internal controls over financial reporting. As a result of the Restatement and such material weakness, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this prospectus, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.
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In addition, the market for our securities may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price may continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.
The Company’s financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic.
Since March 2020, COVID -19 has caused a material and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will likely continue to experience a reduction in projects, longer sales and collection cycles, deferral or delay of purchase commitments for our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially adversely affect revenue and our ability to remain a going concern.
In the event we remain a going concern, the impacts of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and thenthe general economy, are currently not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing events, among other modifications. We lost a purchase order in excess of one million dollars with a major US sports organization. We have observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, although we do anticipate it to continue to negatively impact our financial results during fiscal years 2021 and 2022.2023.
Forecasts of our revenue isare difficult.
When purchasing our products and services, our clients and prospects are often faced with a significant commitment of capital, the need to integrate new software and/or hardware platforms and other changes in company-wide operational procedures, all of which result in cautious deliberation and evaluation by prospective clients, longer sales cycles and delays in completing transactions. Additional delays result from the significant up-front expenses and substantial time, effort and other resources necessary for our clients to implement our solutions. For example, depending on the size of a prospective client’s business and its needs, a sales cycle can range from two weeks to 12 months. Because of these longer sales cycles, revenues and operating results may vary significantly from period to period. As a result, it is often difficult to accurately forecast our revenues for any fiscal period as it is not always possible for us to predict the fiscal period in which sales will actually be completed. This difficulty in predicting revenue, combined with the revenue fluctuations we may experience from period to period, can adversely affect and cause substantial fluctuations in our stock price.
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The reliability of our product solutions is dependent on data from third-partiesthird parties and the integrity and quality of that data.
Much of the data that we use is licensed from third-party data suppliers, and we are dependent upon our ability to obtain necessary data licenses on commercially reasonable terms. We could suffer material adverse consequences if our data suppliers were to withhold their data from us. For example, data suppliers could withhold their data from us if there is a competitive reason to do so; if we breach our contract with a supplier; if they are acquired by one of our competitors; if legislation is passed restricting the use or dissemination of the data they provide; or if judicial interpretations are issued restricting use of such data. Additionally, we could terminate relationships with our data suppliers if they fail to adhere to our data quality standards. If a substantial number of data suppliers were to withdraw or withhold their data from us, or if we sever ties with our data suppliers based on their inability to meet our data standards, our ability to provide products and services to our clients could be materially adversely impacted, which could result in decreased revenues.
The reliability of our solutions depends upon the integrity and quality of the data in our database. A failure in the integrity or a reduction in the quality of our data could cause a loss of customer confidence in our solutions, resulting in harm to our brand, loss of revenue and exposure to legal claims. We may experience an increase in risks to the integrity of our database and quality of our data as we move toward real-time, non-identifiable, consumer-powered data through our products. We must continue to invest in our database to improve and maintain the quality, timeliness and coverage of the data if we are to maintain our competitive position. Failure to do so could result in a material adverse effect on our business, growth and revenue prospects.
Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection.
Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot assure you that our practices have complied, comply, or will comply fully with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by us to comply with federal, state or international laws or regulations, including laws and regulations regulating privacy, data security, marketing communications or consumer protection, or other policies, self-regulatory requirements or legal obligations could result in harm to our reputation, a loss in business, and proceedings or actions against us by governmental entities, consumers, retailers or others. We may also be contractually liable to indemnify and hold harmless performance marketing networks or other third parties from the costs or consequences of noncompliance with any laws, regulations, self-regulatory requirements or other legal obligations relating to privacy, data protection and consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. Any such proceeding or action, and any related indemnification obligation, could hurt our reputation, force us to incur significant expenses in defense of these proceedings, distract our management, increase our costs of doing business and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition of monetary liability. Furthermore, the costs of compliance with, and other burdens imposed by, the data and privacy laws, regulations, standards and policies that are applicable to the businesses of our clients may limit the use and adoption of, and reduce the overall demand for, our products.
A significant breach of the confidentiality of the information we hold or of the security of our or our customers’, suppliers’, or other partners’ computer systems could be detrimental to our business, reputation and results of operations. Our business requires the storage, transmission and utilization of data. Although we have security and associated procedures, our databases may be subject to unauthorized access by third parties. Such third parties could attempt to gain entry to our systems for the purpose of stealing data or disrupting the systems. We believe we have taken appropriate measures to protect our systems from intrusion, but we cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities in our systems and attempts to exploit those vulnerabilities, physical system or facility break-ins and data thefts or other developments will not compromise or breach the technology protecting our systems and the information we possess. Furthermore, we face increasing cyber security risks as we receive and collect data from new sources, and as we and our customers continue to develop and operate in cloud-based information technology environments. In the event that our protection efforts are unsuccessful, and we experience an unauthorized disclosure of confidential information or the security of such information or our systems are compromised, we could suffer substantial harm. Any breach could result in one or more third parties obtaining unauthorized access to our customers’ data or our data, including personally identifiable information, intellectual property and other confidential business information. Such a security breach could result in operational disruptions that impair our ability to meet our clients’ requirements, which could result in decreased revenues. Also, whether there is an actual or a perceived breach of our security, our reputation could suffer irreparable harm, causing our current and prospective clients to reject our products and services in the future and deterring data suppliers from supplying us data. Further, we could be forced to expend significant resources in response to a security breach, including repairing system damage, increasing cyber security protection costs by deploying additional personnel and protection technologies, and litigating and resolving legal claims, all of which could divert the attention of our management and key personnel away from our business operations. In any event, a significant security breach could materially harm our business, financial condition and operating results.
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Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business and results of operations.
Our product platforms are hosted and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Specifically, our data intelligence platform uses the following AWS services: EC2, Lambda, Kafka, Kinesis, S3, Storm, Spark, Machine Learning, RDS, Redshift, Elastic Map Reduction, CloudWatch, DataBricks, and Elastic Search Service with built-in Kibana integration. Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business, results of operations and financial condition. Our business is heavily dependent upon highly complex data processing capability. The ability orof our platform hosts and managers to protect these data centers against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure or other disasters is beyond our control and is critical to our ability to succeed.
We rely on information technology to operate our business and maintain competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.
We depend on the use of information technologies and systems. As our operations grow in size and scope, we will be required to continuously improve and upgrade our systems and infrastructure while maintaining or improving the reliability and integrity of our infrastructure. Our future success also depends on our ability to adapt our systems and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance, features and reliability of our solutions in response to competitive services and product offerings. The emergence of alternative platforms will require new investment in technology. New developments in other areas, such as cloud computing, could also make it easier for competition to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner.
Our technology and associated business processes may contain undetected errors, which could limit our ability to provide our services and diminish the attractiveness of our offerings.
Our technology may contain undetected errors, defects or bugs. As a result, our customers or end users may discover errors or defects in our technology or the systems incorporating our technology may not operate as expected. We may discover significant errors or defects in the future that we may not be able to fix. Our inability to fix any of those errors could limit our ability to provide our solution, impair the reputation of our brand and diminish the attractiveness of our product offerings to our customers. In addition, we may utilize third party technology or components in our products, and we rely on those third parties to provide support services to us. Failure of those third parties to provide necessary support services could materially adversely impact our business.
We need to protect our intellectual property, or our operating results may suffer.
Third parties may infringe our intellectual property and we may suffer competitive injury or expend significant resources enforcing our rights. As our business is focused on data-driven results and analytics, we rely heavily on proprietary information technology. Our proprietary portfolio consists of various intellectual property including source code, trade secrets, and know-how. The extent to which such rights can be protected is substantially based on federal, state and common law rights as well as contractual restrictions. The steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. If we do not enforce our intellectual property rights vigorously and successfully, our competitive position may suffer which could harm our operating results.
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We could incur substantial costs and disruption to our business as a result of any claim of infringement of another party’s intellectual property rights, which could harm our business and operating results.
From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights. We analyze and take action in response to such claims on a case-by-case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and the uncertainty of intellectual property litigation, which could divert the attention of our management and key personnel away from our business operations. A claim of intellectual property infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, or could subject us to significant damages or to an injunction against development and sale of certain of our products or services.
We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share.
We compete in the data, marketing and research business and in all other facets of our business against small, medium and large companies throughout the United States. Some examples include companies such as LiveRamp, BeeswaxThe TradeDesk and TradeDesk.OneTrust. If we are unable to successfully compete for new business our revenue growth and operating margins may decline. The market for our advertising and marketing technology operating system platform is competitive. We believe that our competitors’ product offerings in that our competitor’s products do not provide the end-to-end solutions our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions. However, barriers to entry in our markets are relatively low. With the introduction of new technologies and market entrants, we expect competition to intensify in the future. Some of these competitors may be in a better position to develop new products and strategies that more quickly and effectively respond to changes in customer requirements in our markets. The introduction of competent, competitive products, pricing strategies or other technologies by our competitors that are superior to or that achieve greater market acceptance than our products and services could adversely affect our business. Our failure to meet a client’s expectations in any type of contract may result in an unprofitable engagement, which could adversely affect our operating results and result in future rejection of our products and services by current and prospective clients. Some of our principal competitors offer their products at a lower price, which may result in pricing pressures. These pricing pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our product and service offerings to achieve or maintain more widespread market acceptance.
Many of our competitors are substantially larger than we are and have significantly greater financial, technical and marketing resources, and established direct and indirect channels of distribution. As a result, they are able to devote greater resources to the development, promotion and sale of their products than we can.
We can provide no assurance that our business will be able to maintain a competitive technology advantage in the future.
Our ability to generate revenues is substantially based upon our proprietary intellectual property that we own and protect through trade secrets and agreements with our employees to maintain ownership of any improvements to our intellectual property. Our ability to generate revenues now and in the future is based upon maintaining a competitive technology advantage over our competition. We can provide no assurances that we will be able to maintain a competitive technology advantage in the future over our competitors, many of whom have significantly more experience, more extensive infrastructure and are better capitalized than us.
No assurances can be given that we will be able to keep up with a rapidly changing business information market.
Consumer needs and the business information industry as a whole are in a constant state of change. Our ability to continually improve our current processes and products in response to these changes and to develop new products and services to meet those needs are essential in maintaining our competitive position and meeting the increasingly sophisticated requirements of our customers. If we fail to enhance our current products and services or fail to develop new products in light of emerging industry standards and information requirements, we could lose customers to current or future competitors, which could result in impairment of our growth prospects and revenues.
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The market for programmatic advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected.
A substantial portion of our revenue has been derived from customers that programmatically purchase and sell advertising inventory through our platform. We expect that spending on programmatic ad buying and selling will continue to be a significant source of revenue for the foreseeable future, and that our revenue growth will largely depend on increasing spend through our platform. The market for programmatic ad buying is an emerging market, and our current and potential customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing our growth potential. Because our industry is relatively new, we will encounter risks and difficulties frequently encountered by early-stage companies in similarly rapidly evolving industries, including the need to:
· | Maintain our reputation and build trust with advertisers and digital media property owners; |
· | Offer competitive pricing to publishers, advertisers, and digital media agencies; |
· | Maintain quality and expand quantity of our advertising inventory; |
· | Continue to develop, launch and upgrade the technologies that enable us to provide our solutions; |
· | Respond to evolving government regulations relating to the internet, telecommunications, mobile, privacy, marketing and advertising aspects of our business; |
· | Identify, attract, retain and motivate qualified personnel; and |
· | Cost-effectively manage our operations, including our international operations. |
If the market for programmatic ad buying deteriorates or develops more slowly than we expect, it could reduce demand for our platform, and our business, growth prospects and financial condition would be adversely affected.
In addition, revenue may not necessarily grow at the same rate as spend on our platform. Growth in spend may outpace growth in our revenue as the market for programmatic advertising matures due to a number of factors including quantity discounts and product, media, customer and channel mix shifts. A significant change in revenue as a percentage of spend could reflect an adverse change in our business and growth prospectus. In addition, any such fluctuations, even if they reflect our strategic decisions, could cause our performance to fall below the expectations of securities analysts and investors, and adversely affect the price of our common stock.
Our failure to maintain and grow the customer base on our platform may negatively impact our revenue and business.
To sustain or increase our revenue, we must regularly add both new advertiser customers and publishers, while simultaneously keeping existing customers to maintain or increase the amount of advertising inventory purchased through our platform and adopt new features and functionalities that we add to our platform. If our competitors introduce lower cost or differentiated offerings that compete with or are perceived to compete with ours, our ability to sell access to our platform to new or existing customers could be impaired. Our agreements with our customers allow them to change the amount of spending on our platform or terminate our services with limited notice. Our customers typically have relationships with different providers and there is limited cost to moving budgets to our competitors. As a result, we may have limited visibility as to our future advertising revenue streams. We cannot assure you that our customers will continue to use our platform or that we will be able to replace, in a timely or effective manner, departing customers with new customers that generate comparable revenue. If a major customer representing a significant portion of our business decides to materially reduce its use of our platform or to cease using our platform altogether, it is possible that our revenue could be significantly reduced.
We rely substantially on a limited number of customers for a significant percentage of our sales.
DuringFor the six-month period ending on Juneyear ended December 31,2021 and the nine months ended September 30, 2021,2022, sales of our products to four customers generated 45.92%approximately 31% and 52% of our revenues.revenues, respectively. Our contracts with our customers generally do not obligate them to a specified term and they can generally terminate their relationship with us at any time with a minimal amount of notice. If we lose any of our customers, or any of them decide to scale back on purchases of our products, it will have a material adverse effect on our financial condition and prospects. Therefore, we must engage in continual sales efforts to maintain revenue, sustain our customer relationships and expand our client base or our operating results will suffer. If a significant client fails to renew a contract or renews the contract on terms less favorable to us than before, our business could be negatively impacted if additional business is not obtained to replace or supplement that which was lost. We may require additional financial resources to expand our internal and external sales capabilities, andalthough we plan to use a portion of the net proceeds from theof this offering of our shares underfor this prospectus for such purpose. We cannot assure that we will be able to sustain our customer relationships and expand our client base. The loss of any of our current customers or our inability to expand our customer base will have a material adverse effect on our business plans and prospects.
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If we fail to innovate and make the right investment decisions in our offerings and platform, we may not attract and retain advertisers and publishers and our revenue and results of operations may decline.
Our industry is subject to rapid and frequent changes in technology, evolving customer needs and the frequent introduction by our competitors of new and enhanced offerings. We must constantly make investment decisions regarding our offerings and technology to meet customer demand and evolving industry standards. We may make wrong decisions regarding these investments. If new or existing competitors have more attractive offerings or functionalities, we may lose customers or customers may decrease their use of our platform. New customer demands, superior competitive offerings or new industry standards could require us to make unanticipated and costly changes to our platform or business model. If we fail to adapt to our rapidly changing industry or to evolving customer needs, demand for our platform could decrease and our business, financial condition and operating results may be adversely affected.
We may not be able to integrate, maintain and enhance our advertising solutions to keep pace with technological and market developments.
The market for digital video advertising solutions is characterized by rapid technological change, evolving industry standards and frequent introductions of new products and services. To keep pace with technological developments, satisfy increasing publisher and advertiser requirements, maintain the attractiveness and competitiveness of our advertising solutions and ensure compatibility with evolving industry standards and protocols, we will need to anticipate and respond to varying product lifecycles, regularly enhance our current advertising solutions and develop and introduce new solutions and functionality on a timely basis. This requires significant investment of financial and other resources. For example, we will need to invest significant resources into expanding and developing our platforms in order to maintain a comprehensive solution. Ad exchanges and other technological developments may displace us or introduce an additional intermediate layer between us and our customers and digital media properties that could impair our relationships with those customers.
If we fail to detect advertising fraud, we could harm our reputation and hurt our ability to execute our business plan.
As we are in the business of providing services to publishers, advertisers and agencies, we must deliver effective digital advertising campaigns. Despite our efforts to implement fraud protection techniques in our platforms, some of our advertising and agency campaigns may experience fraudulent and other invalid impressions, clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by computers designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given digital advertising campaign and could harm our reputation. It may be difficult for us to detect fraudulent or malicious activity because we do not own content and rely in part on our digital media properties to control such activity. Industry self-regulatory bodies, the U.S. Federal Trade Commission and certain influential members of Congress have increased their scrutiny and awareness of, and have taken recent actions to address, advertising fraud and other malicious activity. If we fail to detect or prevent fraudulent or other malicious activity, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund or future credit demands or withdrawal of future business.
The loss of advertisers and publishers as customers could significantly harm our business, operating results and financial condition.
Our customer base consists primarily of advertisers and publishers. We do not have exclusive relationships with advertising agencies, companies that are advertisers, or publishers, such that we largely depend on agencies to work with us as they embark on advertising campaigns for advertisers. The loss of agencies as customers and referral sources could significantly harm our business, operating results and financial condition. If we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the advertisers represented by that agency.
Furthermore, advertisers and publishers may change advertising agencies. If an advertiser switches from an agency that utilizes our platform to one that does not, we will lose revenue from that advertiser. In addition, some advertising agencies have their own relationships with publishers that are different thatthan our relationships, such that they might directly connect advertisers with such publishers. Our business may suffer to the extent that advertising agencies and inventory suppliers purchase and sell advertising inventory directly from one another or through intermediaries other than us.
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Our sales efforts with advertisers and publishers require significant time and expense.
Attracting new advertisers and publishers requires substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships.
Our solutions, including our programmatic solutions, and our business model often requires us to spend substantial time and effort educating our own sales force and potential advertisers, advertising agencies, supply side platforms and digital media properties about our offerings, including providing demonstrations and comparisons against other available solutions. This process is costly and time-consuming. If we are not successful in targeting, supporting and streamlining our sales processes, our ability to grow our business may be adversely affected.
Changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect data on consumer shopping behavior.
The collection and use of electronic information about userusers is an important element of our data intelligence technology and solutions. However, consumers may become increasingly resistant to the collection, use and sharing of information, including information used to deliver advertising and to attribute credit to publishers in performance marketing programs, and take steps to prevent such collection, use and sharing of information. For example, consumer complaints and/or lawsuits regarding advertising or other tracking technologies in general and our practices specifically could adversely impact our business. In addition to this change in consumer preferences, if retailers or brands perceive significant negative consumer reaction to targeted advertising or the tracking of consumers’ activities, they may determine that such advertising or tracking has the potential to negatively impact their brand. In that case, advertisers may limit or stop the use of our solutions, and our operating results and financial condition would be adversely affected.
Government regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by us to comply with these laws and regulations could substantially harm our business and results of operations.
We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet, e-commerce and m-commerce in a number of jurisdictions around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot assure you that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business, and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant resources in defense of these proceedings, distract our management, increase our costs of doing business, and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of noncompliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek to censor content available on our websites and mobile applications or may even attempt to completely block access to our marketplace. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected and we may not be able to maintain or grow our net revenues as anticipated.
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We may be required to invest significant monies upfront in capital intensive project(s) which we may be unable to recover.
Failure to recover significant, up-front capital investments required by certain client contracts could be harmful to the Company’s financial condition and operating results. Certain of our client contracts require significant investment in the early stages, which we expect to recover through billings over the life of the contract. These contracts may involve the construction of new computer systems and communications networks or the development and deployment of new technologies. Substantial performance risk exists in each contract with these characteristics, and some or all elements of service delivery under these contracts are dependent upon successful completion of the development, construction and deployment phases. Failure to successfully meet our contractual requirements under these contracts over their life increases the possibility that we may not recover our capital investments in these contracts. Failure to recover our capital investments could be detrimental to the particular engagement as well as our operating results.
We are subject to payment-related risks and, if our customers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.
We may be involved in disputes with agencies and their advertisers over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform. If we are unable to collect or make adjustments to bills to customers, we could incur write-offs for bad debt, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on our business, financial condition and operating results. Even if we are not paid by our customers on time or at all, we are still obligated to pay for the advertising inventory we have purchased for the advertising campaign, and as a consequence, our results of operations and financial condition would be adversely impacted.
If we default on our credit obligations, our operations may be interrupted, and our business and financial results could be adversely affected.
Publishers extend us credit terms for the purchase of advertising inventory. We currently have outstanding payables to existing publishers. If we are unable to pay our publishers in a timely fashion, they may elect to no longer sell us inventory to provide for sale to advertisers. Also, it may be necessary for us to incur additional indebtedness to maintain operations of the Company. If we default on our credit obligations, our lenders and debt financing holders may, among other things:
· | require repayment of any outstanding obligations or amounts drawn on our credit facilities; |
· | terminate our credit; |
· | stop delivery of ordered equipment; |
· | discontinue our ability to acquire inventory that is sold to advertisers; |
· | require us to accrue interest at higher rates; or |
· | require us to pay significant damages. |
If some or all of these events were to occur, our operations may be interrupted and our ability to fund our operations or obligations, as well as our business, financial results, and financial condition, could be adversely affected.
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We will be relying on funding from a subsequent offering or cashflow to pay a $1,437,500 Promissory Note to an investor, and if we are unable to pay the Note when it becomes due, we will be in default.
On December 30, 2022, Walleye Opportunities Master Fund Ltd. invested $1,437,500 in the Company in exchange for a senior secured 20% OID nine-month promissory note among other securities. This Note, as amended, matures and is payable on or before September 30, 2023, and it provides that it is accelerated and becomes immediately payable if we complete a trigger financing of $3,000,000 or more which closes subsequent to the earlier of the closing the offering in this prospectus or March 31, 2023. If we are unable to raise additional funding in a trigger financing after this offering or do not generate sufficient cashflow to repay the Note when due, or we will be default under the Note if we do not pay it. In the event of default, the investor may elect to convert all or a portion of the Note at a conversion price based on closing price of the Company’s common stock on Nasdaq at the time of default subject to a floor. The Note, as amended further requires the Company to use reasonable efforts to obtain, on or before May 15, 2023, stockholder approval to permit the Company to issue the requisite number of shares upon conversion in accordance with Nasdaq Rule 5635(a)(1) and/or 5635(d) (the so-called Nasdaq 20% Rule). If we fail to obtain such stockholders approval on a timely basis, and the Note is converted, and we cannot deliver the shares to the investor, we will be liable for penalties, and the investor can rescind the conversion, requiring us to repay the Note. This failure to repay the Note could have a material adverse effect on our financial condition.
Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our operations.
Our future success depends in large part on our current senior management team and our ability to attract and retain additional high-quality management and operating personnel. Our senior management team’s in-depth knowledge of and deep relationships with the participants in our industry are extremely valuable to us. Our business also requires skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. Our failure to recruit and retain qualified personnel could hinder our ability to successfully develop and operate our business, which could have a material adverse effect on our financial position and operating results.
The complexity of our data products, processing functionality, software systems and services require highly trained professionals to operate, maintain, improve and repair them. While we presently have a sophisticated, dedicated and experienced team of associates who have a deep understanding of our business, some of whom have been with Mobiquity for years, the labor market for these individuals has historically been, and is currently, very competitive due to the limited number of people available with the necessary technical skills and understanding, compensation strategies, general economic conditions and various other factors. As the business information and marketing industries continue to become more technologically advanced, we anticipate increased competition for qualified personnel. The loss of the services of highly trained personnel like the Company’s current team of associates, or the inability to recruit and retain additional, qualified associates, could have a material adverse effect on our business, financial position or operating results.
Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.
Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due with respect to our indebtedness. Our indebtedness could have other important consequences to you as a shareholder. For example, it could:
· | make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments could result in an event of default under our debt financing agreements; |
· | make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
· | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes; |
· | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
· | place us at a competitive disadvantage compared to our competitors that have less debt; and |
· | limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes. |
Any of the above listed factors could materially adversely affect our business, financial condition and results of operations.
Our subsidiary Advangelists, LLC is party to litigation, the outcome of which could have a material adverse effect on us if it is not settled on terms favorable to us, or at all and the plaintiff is successful in its claims.
In July 2020, Fyber Monetization, an Israeli company in the business of digital advertising, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in the Magistrate’s Court in Tel Aviv, Israel. In its statement of claim, Fyber alleged that Advangelists owes Fyber license fees of $584,945 invoiced in June through November 3, of 2019 under a February 1, 2017 license agreement for the use of Fyber’s RTB technology and e-commerce platform with connects digital advertising media buyers and media sellers. Advangelists has disputed the claims and is defending this lawsuit. Due to uncertainties inherent in litigation, we cannot predict the outcome on this action with any certainty. If we do not settle this action on terms favorable to us, or at all and Fyber is successful in its claim against Advangelists, the obligation to pay substantial monetary damages could have a material adverse effect on our financial condition and funds available to us pursue our business plans.
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Risks Relating to An Investment in Our Securities
If we are not able to comply with the applicable continued listing requirements or standards of NasdaqCM, NasdaqCM could delist our common stock.
Our common stock and 2021 Warrants are listed on the NasdaqCM. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with the applicable listing standards.
On January 13, 2023, we received a letter from The Nasdaq Stock Market stating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the closing bid price of the Company’s common stock was below $1.00 per share for 30 consecutive business days.. Pursuant to Nasdaq’s Listing Rules, the Company has a 180 day grace period, until July 12, 2023, during which the Company may regain compliance if the bid price of its common stock closes at $1.00 per share or more for a minimum of ten consecutive business days.
If we do not regain compliance with the bid price requirement, we may be eligible for an additional 180-calendar day compliance period so long as we satisfy the criteria for initial listing on the NasdaqCM and the continued listing requirement for market value of publicly held shares and we provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. A reverse stock split requires the approval of our shareholders and we cannot assure that we will receive the requisite shareholder vote to allow us to effectuate a stock split. In the event we are not eligible for the second grace period, the Nasdaq staff will provide written notice that our Common Stock is subject to delisting; however, we may request a very limited public trading markethearing before the Nasdaq Hearings Panel, which request, if timely made, would stay any further suspension or delisting action by the Nasdaq pending the conclusion of the hearing process and expiration of any extension that may be granted by the Hearings Panel.
On January 4, 2023, we received a deficiency notification from the Listing Qualifications Department of The NasdaqCM notifying the Company of its noncompliance with the NasdaqCM Listing Rule 5620(a) to hold an annual meeting of shareholders within no later than one year after the end of the Company’s fiscal year end. Under NasdaqCM Rules the Company now has 45 calendar days to submit a plan to regain compliance and can grant up to 180 calendar days from the fiscal year end, or until June 29, 2023, to regain compliance.
On December 14, 2022, we received a deficiency letter from the Listing Qualifications Department of The NasdaqCM notifying the Company of its noncompliance with the NasdaqCM Listing Rule 5550(b)(1) for the NasdaqCM, which requires that a listed company’s stockholders’ equity be at least $2.5 million. In accordance with NasdaqCM rules, the Company has 45 calendar days from the date of the notification to submit a plan to regain compliance with NasdaqCM Listing Rule 5550(b)(1). The Company intends to submit a compliance plan within 45 days of the date of the notification and will evaluate available options to resolve the deficiency and regain compliance, in particular through the completion of this offering. If the Company’s compliance plan is accepted, the Company may be granted up to 180 calendar days from December 14, 2022 to evidence compliance.
In order to maintain the listing of its common stock on The NasdaqCM, the Company must demonstrate compliance with Listing Rule 5550(b)(1) which requires the Company to maintain: (1) Stockholders’ equity of at least $2.5 million; or (2) Market Value of Listed Securities of at least $35 million. The Company’s plan of compliance outlined a plan for compliance with the stockholders’ equity standard requirement by completing this Offering.
The Company intends to regain compliance with each of the applicable continued listing requirements of The NasdaqCM prior to the end of the compliance periods set forth in the Hearings Panel decision. However, until Nasdaq has reached a final determination that the Company has regained compliance with all of the applicable continued listing requirements, there can be no assurances regarding the continued listing of the Company’s common stock and 2021 Warrants on Nasdaq. If our common stock and; therefore,and 2021 Warrants cease to be listed for trading on the NasdaqCM, we would expect that our investors may notCommon Stock and 2021 Warrants would be traded on one of the three tiered marketplaces of the OTC Markets Group. If Nasdaq were to delist our common stock and 2021 Warrants, it would be more difficult for our stockholders to dispose of our common stock or 2021 Warrants and more difficult to obtain accurate price quotations on our common stock or 2021 Warrants. The delisting of the Company’s common stock and 2021 Warrants from Nasdaq would have a material adverse effect on the Company’s access to capital markets, and any limitation on market liquidity or reduction in the price of its common stock as a result of that delisting would adversely affect the Company’s ability to raise capital on terms acceptable to the Company, if at all.
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Even if a reverse stock split achieves the requisite increase in the market price of our common stock, we cannot assure you that we will be approved for listing on the NasdaqCM or able to sell theircomply with other continued listing standards of the NasdaqCM.
Even if a reverse stock split, if approved by our stockholders, achieves the requisite increase in the market price of our common stock to be in compliance with the minimum bid price of Nasdaq, there can be no assurance that the market price of our common stock following the reverse stock split will remain at the level required for continuing compliance with that requirement. It is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split. If the market price of our common stock declines following the effectuation of the reverse stock split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and jeopardize our ability to meet or maintain Nasdaq’s minimum bid price requirement.
The NasdaqCM requires that the trading price of its listed stocks remain above one dollar in order for the stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock may fluctuate substantially.and would impair your ability to sell or purchase our common stock when you wish to do so. Although we are taking certain actions to regain compliance with Nasdaq listing standards, including the reverse stock split and this offering, we can provide no assurance that any such action taken by us would enable us to regain or remain in compliance, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.
Our commonA reverse stock is thinly traded. Our common shares currently trade onsplit may decrease the over-the-counter OTCQB market. We are applying for our common shares to be listed onliquidity of the NASDAQ Capital Market. Whether or not our shares are accepted for listing on NASDAQ, we cannot assure that the trading market for our common shares will develop or expand. As a result, stockholders may be unable to liquidate their investments, or may encounter considerable delay in selling shares of our common stock. If
The liquidity of the shares of our common stock may be affected adversely by a reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase as a result of the reverse stock split. In addition, a reverse stock split may increase the number of shareholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
Following a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.
Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that a reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.
You will experience immediate dilution in the book value per share of the common stock purchased in the offering.
Since the public offering price of our common stock in this offering is substantially higher than the net tangible book value per share of our outstanding common stock outstanding prior to this offering, you will suffer dilution in the book value of the common stock you purchase in this offering. The exercise of outstanding stock options and warrants, including warrants sold in this offering and the underwriters warrants, may result in further dilution of your investment.
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There is no public market for the Series 2023 Warrants or the pre-funded warrants being offered by us in this offering.
There is no established public trading market for the Series 2023 Warrants or the pre-funded warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list Series 2023 Warrants or pre-funded warrants on any national securities exchange or other nationally recognized trading system. Without an active trading market, does develop, the liquidity of the Series 2023 Warrants and the pre-funded warrants will be limited.
The Series 2023 Warrants and pre-funded warrants are speculative in nature.
The Series 2023 Warrants and pre-funded warrants offered hereby do not confer any rights of share of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price. Specifically, commencing on the date of issuance, holders of the Series 2023 Warrants may acquire the shares of common stock issuable upon exercise of such warrants at an exercise price of $____ per share of common stock, and holders of the pre-funded warrants may acquire the shares of common stock issuable upon exercise of such warrants at an exercise price of $0.0001 per share of common stock. Moreover, following this offering, the market value of the Series 2023 Warrants and pre-funded warrants is uncertain and there can be no assurance that the market value of the Series 2023 Warrants or pre-funded warrants will equal or exceed their respective public offering prices. There can be no assurance that the market price of the shares of common stock will ever equal or exceed the exercise price of the Series 2023 Warrants or pre-funded warrants, and consequently, whether it will ever be profitable for holders of Series 2023 Warrants to exercise their Warrants or for holders of the pre-funded warrants to exercise the pre-funded warrants.
Holders of the warrants offered hereby will have no rights as common stockholders with respect to the shares our common stock underlying the warrants until such holders exercise their warrants and acquire our common stock, except as otherwise provided in the warrants.
Until holders of the Series 2023 Warrants and the pre-funded warrants acquire shares of our common stock upon exercise thereof, such holders will have no rights with respect to the shares of our common stock underlying such warrants, except to the extent that holders of such warrants will have certain rights to participate in distributions or dividends paid on our common stock as set forth in the warrants. Upon exercise of the Series 2023 Warrants and the pre-funded warrants, the holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.
Since the Series 2023 Warrants are executory contracts, they may have no value in a bankruptcy or reorganization proceeding.
In the event a bankruptcy or reorganization proceeding is commenced by or against us, a bankruptcy court may hold that any unexercised Series 2023 Warrants are executory contracts that are subject to rejection by us with the approval of the bankruptcy court. As a result, holders of the Series 2023 Warrants may, even if we have sufficient funds, not be entitled to receive any consideration for their Series 2023 Warrants or may receive an amount less than they would be entitled to if they had exercised their warrants prior to the commencement of any such bankruptcy or reorganization proceeding.
Provisions of the Series 2023 Warrants offered by this prospectus could discourage an acquisition of us by a third party, may have an adverse effect on the market price of our common stock, and make it more difficult to effect a business combination.
We will be issuing Series 2023 Warrants to purchase shares of our common stock as part of this offering. Certain provisions of the Series 2023 Warrants offered by this prospectus could make it more difficult or expensive for a third party to acquire us. The Series 2023 Warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the Series 2023 Warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
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Additionally, to the extent we issue shares of common stock to effect a future business combination, the potential for the issuance of a substantial number of additional shares upon exercise of the Series 2023 Warrants could make us a less attractive acquisition vehicle in the eyes of a target business. Such Series 2023 Warrants, when exercised, will increase the number of issued and outstanding shares of common stock and reduce the value of the shares issued to complete the business combination. Accordingly, the Series 2023 Warrants may make it more difficult to effectuate a business combination or increase the cost of acquiring a target business. Additionally, the sale, or even the possibility of sale, of the shares of common stock underlying the Series 2023 Warrants could have an adverse effect on the market price for our securities or on our ability to obtain future financing. If and to the extent the Series 2023 Warrants are exercised, you may experience dilution to your holdings.
If we do not file and maintain a current and effective prospectus relating to the common stock issuable upon exercise of the Series 2023 Warrants, holders will only be able to exercise such Series 2023 Warrants on a “cashless basis.”
If we do not file and maintain a current and effective registration statement relating to the common stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available. As a result, the number of shares of common stock that holders will receive upon exercise of the Series 2023 Warrants will be fewer than it would have been had such holder exercised his, her or its Series 2023 Warrants for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their Series 2023 Warrants for cash if a current and effective registration statement relating to the common stock issuable upon exercise of the Series 2023 Warrants is available. Under the terms of the underwriting agreement, we have agreed to use our best efforts to meet these conditions and to file and maintain a current and effective registration statement relating to the common stock issuable upon exercise of the Series 2023 Warrants until the expiration of the Series 2023 Warrants. However, we cannot assure you that we will be able to do so. If we are unable to do so, the potential “upside” of the holder’s investment in our Company may be reduced or the Series 2023 Warrants may expire worthless.
The market price of our common stock is likely to be highly volatile due to, among other things, the naturebecause of our business and because we areseveral factors, including a thinly-tradedlimited public company. Further, a few individual stockholders dominate our shares. The limited trading volume subjects the price of our common stock to manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short period of time. float.
The market price of our common stock may also fluctuate significantlyhas been volatile in response to the following factors, most of which are beyond our control:
The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies’ securities and that have often been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of our common stock and our warrants is likely to be highly volatile in the future. You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.
Other factors that could cause such volatility may include, among other things:
· | actual or anticipated fluctuations in our operating results; | |
· | the absence of securities analysts covering us and distributing research and recommendations about us; | |
· | we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held; | |
· | overall stock market fluctuations; | |
· | announcements concerning our business or those of our competitors; | |
· | actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms; | |
· | conditions or trends in the industry; | |
· | litigation; | |
· | changes in market valuations of other similar companies; | |
· | future sales of common stock; | |
· | departure of key personnel or failure to hire key personnel; and | |
· | general market conditions. |
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Any of these factors could have a significant and adverse impact on the market price of our common stock and/or warrants. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and/or warrants, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
A lack of an active market may impair the ability of our stockholders to sell shares at the time they wish to sell or at a price that they consider favorable. The lack of an active market may also reduce the fair market value of our common stock, impair our ability to raise capital by selling shares of capital stock and may impair our ability to use common stock as consideration to attract and retain talent or engage in business transactions (including mergers and acquisitions).
Our future sales of common stock by management and other stockholders may have an adverse effect on the then prevailing market price of our common stock.
In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a fully reporting company under the Securities Exchange Act of 1934, as amended, may, sell their restricted common stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for there to be adequate common public information. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their common stock without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock.
A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common shares to drop significantly, even if our business is doing well.
In this offering, weWe currently have registered 1,833,334 shares in this offering, as well as 281,250 shares for selling shareholders for resale by them, which is a substantial increase to the 3,667,586approximately 4.2 million shares of common stock free trading before this offering.out of a total of approximately 9.8 million outstanding common shares. Any increase in freely trading shares or the perception that such sharessecurities will or could come onto the market could have an adverse effect on the trading price of the stock.securities. No prediction can be made as to the effect, if any, that sales of these shares,securities, or the availability of such sharessecurities for sale, will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of common stock and warrants may be sold in the public market may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities or impair our shareholders’ ability to sell on the open market.
Additionally, theany substantial increase of our shares that are eligible to be sold into the market in the near future could cause the market price of our common shares to drop significantly, even if our business is doing well.
IfWe have had to restate our sharespreviously issued consolidated financial statements and as part of common stock are listed on NASDAQ andthat process have identified a material weakness in our internal control over financial reporting as of December 31, 2021. If we are unable to develop and maintain compliance with NASDAQ continued listing standardsan effective system of internal control over financial reporting, we may not be able to accurately report our common stockfinancial results in a timely manner, which may be delisted from NASDAQ.adversely affect investor confidence in us and materially and adversely affect our business and operating results.
In May 2022 and again in November 2022, our Audit Committee concluded, after discussion with the Company’s management and independent registered public accounting firm BF Borgers, CPA PC, that the previously issued financial statements during the Affected Period should no longer be relied upon due to:
· | The recording of compensation expense for warrants issued in an equity financing. The warrants were a direct offering cost and should have been recorded as a reduction in additional paid-in capital, | |
· | The recording of the sale of warrants for cash that should have increased additional paid-in capital and not other income, | |
· | The recording of a mark to market adjustment for stock sold to third parties. The Company recognized a gain as a part of other income and a decrease to additional paid-in capital, this entry was made in error as the Company was not a holder of an investment of its own stock, | |
· | The reduction of our net operating loss carryforward and related deferred tax assets; and | |
· | Various reclassifications throughout our balance sheet, statement of operations, stockholders’ equity and cash flows to better reflect the nature or classification of each transaction. |
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As part of the restatement process, we have identified a material weakness in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
Any failure to maintain effective internal controls could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our commonfinancial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our ordinary shares becomeand other securities are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on NASDAQ, thereour business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information which could have a negative effect on the trading price of our stock.
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be no assurancesadequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
We in the past identified significant deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements.
We have concluded that we have not maintained effective internal control over financial reporting through the past three years ended December 31, 2022. The Company determined that it has deficiencies over financial statements recording in areas of recording revenue and expenses in proper cut off as well as proper classification of accounts. Significant deficiencies and material weaknesses in our internal control could have a material adverse effect on us. Due to these deficiencies, there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We are working to remediate these deficiencies and material weaknesses. We are taking steps to enhance our internal control environment to establish and maintain effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance. In this regard, the Company in December 2021 adopted several corporate governance policies, and it has established various committees of the Board of Directors, including an Audit Committee comprised of three independent directors in accordance with Nasdaq Rule 5605(c)(2). One of the Audit Committee’s priorities will be able to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this process, the Company has implemented and/or intends to implement with the proceeds of this offering the following initiatives under the oversight of the Audit committee.
· | Hire additional staff both internally and externally to the Finance department with sufficient GAAP and public company financial reporting experience. | |
· | Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. | |
· | Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis as described herein. | |
· | Initiate a preliminary assessment of management’s internal controls over financial reporting. | |
· | Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed. |
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We have hired Refidential One - SOX Consultants who have reviewed testing procedures and analysis as follows:
· | Phase 1, which was completed on or about the Company filing its form 10-K for December 31, 2021, to identify the gaps and suggested remediations in 2021. | |
· | Phase 2, which was completed on or about June 30, 2022 to update all the narratives and create risk control matrixes (“RCM”) for testing when a remediation plan is implemented. | |
· | Phase 3, which was completed on or about September 30, 2022, tested the key controls identified and implemented in Phases 1 and 2 above. | |
· | Phase 4, to be completed in the first quarter of 2023 will be to retest the failures in Phase 3. Phase 4 testing will enable the Company to rectify any failiures in Phase 3 testing, thus reducing the likelihood of significant deficiencies. |
Although we plan to undertake and complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not be successful in remediating the deficiencies or material weaknesses.
A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information, and to timely or accurately report our financial condition, results of operations or cash flows or maintain our NASDAQ listing in the future. In the eventeffective disclosure controls and procedures. If we are unable to report financial information timely and accurately or to maintain compliance with NASDAQ continued listing standardseffective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our common stock is delisted from NASDAQ, it could likely lead to a number of negative implications, including an adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing. In the event of a delisting, we would take actions to restore our compliance with NASDAQ’s continued listing standards, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s continued listing requirements.business prospects.
Our common stock (and our warrants) may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”
Our common stock and warrants may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future. While our common stock willand warrants are currently not be considered “penny stock” following this offering since they will beare listed on the Nasdaq Capital Market,NasdaqCM, if we are unable to maintain that listing and our common stock isand warrants are no longer listed on the Nasdaq Capital Market,NasdaqCM, unless we maintain a per-share price above $5.00, our common stock and warrants will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.
Legal remedies available to an investor in “penny stocks” may include the following:
· | If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment. |
· | If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages. |
These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock or our warrants and may affect your ability to resell our common stock and our warrants.
Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.
For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock or our warrants will not be classified as a “penny stock” in the future.
We do not intend to pay dividends for the foreseeable future and thus you must rely on stock appreciation for any return on your investment.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. As a result, you must rely on stock appreciation and a liquid trading market for any return on your investment. If an active and liquid trading market does not develop, you may be unable to sell your shares of common stock at or above the price in this offering at the time you would like to sell.
Our principal stockholders, directors and executive officers have a material level of control over us, which could delay or prevent a change in our corporate control favored by our other stockholders.
As of the date of this Prospectus,Currently, our principal stockholders, directors and executive officers beneficially own, in the aggregate, more than 50%approximately 44% of our outstanding common stock. The interests of our current directors and executive officers may differ from the interests of other stockholders. As a result, these current directors and officers could have the ability to exercise material influence over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:
· | approval of certain mergers and other significant corporate transactions, including a sale of substantially all of our assets and material financing transactions; |
· | election of directors; |
· | adoption of or amendments to stock option plans; or |
· | amendment of charter |
Our certificate of incorporation grants our board of directors the authority to issue a new series of preferred stock without further approval by our shareholders, which could adversely affect the rights of the holders of our common shares.
Our board of directors has the power to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the power to issue preferred stock without further shareholder approval, subject to applicable listing regulations. As a result, our board of directors could authorize the issuance of new series of preferred stock that would grant to holders thereof certain rights in preference to the rights of our common stock holdersstockholders to:
· | our assets upon liquidation; |
· | receive dividend payments ahead of holders of common shares; |
· | the redemption of the shares, together with a premium, prior to the redemption of our common shares; |
· | vote to approve matters as a separate class or have more votes per share relative to shares of common stock. |
In addition, our board of directors could authorize the issuance of new series of preferred stock that is convertible into our common shares, or may also authorize the sale of additional shares of authorized common stock, which could decrease the relative voting power of our common shares or result in dilution to our existing shareholders.
If you invest in our securities in this offering, your ownership will be immediately diluted.
If you invest in our securities in this offering, your ownership interest will be immediately diluted to the extent of the difference between the assumed public offering price per share of common stock and the as adjusted net tangible book value per share after giving effect to this offering.
The net tangible book value of our Company as of June 30, 2021 was $(5,505,693). The proforma net tangible book value of our Company (see Capitalization) as of June 30, 2021 was $(3,925,874),after giving effect on a pro forma basis to reflect the (i) conversion of all outstanding shares of our Series C convertible preferred stock into 375,000 shares of common stock and 375,000 warrants resulting in additional paid in capital of $2,718,712,(ii) third quarter sale of promissory notes in the principal amount of $2,075,500 in exchange for cash of $1,823,000 (iii) the conversion of convertible promissory notes in the principal amount of $657,000 outstanding as of June 30, 2021 into 133,761 shares of common stock, (iv) the conversion of convertible promissory notes in the principal amount of $497,500 issued in the third quarter and subsequently converted into 89,904 shares of common stock ,and(v) the issuance of 53,400 shares as original issue discount in connection with the third quarter sale of notes, as if such transaction had occurred on June 30, 2021. After deducting the book value of $5,803,909 attributable to the Series AAA Preferred Stock and Series E Preferred Stock, the net tangible book value of our Common Stock on June 30, 2021 was ($9,729,783) or approximately ($2.65) per share of common stock. Net tangible book value per common share is determined by dividing the net tangible book value of our Company (total tangible assets less total liabilities less book value of Preferred Stock) by the number of outstanding shares of our common stock.
As a public company, we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance.
As a public company, we are subject to numerous legal and accounting requirements, and the Nasdaq maintenance listing requires if we become listed on NASDAQ,requirements, that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our management team is relatively inexperienced in complying with these requirements, and our management resources are limited, which may lead to errors in our accounting and financial statements, and which may impair our operations. This inexperience and lack of resources may also increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis or comply with NASDAQNasdaqCM listing requirements, resulting in loss of market confidence and/or governmental or private actions against us, or delisting from NASDAQ.NasdaqCM. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.
We could become subject to shareholder litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations.
The market for our common shares may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price may continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.
Our management will have broad discretion as to the use of proceeds from this offering, and we may not use the proceeds effectively.
Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. You will not have the opportunity, as part of your investment decision, to assess whether these proceeds are being used appropriately. Our failure to apply these funds effectively could have a material adverse effect on our business and cause the price of our common stock to decline.
We currently have identified significant deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements.
We have concluded that we have not maintained effective internal control over financial reporting through the years ended December 31, 2020 and December 31, 2019. The Company determined that it has deficiencies over financial statements recording in areas of recording revenue and expenses in proper cut off as well as proper classification of accounts. Significant deficiencies and material weaknesses in our internal control could have a material adverse effect on us. Due to these deficiencies, there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We are working to remediate the deficiencies or material weaknesses. We have taken steps to enhance our internal control environment and plan to take additional steps to remediate the material weaknesses, including (i) hiring additional personnel with sufficient U.S. GAAP experience and (ii) implementing ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. Although we plan to undertake and complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not be successful in remediating the deficiencies or material weaknesses.
A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information, and to timely or accurately report our financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures. If we are unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business prospects.
General Risk Factors
Certain provisions of our certificate of incorporation, bylaws and New York law make it more difficult for a third party to acquire us and make a takeover more difficult to complete, even if such a transaction were in the stockholders’ interest.
Our restated certificate of incorporation, as amended, and by-laws and New York law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. In addition, provisions of our restated certificate of incorporation, as amended, by-laws and New York law impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. These provisions include, among others:
· | the inability of our shareholders to call a special meeting; |
· | rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; |
· | the right of our Board to issue preferred stock without shareholder approval; and |
· | the ability of our directors, and not shareholders, to fill vacancies on our Board. |
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We believe these provisions may help protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make our Company immune from takeovers. In addition, although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board, they would apply even if the offer may be considered beneficial by some shareholders. These provisions may also frustrate or prevent any attempts by our shareholders to replace or remove our current management team by making it more difficult for shareholders to replace members of our Board, which is responsible for appointing the members of our management.
Our bylaws provide for limitations of director liability and indemnification of directors and officers and employees.
Our bylaws provide that we will indemnify our directors, officers and employees to the fullest extent permitted by law. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding. We believe that these provisions are necessary to attract and retain qualified persons as directors and officers.
Section 402(b) of the BCL permits a New York corporation to include in its certificate of incorporation a provision eliminating the potential monetary liability of a director to the corporation or its shareholders for breach of fiduciary duty as a director; provided that this provision may not eliminate the liability of a director (i) for acts or omissions in bad faith or which involve intentional misconduct or a knowing violation of law, (ii) for any transaction from which the director receives an improper personal benefit or (iii) for any acts in violation of Section 719 of the BCL. Section 719 provides that a director who votes or concurs in a corporate action will be liable to the corporation for the benefit of its creditors and shareholders for any damages suffered as a result of an action approving (i) an improper payment of a dividend, (ii) an improper redemption or purchase by the corporation of shares of the corporation, (iii) an improper distribution of assets to shareholders after dissolution of the corporation without adequately providing for all known liabilities of the corporation or (iv) the making of an improper loan to a director of the corporation.
The limitation of liability in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which reflect the views of our management with respect to future events and financial performance. These forward-looking statements are subject to a number of uncertainties and other factors that could cause actual results to differ materially from such statements. Forward-looking statements are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “targets,” and similar expressions. Such forward-looking statements may be contained in the sections “Risk Factors,” and “Business,” among other places in this prospectus. Readers are cautioned not to place undue reliance on these forward-looking statements, which are based on the information available to management at this time and which speak only as of this date. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under “Risk Factors.”
The identification in this document of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You may rely only on the information contained in this prospectus.
We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of our common stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these securities in any circumstances under which the offer or solicitation is unlawful.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, numerous assumptions, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. We have based these forward-looking statements on our current expectations and projections about future events. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date of this prospectus, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. These statements are inherently subject to known and unknown risks, uncertainties and other factors, including, but not limited to, such forward-looking statements contained in the sections “Description of the Business,” “Management Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and the following:
These and other factors should be considered carefully, and readers should not place undue reliance on our forward-looking statements. Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made. Except as required by U.S. federal securities laws, we have no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
Information regarding market and industry statistics contained in this prospectus is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services., we have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.
USE OF PROCEEDS
We estimate that weour net proceeds from this offering will receive gross proceeds ofbe approximately $11,000,004 (or approximately $12,650,004 if the underwriter exercises in full its option to purchase up to 275,000 additional shares of common stock)$________ based on the assumedsale of ______ shares of Common Stock, pre-funded warrants to purchase _____ shares of Common Stock and accompanying Series 2023 Warrants and Class C Warrants at a public combined offering price of $6.00$____ per share before deducting the estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $6.00Common Stock (less $0.0001 per share would increase (decrease) the net proceeds to us from this offering by $1.686 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, andpre-funded warrant), Series 2023 Warrants after deducting the estimated underwriting discounts and commissionsunderwriters fees and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us, would increase (decrease) the net proceeds to us from this offering by approximately $5.52 million,and assuming the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial public offering price or the number of shares by these amounts would have a material effect on our usesno exercise of the proceeds fromSeries 2023 Warrants being issued in this offering, although it may accelerate the time at which we will need to seek additional capital.
offering. We intend to use the net proceeds ($9,690,004 calculated as follows: $11,000,004 less estimated Offering costs of $1,310,000) from the salethis offering for continuing operating expenses and general working capital.
As of the 1,833,334 sharesdate of common stockthis prospectus, we cannot specify with certainty all of the particular uses for the following:
This expected use of the net proceeds fromto be received upon the completion of this offering represents our intentions based on our current plans and business conditions, which could change in the future as our plans and business conditions evolve. If management reasonably determines that the net proceeds from this offering would not be sufficient to meet the Company’s development plans and other working capital obligations after closing, management will re-evaluate and revise its current plans and/or seek other sources of financing, although management currently has no specific additional financing plans.offering. The amounts and timing of our use of proceedsactual expenditures will vary dependingdepend on a number ofnumerous factors, including the status of our sales and marketing activities, amount of cash generated or used byin operations, and competition. Accordingly, our operations. As a result, wemanagement will retainhave broad discretion in the allocationapplication of the net proceeds of this offering, and our investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering. In addition, while we have not entered into any agreements, commitments or understandings relating to any significant transaction as of the date of this prospectus, we may use a portion of the net proceeds to pursue acquisitions, joint ventures and other strategic transactions.
Pending their use, we intend to invest the net proceeds of this offering in short-term interest-bearing investment-grade securities, certificates of deposit or government securities. The goal with respect to the investment of these net proceeds is capital preservation and liquidity so that such funds are readily available to fund our operations.
MARKET PRICE FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSINFORMATION
Market InformationCommon Stock
OurIn the past, our Common Stock tradestraded on the OTCQB under the symbol "MOBQ"“MOBQ” on a limited basis. In October 2021, our Board of Directors approved the filing, and we submitted an application in compliance with the NASDAQ rules and regulations to list and trade our Company’s securities on the NASDAQ Capital Market. As of the date of this prospectus, we have not been given approval by NASDAQ regarding the listing ofNasdaqCM. Trading commenced for our Company’s securitiescommon stock and warrants on the NASDAQ Capital Market.December 9, 2021. The following table sets forth the range of high and low closing sales prices of our Common Stock for the last two fiscal years. On September 9, 2020, the Company effected a one-for-400 reverse stock split. All share and per share amounts set forth herein give retroactive effect to the stock split unless the context indicates otherwise.
Quarters Ended | High | Low | |||||
March 31, 2019 | $ | 96.00 | $ | 40.00 | |||
June 30, 2019 | 76.00 | 40.00 | |||||
June 30, 2019 | 72.00 | 28.00 | |||||
December 31, 2019 | 64.00 | 28.00 | |||||
March 31, 2020 | 48.00 | 8.00 | |||||
June 30, 2020 | 16.00 | 8.00 | |||||
June 30, 2020 | 16.00 | 4.00 | |||||
December 31, 2020 | 11.00 | 5.50 | |||||
March 31, 2021 | 10.95 | 6.15 | |||||
June 30, 2021 | 9.50 | 5.50 |
Quarters Ended | High | Low | |||||
March 31, 2021 | $ | 10.95 | $ | 6.15 | |||
June 30, 2021 | 9.50 | 5.50 | |||||
September 30, 2021 | 10.25 | 6.45 | |||||
December 31, 2021 | 9.50 | 2.01 | |||||
March 31, 2022 | 2.68 | 1.20 | |||||
June 30, 2022 | 2.21 | 0.71 | |||||
September 30, 2022 | 1.93 | 1.07 | |||||
December 31, 2022 | 1.55 | 0.42 |
The closing sales price on October 18, 2021February 6, 2023, was $7.99$0.68 per share. All quotations provided herein reflect inter-dealer prices, without retail mark-up, markdown or commissions.
In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a fully reporting company under the Securities Exchange Act of 1934 may, sell their restricted Common Stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for there to be adequate public information disclosed. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their shares without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock. See "Risk Factors –Our future sales of common stock by management and other stockholders may have an adverse effect
2021 Warrants
Our 2021 Warrants commenced trading on the then prevailing marketNASDAQ Capital Market on December 9, 2021, under the symbol “MOBQW.” The high and low sales price of our common stock."warrants was $.8093 and $.028, respectively, for the period December 14, 2021, through January 9, 2023. The closing sales price of on February 6, 2023, was $.10 per warrant. All quotations provided herein reflect inter-dealer prices, without retail mark-up, markdown or commissions.
Holders of Record
As of October 15, 2021,February 1, 2023, there were 148273 active holders of record of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. As of February 1, 2023, the Company has a list consisting of 1,576 beneficial (“NOBO”) holders who do not object to having their names provided to the Company. The transfer agent of our common stock is Continental Stock Transfer & Trust Company, New York NY.
DIVIDEND POLICY
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying cash dividends on our capital stock in the foreseeable future. It is the present intention of management to utilize all available funds and future earnings for the development of the Company’s business. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant. Our future ability to pay cash dividends on our capital stock may be limited by any future debt instruments or preferred securities.
CAPITALIZATIONMANAGEMENT’S DISCUSSION
The following table sets forthdiscussion should be read in conjunction with our actual cashfinancial statements and cash equivalentsthe notes thereto appearing elsewhere in this Prospectus. All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future capital requirements, our future plan of operations, our ability to obtain debt, equity or other financing, and our capitalization as of June 30, 2021 as follows:
The pro forma information set forth in the table below is illustrative only and will be adjustedability to generate cash from operations, are based on current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties that may cause the assumed public offering price and other terms of this offering determined at pricing.
You should read this informationCompany's actual results in conjunction withfuture periods to differ materially from forecasted results. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect to the restatement of our financial statements, and related notes which is included elsewhereas more fully described in this prospectus.our Notes to our consolidated financial statements entitled “Restatement of Financial Statement.”
As of June 30, 2021
Actual (unaudited) | Pro forma (unaudited) | Pro forma As Adjusted(3) (unaudited) | ||||||||||
CASH | $ | 173,571 | $ | 1,996,571 | $9,986,575 | (1) | ||||||
INDEBTEDNESS | $ | (3,796,625 | ) | $ | (4,717,625 | ) | $ | (3,017,625 | ) | |||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Preferred stock Series AAA: $0.0001 par value; 4,930,000 authorized; 56,413 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis as of June 30, 2021 | $ | 868,869 | $ | 868,869 | $ | 868,869 | ||||||
Preferred stock Series C: $.0001 par value; 1,500 shares authorized; 1,500, shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis as of June 30, 2021 (2) | $ | 15,000 | $ | 0 | $ | 0 | ||||||
Preferred stock Series E: $80 par value; 70,000 authorized; 61,688 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis as of June 30, 2021 | $ | 4,935,040 | $4,935,040 | $4,935,040 | ||||||||
Common stock: $0.0001 par value; 100,000,000 authorized; 3,100,782 shares issued and outstanding on an actual,3,667,586 shares pro forma and 5,500,920 shares pro forma as adjusted basis as of June 30, 2021, respectively | $ | 312 | $ | 367 | $ | 550 | ||||||
Treasury stock: $36 par value: 37,500 and 37,500 shares outstanding at June 30, 2021 | $ | (1,350,000 | ) | $ | (1,350,000 | ) | $ | (1,350,000 | ) | |||
Additional paid-in capital | $ | 187,117,663 | $ | 188,712,427 | $ | 198,402,614 | ||||||
Accumulated deficit | $ | (190,992,325 | ) | $ | (190,992,325 | ) | $ | (190,992,325 | ) | |||
Total stockholders’ equity | $ | 594,559 | $ | 2,174,378 | $ | 11,864,748 | ||||||
Total capitalization | $ | 4,391,184 | $ | 6,892,003 | $ | 14,882,373 |
Critical Accounting Policies
(1)Cash is shown netOur discussion and analysis of $1,700,000our financial condition and results of Offering expenses utilizedoperations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires management to repay debt(see “Usemake estimates and disclosures on the date of Proceeds”)the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.
(2)The Series C Preferred Stock was converted into 375,000 sharesUse of common stock and warrants to purchase 375,000 shares of common stock on September 30, 2021.Estimates
(3)Each $1.00 increase (decrease)Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the assumed initial public offering pricereported amounts of $6.00 per share would increase (decrease)assets and liabilities and the net proceeds to usdisclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from this offering by $1.686 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same,those estimates, and after deducting the estimated underwriting discountsthose estimates may be material.
Risks and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $5.52 million, assuming the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.Uncertainties
The numberCompany operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of shares of our common stock to be outstanding prior to and after this offering is based on 3,100,782 shares of our common stock outstanding as of June 30, 2021.business failure.
The preceding table excludesCompany has experienced, and in the following:
DILUTION
If you investfuture expects to continue to experience, variability in our securities insales and earnings. The factors expected to contribute to this offering, your ownership interest will be immediately diluted tovariability include, among others, (i) the extentcyclical nature of the difference between the assumed public offering price per share of common stock and the as adjusted net tangible book value per share after giving effect to this offering.
The net tangible book value of our Company as of June 30, 2021 was $(5,505,693). The proforma net tangible book value of our Company (see Capitalization) as of June 30, 2021 was $(3,925,874),after giving effect on a pro forma basis to reflect the (i) conversion of all outstanding shares of our Series C convertible preferred stock into 375,000 shares of common stock and 375,000 warrants resulting in additional paid in capital of $2,718,712,industry, (ii) third quarter sale of promissory notesgeneral economic conditions in the principal amount of $2,075,500various local markets in exchange for cash of $1,823,000which the Company competes, including a potential general downturn in the economy, and (iii) the conversionvolatility of convertible promissory notes in the principal amount of $657,000 outstanding as of June 30, 2021 into 133,761 shares of common stock, (iv) the conversion of convertible promissory notes in the principal amount of $497,500 issued in the third quarter and subsequently converted into 89,904 shares of common stock ,and(v) the issuance of 53,400 shares as original issue discountprices in connection with the third quarter saleCompany’s distribution of notes, as if such transaction had occurredthe product. These factors, among others, make it difficult to project the Company’s operating results on June 30, 2021. After deducting the book value of $5,803,909 attributable to the Series AAA Preferred Stock and Series E Preferred Stock, the net tangible book value of our Common Stock on June 30, 2021 was ($9,729,783) or approximately ($2.65) per share of common stock. Net tangible book value per common share is determined by dividing the net tangible book value of our Company (total tangible assets less total liabilities less book value of Preferred Stock) by the number of outstanding shares of our common stock.a consistent basis.
After giving effect to the issuance and sale in this offeringFair Value of 1,833,334 shares of common stock at an assumed public offering price of $6.00 per share after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, the as adjusted net tangible book value on June 30, 2021, would have been approximately $(39,779), or $(.01) per share of common stock. This represents an immediate dilution in the as adjusted net tangible book value of $6.01 per share of common stock to investors purchasing our common stock in this offering.Financial Instruments
The following table illustratesCompany accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the rangeprice that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of immediate dilution to new investors:
Assumed public offering price per common share | $ | 6.00 |
Proforma net tangible book value per common share as of June 30, 2021 | $ | (2.65) |
Increase in net tangible book value per share attributable to new investors in this offering | $ | 2.64 |
Pro forma as adjusted net tangible book value per common share after this offering | $ | (0.01) |
Dilution per share to investors in this offering | $ | 6.01 |
The information above assumes thata principal, most advantageous market for the underwriters do not exercise their over-subscription option. If the underwriters exercise their over-subscription option in full, the as adjusted net tangible book value will increase to $1,478,221specific asset or $0.26 per share, representing an immediate increase to existing stockholders of $2.90 per share and an immediate dilution of $5.74 per share to new investors. If any shares are issued upon exercise of outstanding options or warrants, new investors will experience further dilution.liability.
The numberCompany uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of shares of our common stock that will be issued and outstanding immediately after this offering as shown above is based on 3,100,782 shares outstanding as of June 30, 2021, with adjustments as shown under Capitalization. Assuming the 15% over-allotment option is exercised and the Underwriter exercises their option in full then there will be 5,775,920 common shares outstanding immediately after this offering.
If you purchase securities in this offering, your interest will be immediately and substantially diluted to the extent of the difference between the assumed public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock after giving effect to this offering.unobservable inputs, when determining fair value.
The three tiers are defined as follows:
· | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; | |
· | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and | |
· | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
As of September 30, 2022 and December 31, 2021, the Company does not have any financial instruments measured on a recurring or nonrecurring basis at fair value.
The Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, and accounts payable and accrued expenses, are carried at historical cost. At September 30, 2022 and December 31, 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.
Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made.
Allowance for doubtful accounts was $820,990 at September 30, 2022 and December 31, 2021.
Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations.
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Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 to align revenue recognition more closely with the delivery of the Company’s services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts as of September 30, 2022, and 2021, respectively, contained a significant financing component.
Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
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Recognize revenue when or as the Company satisfies a performance obligation.
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
For each revenue stream we only have a single performance obligation.
Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days.
Stock-Based Compensation
The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
The Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes model for measuring the fair value of options.
The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value of stock-based compensation, the Company considers the following assumptions in the Black-Scholes models:
· | Exercise price, | |
· | Expected dividends, | |
· | Expected volatility, | |
· | Risk-free interest rate; and | |
· | Expected life of option |
Recent Accounting Standards
Changes to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.
In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year.
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We adopted this pronouncement on January 1, 2022; however, the adoption of this standard did not have a material effect on the Company’s consolidated financial statements.
Plan of Operation
Mobiquity intends to hire several new sales and sales support individuals to help generate additional revenue using the Advangelists platform and the Mobiquity Networks MobiExchange. Mobiquity’s sales team will focus on Advertising Agencies, Brands, and publishers to help increase both supply and demand across the Advangelists platform while providing unique data segments utilizing MobiExchange. Together the Advangelists platform and MobiExchange platform creates multiple revenue streams for Mobiquity. The first is licensing the Advangelists platform as a white-label product for use by Advertising Agencies, DSP’s, Publishers, and Brands. Under the White-Label scenario, the user licenses the technology and is responsible for running its own business operations and is billed a percentage of volume run through the platform. The second revenue stream is a managed services model in which the user is billed a higher percentage of revenue run through the platform, but all services are managed by the Mobiquity/Advangelists team. The third revenue model is a seat model, where the user is billed a percentage of revenue run through the platform and business operations are shared between the user and the Mobiquity/Advangelists team. Additional revenue can be generated by offering data segments and digital audiences through MobiExchange for use in omnichannel marketing programs that include but not limited to programmatic advertising email marketing and SMS. The goal of the sales team is to inform potential users of the benefits in efficiency and effectiveness of utilizing the end-to-end, fully integrated ATOS created by Advangelists and Mobiquity Networks.
Results of Operations
Nine Months Ended September 30, 2022, versus Nine Months Ended September 30, 2021
The following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.
Nine Months Ended | ||||||||
September 30, 2022 | September 30, (as restated) | |||||||
Revenues | $ | 3,367,346 | $ | 1,797,052 | ||||
Cost of revenues | 1,916,720 | 2,439,501 | ||||||
Gross profit (loss) | 1,450,626 | (642,449 | ) | |||||
General and administrative expenses | 6,524,042 | 5,804,791 | ||||||
Loss from operations | $ | (5,073,416 | ) | $ | (6,447,240 | ) |
We generated revenues of $3,367,346 in the first nine months of 2022 as compared to $1,797,052 in the same period for 2021, an increase of $1,570,294. The nationwide economic impact of COVID-19 during the past twenty-four months severely reduced operations and we are now seeing a turnaround starting in the third quarter of 2022 with a decreasing impact from COVID-19, although we have concerns regarding the overall US economy and a potential recession. The Company has developed several new features which we believe will help grow revenue in 2023 and beyond. We anticipate releasing one or more new products and services in 2023 that will address many of the changes that have affected the AdTech industry over the last year.
Cost of revenues was $1,916,720 or 56.9% of revenues in the first nine months of 2022 as compared to $2,439,501 or 135.7% of revenues in the same fiscal period of fiscal 2021. Costs of revenues include audience building, targeting features and web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability to capture and store data for sales does not translate to increased cost of sales. During the first nine months of 2021, the Company incurred certain costs associated with populating the MobiExchange platform with “targeting data” and “audiences.” Such costs were not repeated or as substantial during 2022 thus resulting in higher overall margins associated with revenue for the MobiExchange services for the nine months ended September 30, 2022.
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Gross profit (loss) was $1,450,626 or 43.1% of revenues for the first nine months of 2022 as compared to $(642,449) in the same fiscal period of 2021 or (35.7%) of revenues. The increased sales have resulted from increased efforts from our sales force and the recovery from COVID-19.
General and administrative expenses were $6,524,042 for the first nine months of fiscal 2022 compared to $5,804,791 in the comparable period of the prior year, an increase of $719,251. Increased operating costs primarily related to salaries of $292,192, computer support of $951,131, and license and fees of $199,341, offset by reduced stock-based compensation expense of $855,094.
The net loss from operations for the first nine months of fiscal 2022 was $5,073,416 as compared to $6,447,240 for the comparable period of the prior year. While our loss from operations decreased by approximately $1,373,824 due to improved revenues over the comparable nine months of 2021, the continuing operating loss is attributable to the focused effort in creating the products and services required to move forward with our business.
Year Ended December 31, 2021, versus Year Ended December 31, 2020
The following table sets forth certain selected consolidated statement of operations data for the years indicated in dollars. In addition, we note that the year-to-year comparison may not be indicative of future performance.
Year Ended (As Restated) | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
Revenue | $ | 2,672,615 | $ | 6,184,010 | ||||
Cost of Revenues | 1,954,383 | 4,360,645 | ||||||
Gross Profit | 718,232 | 1,823,365 | ||||||
Operating Expenses | 13,607,759 | 8,850,929 | ||||||
Loss from operations | (12,889,527 | ) | (7,027,564 | ) |
We generated revenues of $2,672,615 in 2021 as compared to $6,184,010 in the same period for 2020, a change in revenues of $3,511,395. The nationwide economic shutdown due to COVID-19 during 2021 severely reduced current operations.
Cost of revenues was $1,954,383 or 71% of revenues in 2021 as compared to $4,360,645 or 71% of revenues in the same fiscal period of fiscal 2020. Cost of revenues include web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability to capture and store data for sales does not translate to increased cost of sales.
Gross profit was $718,232 or 27% of revenues for 2021 as compared to $1,823,365 in the same fiscal period of 2020 or 29% of revenues. When the country comes out of COVID-19 and the economy begins to turn around we anticipate income to increase.
Restated operating expenses were $13,607,759 for 2021 compared to $8,850,929 in the comparable period of the prior year, an increase of $4,756,830. Increased operating costs include cash and non-cash expenses for professional fees of $1,141,848, non-cash operating costs also include stock and share-based compensation of $4,635,224, and amortization of debt discount and issue costs of $780,081.
The restated net loss from operations for 2021 was $12,889,527 as compared to $7,027,564 for the comparable period of the prior year, an increase of $5,861,963. The loss from operations primarily includes stock-based compensation of $4,635,224, stock issued for services of $1,158,025, bad debt expense of $434,390, amortization of intangible assets of $800,735, and amortization of debt discount/issue costs of $780,081. The continuing operating loss is attributable to the focused effort in creating the infrastructure required to move forward with our Mobiquity and Advangelists network business.
No benefit for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability to be profitable in the future is dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.
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Liquidity and Capital Resources
We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2021, and 2020.
The Company had cash of $855,246 at September 30, 2022. Cash used in operating activities for the nine months ended September 30, 2022, was $5,502,991. This resulted primarily from a net loss of $5,791,201 offset by stock-based compensation of $72,411, amortization of $450,551, common stock issued for services of $84,500, increase in accounts receivable of $592,362 and $384,284 decrease in accounts payable and accrued expenses, non-cash gain on settlement of liability $389,495, loss on debt extinguishment of $55,296 and inducement expense of $101,000. Cash used in investing activities results from the purchase of property and equipment of $8,004. Cash flows provided by financing activities of $980,996 resulted from cash paid on debt of $156,504 offset by net proceeds received from the sale of common stock of $1,137,500.
We had cash and cash equivalents of $5,385,245 at December 31, 2021. Restated cash used in operating activities for the year ended December 31, 2021, was $6,717,324. This resulted from a restated net loss of $18,333,383, partially offset by non-cash expenses, including depreciation and amortization of $808,300, stock-based compensation of $4,635,224, stock issued for service of $1,158,025, and impairment expense of $3,600,000.
For the year ended December 31, 2021, cash used in investing activities was $6,472 related to the purchase of property and equipment.
Restated cash provided by financing activities of $11,506,860 was the result of issuance of notes totaling $4,143,000 and repayments of notes totaling $2,840,337, as well as stock and warrants issued for cash net of direct offering costs of $10,204,197.
We had cash and cash equivalents of $602,182 at December 31, 2020. Cash used in operating activities for the year ended December 31, 2020 was $3,286,764 (as restated). This primarily resulted from a net loss of $11,745,835 (as restated), partially offset by non-cash expenses, including depreciation and amortization of $1,807,007, stock-based compensation of $993,512 (as restated), and impairment expense of $4,000,000. Cash provided by financing activities of $2,655,481 (as restated) was the result of issuance of notes payable and common stock, net, offset by cash payments on notes outstanding.
Our company commenced operations in 1998 and was initially funded by our three founders, each of whom has made demand loans to our company that have been repaid. Since 1999, we have relied on equity financing and borrowings from outside investors to supplement our cash flow from operations and expect this to continue in 2022 and beyond until cash flow from our proximity marketing operations become substantial.
Recent Financings
On October 19, 2021, the Company filed a Form S-1 Registration Statement (File no. 333-260364) with the Securities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NasdaqCM under the symbol “MOBQ.” This offering was completed on December 13, 2021, and the Company retired the loans of Talos Victory Fund, LLC and Blue Lake Partners LLC out of the gross proceeds it received of approximately $10.3 million. Also, Talos Victory Fund, LLC and Blue Lake Partners, LLC converted all of their warrants on a cashless basis into 24,692 common shares and 24,692 common shares, respectively.
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On December 30, 2022, we and Walleye Opportunities Master Fund Ltd, a Cayman Islands company (the “Investor”), entered into a Securities Purchase Agreement (the “Agreement”) for the Investor to purchase from the Company (i) a senior secured 20% OID nine-month promissory note in an aggregate original principal amount of $1,437,500 (the “Investor Note”), and (ii) a five year warrant to purchase 2,613,636 shares of the Company’s common stock at an exercise price of $.44 per share which is not exercisable until July 1, 2023 (the “Investor Warrant”). A total of 522,727 shares of Common Stock, or approximately 5.3% of the Company’s outstanding shares of Common Stock, were issued to the Investor as an incentive on the transaction, excluding the above referenced Investor Warrant, the shares of Common Stock exercisable pursuant to such Investor Warrant not being considered beneficially owned by the Investor until the Investor Warrant is exercisable within 60 days. A fee of $103,500 plus warrants to purchase 26,136 shares of Common Stock exercisable at $0.484 per share were issued to Spartan Capital Securities LLC. These warrants were subsequently cancelled on February 7, 2023. Approximately $163,000 of the loan proceeds were utilized to retire a small business loan originally in the principal amount of $150,000. The Investor Note will only become convertible into Common Stock upon the occurrence of an Event of Default under and as defined in the Investor Note on terms set forth in the Investor Note. This Note matures and is payable on or before September 30, 2023, and it provides that it is accelerated and becomes immediately payable if we complete a trigger financing of $3,000,000 or more, which closes subsequent to the earlier of the closing the offering in this prospectus or March 31, 2023. If we are unable to raise additional funding in a trigger financing after this offering or do not generate sufficient cashflow to repay the Note when due, or we will be default under the Note if we do not pay it. The Company granted a security interest in all of its assets to the Investor as collateral for its obligations under the Investor Note pursuant to a Security Agreement. In addition, the Company’s subsidiaries guaranteed the obligations of the Company under the Investor Note pursuant to a Subsidiary Guarantee and granted a first lien security interest in all of their assets to the Investor as additional collateral pursuant to the Security Agreement. All securities sold in the above described transaction contain certain piggy-back registration rights after the completion of the offering contemplated by this prospectus. See “Use of Proceeds” where we disclosed our intention to retire the Note utilizing the proceeds of this offering. We have completed various other financings as described under the Notes to Consolidated Financial Statements.
Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the disclosure controls and procedures as of December 31, 2021 and quarterly since this date. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2021 and quarterly since this date, due solely to the material weakness in our internal control over financial reporting primarily related to the accounting for direct offering costs paid in an equity financing, the sale of warrants and the mark to market of our common stock sold to third parties as described below in “Management’s Report on Internal Control over Financial Reporting.”
In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this prospectus present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was not effective as of December 31, 2021 and quarterly since this date. There were no significant changes in our internal control over financial reporting during the year ended December 31, 2021 and quarterly since this date, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our independent auditors have not audited and are not required to audit this assessment of our internal control over financial reporting for the fiscal year ended December 31, 2021 and quarterly since this date.
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Internal Controls Remediation Efforts
Since December 2021, we are working to remediate the deficiencies and material weaknesses in our internal controls. We are taking steps to enhance our internal control environment establish and maintain effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance., In this regard, the Company will be adopting several corporate governance policies and it has established various committees of the Board of Directors, including an Audit Committee comprised of three independent directors in accordance with Nasdaq Rule 5605(c)(2), which will take effect at the time that our registration statement of which this prospectus is a part becomes effective. One of the Audit Committee’s priorities will be to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this process, the Company plans to implement the following initiatives under the oversight of the Audit committee.
· | Hire additional staff both internally and externally to the Finance department with sufficient GAAP and public company financial reporting experience. | |
· | Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. | |
· | Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis as described below. | |
· | Initiate a preliminary assessment of management’s internal controls over financial reporting. | |
· | Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed. |
We have hired Refidential One - SOX Consultants who have reviewed testing procedures and analysis as follows:
· | Phase 1, which was completed on or about the Company filing its form 10-K for December 31, 2021, to identify the gaps and suggested remediations in 2021. | |
· | Phase 2, which was completed on or about June 30, 2022 to update all the narratives and create risk control matrixes (“RCM”) for testing when a remediation plan is implemented. | |
· | Phase 3, which was completed on or about September 30, 2022, tested the key controls identified and implemented in Phases 1 and 2 above. | |
· | Phase 4, to be completed in the first quarter of 2023 will be to retest the failures in Phase 3. Phase 4 testing will enable the Company to rectify any failures in Phase 3 testing, thus reducing the likelihood of significant deficiencies. |
Although we plan to undertake and complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not be successful in remediating the deficiencies or material weaknesses.
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DESCRIPTION OF THE BUSINESS
Company Background
Mobiquity Technologies, Inc. is a next-generation marketing and advertising technology, data compliance and data intelligence company whowhich operates through our various proprietary software platforms in the programmatic advertising space.platforms. Our product solutions are comprised of twothree proprietary software platforms:
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· | Publisher Platform for Monetization and Compliance |
Our Products
The ATOS Platform
Our ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and campaigns. The ATOS platform:
· | creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of digital advertising (known as digital real estate) targeted at users while engaged on their internet-connected TV, laptop, tablet, desktop computer, mobile, and over-the-top (or | |
· | gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by using ads in both image and video formats (known as rich media) to increase their awareness, customer base and |
(Screenshot of ATOS Platform Campaign Management landing page.)
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Our ATOS platform engages with an average of approximately 2010 billion advertisement opportunities per day, based on our daily logs. Our sales and marketing strategy for our ATOS platform is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for brands directly and small and medium sized advertisers.
Our ATOS technology is proprietary and primarily consists of know-how and trade secrets developed internally, as well as certain open sourceopen-source software.
Users of the ATOS platform get access to benefits including among other things:
· | ease of set up; | |
· | targeting features based on audience profiles and location and context through an in-house data management platform (or DMP); | |
· | Inventory management and yield optimization; | |
· | support for all rich media creators’ ad tags; | |
· | machine learning and AI powered optimization which aids in delivering a higher click through rate on ad links; | |
· | support for third-party trackers and custom scripts for make-the-most-of-your media (or MOAT) analytics, Integral Ad Science (or IAS), and forensics to enable independent verification by advertisers for transparency; | |
· | detailed campaign wrap-up reporting that gives a breakdown on publishers, categories, demonstrations, and devices to better understand advertisement campaign performance; | |
· | access to business intelligence via an analytics dashboard; | |
· | advanced ad targeting; | |
· | easy campaign uploading; | |
· | automated performance optimization; | |
· | real time reporting; | |
· | fraud prevention tools; and | |
· | 24x7 support, along with guided managed services to enable users to rapidly harness and operate all the features of the ATOS platform. |
Our ATOS platform includes:
· | Adserver; | |
· | Demand Side Platform; | |
· | Advertisement quality tools; | |
· | Analytics dashboard; | |
· | Avails Engine; | |
· | Advertisement prediction and delivery tools; | |
· | Supply quality tools; | |
· | Private marketplace tools; | |
· | Audience and location targeting; | |
· | Wrap up reports; | |
· | An Advertisement software development kit (or SDK); | |
· | Prebid adaptor; | |
· | contextual targeting; | |
· | identity graph capabilities; | |
· | cookie syncing; and | |
· | the updated version of our quality and security tools, among other things for our ATOS platform. |
The Data Intelligence Platform
Our data intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research. We believe, based on our experience in our industry, that we provide one of the most accurate and scaled solutions for data collection and analysis, utilizing multiple proprietary technologies. Our data intelligence platform technology allows for the ingestion and normalization of various data sources, such as location data, transactional data, contextual data, and search data to reach the right target audience with the right message. Utilizing massively parallel cluster computing and machine learning algorithms and technology, our data intelligence solutions make available actionable data for marketers, researchers and application publishers through an automated platform. We are seeking to generate several revenue streams from our data collection and analysis, including, among other things; advertising, data licensing, attribution reporting, and custom research.
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(Screenshot of Data Intelligence HomeGraph landing page.)
We also offer a self-service alternative through our MobiExchange product, which is a SaaS fee model. MobiExchange is a data focused technology solution that enables individuals and companies to rapidly build actionable data and insights for their own use or for resale.use. MobiExchange’s easy-to-use, self-service tools allow users to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the-box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk among other things.
We believe, based on our experience in our industry, that we provide one of the most accurate and scaled solution for data collection and analysis, utilizing multiple proprietary technologies. MobiExchange is a data focused technology solution that enables individuals and companies to rapidly build actionable data and insights for its own use or for resale. MobiExchange’s easy-to-use, self-service tools allow anyone to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk, among other things.
Our data intelligence platform is hosted and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Specifically, our data intelligence platform uses the following AWS services: EC2, Lambda, Kafka, Kinesis, S3, Storm, Spark, Machine Learning, RDS, Redshift, Elastic Map Reduction, CloudWatch, DataBricks, and Elastic Search Service with built-in Kibana integration.
Publisher Platform for Monetization and Compliance
Our Content publisher platform is a single-vendor ad tech operating system that allows publishers to better monetize their opt-in user data and advertising inventory. The platform includes tools for: consent management, audience building, a direct advertising interface and inventory enhancement. Due to the much publicized developments in privacy and data security laws and regulations (such as the European Union’s General Data Protection Regulation or GDPR and the California Consumer Privacy Act of 2018 or CCPA by way of example) along with Apple and Google’s removal of identifiers, we believe that content publishers are facing two material issues: increased costs due to privacy compliance rules, and decreased revenue due to the restrictions selling user identifier data to third parties. We believe this is causing a paradigm shift in the publishing market. Previously content publishers could provide user identifier information to demand-side platforms (or DSP’s) to create user profiles for audience targeting. Now both the user identifier data and the functionality to create profiled data segments from that identifier data (known as first party data) must be owned by the content publisher. Additionally publishers must also manage the targeting of their audiences in-house utilizing these identifier and targeting data. We recently launched our SaaS publisher platform in response to these needs.
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All Publisher data is siloed and secured, using the highest industry standards, optimizing compliance with privacy and data laws that may be applicable. Our platform helps publishers worry less about the integrity of their first party data and allows them to focus on effectively monetizing their inventory.
Users of the publisher platform get access to benefits of our publisher platform, including among other things:
· | A Consent Manager for publishers to meet all privacy requirements in connection with their collection of an audience’s data. | |
· | An Audience Builder to build detailed databases of targeted audiences from the user identifier data. | |
· | A Direct Purchase Interface to increase revenue from direct advertising sales to target audiences; and | |
· | An Inventory Enhancer to enhance the publisher’s supply of audience data with compliant meta-tags. |
(Screenshot of Publisher Platform Audience Management landing page.)
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We believe that irrespective of whether a publisher chooses to engage with us to use our publisher platform or not, they will need to find a solution that allows advertisers to advertise to the publisher’s audience directly through the publisher.
Our Strategy
Our strategy in the programmatic advertising technology space is to provide small- to medium-sized enterprises with anthree proprietary solutions that are highly efficient and effective end-to-end, fully integrated ATOS platform.for monetization of data and advertising with privacy and data regulatory compliance. We believe that our ATOS platformplatforms gives users in these markets the capability of running marketing and brandingprogrammatic campaigns without the need for an extensive marketing team, which enables them to better compete with their larger competitors who have greater marketing financial and human capital resources. Our sales and marketing approach is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for small- and medium-sized advertisers. Mobiquity plans to hire several new sales and sales support individuals to help generate additional revenue through the use of our ATOS platform.three platforms.
Our strategy is based on a problemproblems we perceived in the advertising technology industry as it has rapidly grown over the last 10 years. We viewedfew years and the technology in the industryevolving privacy and data laws and regulations that make it more difficult to be highly fragmentedachieve desired results. Our goal is to help our clients increase revenue, decrease cost and thus inefficient. Many advertisers have had to mix multiple vendors’ different technologies, or bolt-on third-party technology to legacy technology, in an effort to create an integrated solution. Often this has resulted in the absence of a central source to address problemsadd transparency while complying with an integrated system that arise. The flaws that this type of stacked technology ecosystem has includes:
We believe our products addressprivacy and solve the flaws of a stacked system.
A typical digital advertising campaign requires the following components:
Many of the companies we target have between 50-70% of the above components and outsource the rest to vendors who bolt-on technology to those companies’ legacy technology which often results in the flaws discussed above. We provide a single-vendor end-to-end solution integrating the required components from a single source that work together because they are built together, in an effective and cost-efficient way. Our ATOS platform decreases the effective cost-basis for users by integrating all the necessary capabilities at no additional cost: DSP and bidding technologies, AdCop™ Fraud Protection, rich media and ad serving, attribution, reporting dashboard and DMP are all included.data laws.
Our Revenue StreamsSources
We target publishers, brands, advertising agencies and other advertising technology companies as our audience for our ATOSthree platform products. The ATOS platform creates threeWe generate revenue streams.from our platforms through two verticals:
· | The first is licensing | |
· | The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through | |
Our data intelligence revenue is driven by managed services for advertising agencies; brands; market researchers; university research departments; healthcare; and financial, sports, pet, civil planning, transportation, and other data and technology companies. Often-times sales to users of our data intelligence platform will lead to them to our ATOS platform as well.
Our Intellectual Property
Our portfolio of technology consists of various intellectual property including proprietary source code, trade secrets and know-how that we have developed internally. We own our technology, although we use open source software for certain aspects, and we protect it though trade secrets and confidentiality requirements set out in our employee handbook which each employee signing an agreement agreeing to keep the proprietary information confidentialacknowledges, and assigning any technology creations and improvements to us. We also have two patents that relate to our location-based mobile advertising technology business which we are not operating. These patents and patents pending are not material to, or used in, our ATOS or data intelligenceplatform related technology that we use in our current operations.
Governmental Regulations
Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. As we develop and provide solutions that address new market segments, we may become subject to additional laws and regulations, which could create unexpected liabilities for us, cause us to incur additional costs or restrict our operations. From time to time, we may be notified of or otherwise become aware of additional laws and regulations that governmental organizations or others may claim should be applicable to our business. Our failure to anticipate the application of these laws and regulations accurately, or other failure to comply, could create liability for us, result in adverse publicity or cause us to alter our business practices, which could cause our net revenues to decrease, our costs to increase or our business otherwise to be harmed. See “Risk Factors—Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection”; and “Risk Factors-- Changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect data on consumer shopping behavior.“Item 1A.”
We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet, e-commerce and m-commerce in a number of jurisdictions around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. See “Risk“Risk Factors—Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection”; and “Risk Factors-- Government regulation of the Internet, e-commerceChanges in consumer sentiment or laws, rules or regulations regarding tracking technologies and m-commerce is evolving,other privacy matters could have a material adverse effect on our ability to generate net revenues and unfavorable changes or failure by uscould adversely affect our ability to comply with these laws and regulations could substantially harm our business and results of operations.collect data on consumer shopping behavior.”
Competition
We compete in the programmatic advertising, data marketingmanagement, and research businessuser compliance management industries and in all other facets of our business against small, medium and large companies throughout the United States. Some examples include companies such as Liveramp, GroundtruthThe TradeDesk and Nielsen.OneTrust. Although we can give no assurance that our business will be able to compete against other companies with greater experience and resources, we believe we have a competitive advantage with our proprietary software and technology platform based on our view that our competitor’s products do not provide the end-to-end solutions that our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions. See “Risk“Risk Factors — We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share.”
We believe that our competitors’ product offerings in that our competitor’s products do not provide the end-to-end solutions our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions.
Employees and Contractors
As of June 30, 2021,December 31, 2022, we have eleven full time14 employees, including executive management, technical personnel, salespeople, and support staff employees. We also utilize several additional firms/persons who provide services to us on a non-exclusive basis as independent consultants.
Customers
During 2020For the year ended December 31,2021 and the six-month period ending on Junenine months ended September 30, 2021,2022, sales of our products to four customers generated 37%approximately 31% and 52% of our revenues.revenues, respectively.. Our contracts with our customers generally do not obligate them to a specified term and they can generally terminate their relationship with us at any time with a minimal amount of notice.
Debt and Receivables Purchase Financing
We have the following debt financing in place:
Dr. Gene Salkind, who is our Chairman of the Board and one of our directors, and his affiliate provided us an aggregate of $2,700,000 in convertible debt financing for convertible promissory notes and common stock purchase warrants, as discussed in more detail under the heading “Certain Relationships and Related Party Transactions – Related Party Debt Financing”.
Business Capital Providers, Inc. purchased certain future receivables from the Company at a 26% discount under the following agreements on the following terms:
19 private lender-investors, who were unaffiliated shareholders of the Company and accredited investors as provided under Regulation D Rule 501 promulgated under the Securities Act of 1933, provided us convertible debt financing during the period May, 2021 through September, 2021 pursuant to subscription agreements as described below. (Certain of these investors provided us multiple investments in one or more of these convertible debt structures.):
In May of 2020, the Company received Small Business Administration Cares Act loan of $265,842 due to the COVID-19 pandemic. This loan carried a five-year term, with interests at the annual rate of 1%. During second fiscal quarter of 2021 the Cares Act loan was forgiven in full under the SBA Cares Act loan rules.
In June 2020, the Company received a $150,000 Economic Injury Disaster Loan from the SBA which carries a 30-year term, payable in monthly installments of principal plus interest at the annual rate of 3.75%. This loan is secured by all the assets of the Company. The loan proceeds were used for working capital to alleviate economic injury cause by disaster in January 2020 and after that as required by the loan agreement.
On September 20, 2021, the Company entered into securities purchase agreements, with two accredited investors, Talos Victory Fund, LLC and Blue Lake Partners LLC, pursuant to which the Company issued 10% promissory notes with a maturity date of September 20, 2022, in the aggregate principal amount of $1,125,000. In addition, the Company issued warrants to purchase an aggregate of 56,250 shares of its common stock to these holders. Spartan Capital Securities LLC and Revere Securities LLC acted as placement agents on this transaction. The promissory notes include the following terms:
On the closing date of this financing, the holders delivered the net amount of $910,000 of the purchase price to the Company in exchange for the notes (which was net of the original issue discount and other fees and expenses relate to this financing).
Corporate StructureLiquidity and Capital Resources
We operatehave a history of operating losses and our business through two wholly-owned subsidiaries, Advangelists,management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2021, and 2020.
The Company had cash of $855,246 at September 30, 2022. Cash used in operating activities for the nine months ended September 30, 2022, was $5,502,991. This resulted primarily from a net loss of $5,791,201 offset by stock-based compensation of $72,411, amortization of $450,551, common stock issued for services of $84,500, increase in accounts receivable of $592,362 and $384,284 decrease in accounts payable and accrued expenses, non-cash gain on settlement of liability $389,495, loss on debt extinguishment of $55,296 and inducement expense of $101,000. Cash used in investing activities results from the purchase of property and equipment of $8,004. Cash flows provided by financing activities of $980,996 resulted from cash paid on debt of $156,504 offset by net proceeds received from the sale of common stock of $1,137,500.
We had cash and cash equivalents of $5,385,245 at December 31, 2021. Restated cash used in operating activities for the year ended December 31, 2021, was $6,717,324. This resulted from a restated net loss of $18,333,383, partially offset by non-cash expenses, including depreciation and amortization of $808,300, stock-based compensation of $4,635,224, stock issued for service of $1,158,025, and impairment expense of $3,600,000.
For the year ended December 31, 2021, cash used in investing activities was $6,472 related to the purchase of property and equipment.
Restated cash provided by financing activities of $11,506,860 was the result of issuance of notes totaling $4,143,000 and repayments of notes totaling $2,840,337, as well as stock and warrants issued for cash net of direct offering costs of $10,204,197.
We had cash and cash equivalents of $602,182 at December 31, 2020. Cash used in operating activities for the year ended December 31, 2020 was $3,286,764 (as restated). This primarily resulted from a net loss of $11,745,835 (as restated), partially offset by non-cash expenses, including depreciation and amortization of $1,807,007, stock-based compensation of $993,512 (as restated), and impairment expense of $4,000,000. Cash provided by financing activities of $2,655,481 (as restated) was the result of issuance of notes payable and common stock, net, offset by cash payments on notes outstanding.
Our company commenced operations in 1998 and was initially funded by our three founders, each of whom has made demand loans to our company that have been repaid. Since 1999, we have relied on equity financing and borrowings from outside investors to supplement our cash flow from operations and expect this to continue in 2022 and beyond until cash flow from our proximity marketing operations become substantial.
Recent Financings
On October 19, 2021, the Company filed a Form S-1 Registration Statement (File no. 333-260364) with the Securities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NasdaqCM under the symbol “MOBQ.” This offering was completed on December 13, 2021, and the Company retired the loans of Talos Victory Fund, LLC and Mobiquity Networks, Inc. Our corporate structure is as follows:
Blue Lake Partners LLC out of the gross proceeds it received of approximately $10.3 million. Also, Talos Victory Fund, LLC and Blue Lake Partners, LLC converted all of their warrants on a cashless basis into 24,692 common shares and 24,692 common shares, respectively.
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Subsidiaries
Advangelists, LLC
Advangelists LLC operates our ATOS platform business.
WeOn December 30, 2022, we and Walleye Opportunities Master Fund Ltd, a Cayman Islands company (the “Investor”), entered into a Securities Purchase Agreement (the “Agreement”) for the Investor to purchase from the Company (i) a senior secured 20% OID nine-month promissory note in an aggregate original principal amount of $1,437,500 (the “Investor Note”), and (ii) a five year warrant to purchase 2,613,636 shares of the Company’s common stock at an exercise price of $.44 per share which is not exercisable until July 1, 2023 (the “Investor Warrant”). A total of 522,727 shares of Common Stock, or approximately 5.3% of the Company’s outstanding shares of Common Stock, were issued to the Investor as an incentive on the transaction, excluding the above referenced Investor Warrant, the shares of Common Stock exercisable pursuant to such Investor Warrant not being considered beneficially owned by the Investor until the Investor Warrant is exercisable within 60 days. A fee of $103,500 plus warrants to purchase 26,136 shares of Common Stock exercisable at $0.484 per share were issued to Spartan Capital Securities LLC. These warrants were subsequently cancelled on February 7, 2023. Approximately $163,000 of the loan proceeds were utilized to retire a small business loan originally acquiredin the principal amount of $150,000. The Investor Note will only become convertible into Common Stock upon the occurrence of an Event of Default under and as defined in the Investor Note on terms set forth in the Investor Note. This Note matures and is payable on or before September 30, 2023, and it provides that it is accelerated and becomes immediately payable if we complete a 48% membership interest and Glen Eagles Acquisition LP acquiredtrigger financing of $3,000,000 or more, which closes subsequent to the earlier of the closing the offering in this prospectus or March 31, 2023. If we are unable to raise additional funding in a 52% membershiptrigger financing after this offering or do not generate sufficient cashflow to repay the Note when due, or we will be default under the Note if we do not pay it. The Company granted a security interest in Advangelists inall of its assets to the Investor as collateral for its obligations under the Investor Note pursuant to a merger transaction in December 2018 for consideration valued at $20 Million. AtSecurity Agreement. In addition, the time Glen Eagles was a shareholderCompany’s subsidiaries guaranteed the obligations of the Company owning 412,500 sharesunder the Investor Note pursuant to a Subsidiary Guarantee and granted a first lien security interest in all of their assets to the Investor as additional collateral pursuant to the Security Agreement. All securities sold in the above described transaction contain certain piggy-back registration rights after the completion of the offering contemplated by this prospectus. See “Use of Proceeds” where we disclosed our intention to retire the Note utilizing the proceeds of this offering. We have completed various other financings as described under the Notes to Consolidated Financial Statements.
Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the disclosure controls and procedures as of December 31, 2021 and quarterly since this date. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2021 and quarterly since this date, due solely to the material weakness in our internal control over financial reporting primarily related to the accounting for direct offering costs paid in an equity financing, the sale of warrants and the mark to market of our common stock. The Company became, and remains, the sole manager of Advangelists following the merger with sole management power. In consideration for the merger:
The Company acquired 3% of the Advangelists’ membership interests from Glen Eaglesstock sold to third parties as described below in April 2019 in satisfaction of the Company’s $500,000 closing payment advance to Glen Eagles, resulting in Mobiquity owning 51% and Glen Eagles owning 49% of Advangelists.“Management’s Report on Internal Control over Financial Reporting.”
In May 2019light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the Company acquiredfinancial statements included in this prospectus present fairly in all material respects our financial position, results of operations and cash flows for the remaining 49%period presented.
Report of Advangelists’ membership interests from Glen Eagles, becomingManagement on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the 100% ownerCompany. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of Advangelists,our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a transaction involving the Company, Glen Eagles, and Gopher Protocol, Inc. Inmaterial effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that transaction, Gopher acquired the 49% Advangelists membership interest from Glen Eagles and assumed Glen Eagles’ promissory note to Deepanker Katyal, as representativea misstatement of our financial statements would be prevented or detected.
Management conducted an evaluation of the pre-merger Advangelists owners, which had a remaining balanceeffectiveness of $7,512,500,our internal control over financial reporting based on the framework in satisfactionInternal Control – Integrated Framework (2013) issued by the Committee of indebtedness owed by Glen EaglesSponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was not effective as of December 31, 2021 and quarterly since this date. There were no significant changes in our internal control over financial reporting during the year ended December 31, 2021 and quarterly since this date, that have materially affected, or are reasonably likely to Gopher. Concurrently with that transaction,materially affect, our internal control over financial reporting. Our independent auditors have not audited and are not required to audit this assessment of our internal control over financial reporting for the Company acquired the 49% of Advangelists membership interest from Gopherfiscal year ended December 31, 2021 and assumed the promissory note in consideration. Additionally, warrants for 300,000 shares of Company common stock which are issuable upon the conversion of Mobiquity Class AAA preferred stock owned by Gopher were amended to provide for a cashless exercise. In September 2019, the assumed note, which then had a principal balance of $6,780,000, was amended and restated to provide that:
The promissory note was paid in full in November 2019.
Mobiquity Networks, Inc.
We have established Mobiquity Networks, Inc and have operated itquarterly since January 2011. Mobiquity Networks started and developed as a mobile advertising technology company focused on driving foot-traffic throughout its indoor network and has evolved and grown into a next generation data intelligence company. Mobiquity Networks operates our data intelligence platform business.this date.
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PropertiesInternal Controls Remediation Efforts
The Company is presently utilizingSince December 2021, we are working to remediate the office space of its Chief Financial Officer as its principal executive office located at 35 Torrington Lane, Shoreham, NY 11786. The Company was leasing on a month-to-month basis a fully furnished executive suitedeficiencies and material weaknesses in Manhattan at a monthly cost of approximately $9,000. The executive suite was located at 61 Broadway, 11th Floor, Suite 1105, New York, NY 10006. Since COVID-19 we have not been able to use the space nor been responsible to pay rent for the period April 2020 through January 2021 when we terminated this office lease.
Legal Proceedings
our internal controls. We are not a partytaking steps to any pending material legal proceedings, except as follows:
Washington Prime Group, Inc. (“WPG”)enhance our internal control environment establish and maintain effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance., a successor in interest to Simon Property Group, L.P., commenced an action in the Marion Superior Court, County of Marion, State of Indiana againstIn this regard, the Company in February 2020 alleging default on 36 commercial leases which the Company had entered into in 36 separate shopping mall locations across the United States for the placement of Mobiquity’s Bluetooth messaging system equipment in the shopping malls to send advertisements through to shoppers’ phones as they walked through mall common areas. WPG alleged damages from unpaid rent of $892,332. WPG sought a judgment from the court to collect the claimed unpaid rent plus attorneys’ feeswill be adopting several corporate governance policies and other costs of collection. The Company disputed the claim. On September 18, 2020, the parties entered into a settlement agreement with respect to this lawsuit. Under the settlement agreement, Mobiquity paid WPG $100,000.00 in five $20,000 monthly installments ending in January 2021 and mutual general releases were exchanged.
In December 2019, Carter, Deluca & Farrell LP, a law firm, commenced an action in the Supreme Court of New York, County of Nassau, against the Company seeking $113,654 in past due legal fees allegedly owed. The Company disputed the amount owed to that firm. On March 13, 2021 the Company entered into a settlement agreement with the law firm and paid them $60,000 to settle the lawsuit.
In July 2020, Fyber Monetization, an Israeli company in the business of digital advertising, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in the Magistrate’s Court in Tel Aviv, Israel. In its statement of claim, Fyber alleged that Advangelists owes Fyber license fees of $584,945 invoiced in June through November 3, of 2019 under a February 1, 2017 license agreement for the use of Fyber’s RTB technology and e-commerce platform with connects digital advertising media buyers and media sellers. Advangelistsit has disputed the claims and is defending this lawsuit. Due to uncertainties inherent in litigation, we cannot predict the outcome on this action with any certainty. If we do not settle this action on terms favorable to us, or at all and Fyber is successful in its claim against Advangelists, the obligation to pay substantial monetary damages could have a material adverse effect on our financial condition and funds available to pursue our business plans. See “Risk Factors -- Our subsidiary Advangelists, LLC is party to litigation, the outcome of which could have a material adverse effect on us if it is not settled on terms favorable to us, or at all and the plaintiff is successful in its claims.”
In October 2020, FunCorp Limited, a Cypriot company which owns and operates social networking websites and mobile applications, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in Superior Court, State of Washington, County of King alleging Advangelists owed FunCorp for unpaid amounts due under an insertion order for placement of Advangelists’ advertisements on FunCorp’s iFunny website totaling $42,464. Advangelists disputed the claim. In September, 2021 the action was settled in payment of $44,000 and the exchange of general releases, without Advangelists admitting any liability. The settlement agreement provides that the termsestablished various committees of the settlement agreement and FunCorp’s allegations are confidential, and may not be disclosed except as required by law, court order or subpoenaBoard of Directors, including an Audit Committee comprised of three independent directors in accordance with certain limitations.
Reports to Securities Holders
We provide an annual report that includes audited financial information to our shareholders. We make our financial information equally available to any interested parties or investors through compliance withNasdaq Rule 5605(c)(2), which will take effect at the disclosure rules for a small business issuer under the Exchange Act. We are subject to disclosure filing requirements including filing Annual Reports on Form 10-K annually and Quarterly Reports on Form 10-Q quarterly. In addition, we will file Current Reports on Form 8-K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K and registration statements and proxy and information statements, at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549, or you can read our SEC filings, including the Registration Statement on Form S-1statement of which this prospectus is a part overbecomes effective. One of the InternetAudit Committee’s priorities will be to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this process, the Company plans to implement the following initiatives under the oversight of the Audit committee.
· | Hire additional staff both internally and externally to the Finance department with sufficient GAAP and public company financial reporting experience. | |
· | Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. | |
· | Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis as described below. | |
· | Initiate a preliminary assessment of management’s internal controls over financial reporting. | |
· | Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed. |
We have hired Refidential One - SOX Consultants who have reviewed testing procedures and analysis as follows:
· | Phase 1, which was completed on or about the Company filing its form 10-K for December 31, 2021, to identify the gaps and suggested remediations in 2021. | |
· | Phase 2, which was completed on or about June 30, 2022 to update all the narratives and create risk control matrixes (“RCM”) for testing when a remediation plan is implemented. | |
· | Phase 3, which was completed on or about September 30, 2022, tested the key controls identified and implemented in Phases 1 and 2 above. | |
· | Phase 4, to be completed in the first quarter of 2023 will be to retest the failures in Phase 3. Phase 4 testing will enable the Company to rectify any failures in Phase 3 testing, thus reducing the likelihood of significant deficiencies. |
Although we plan to undertake and complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not be successful in remediating the SEC’s website at http://www.sec.gov.1deficiencies or material weaknesses.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSBUSINESS
The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this prospectus and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or our behalf. We disclaim any obligation to update forward-looking statements.
Company OverviewBackground
Mobiquity Technologies, Inc. is a next-generation marketing and advertising technology, data compliance and data intelligence company whowhich operates through our various proprietary software platforms in the programmatic advertising space.
platforms. Our product solutions are comprised of twothree proprietary software platforms:
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· | Publisher Platform for Monetization and Compliance |
Our Products
The ATOS Platform
Our ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and campaigns. The ATOS platform:
· | creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of digital advertising (known as digital real estate) targeted at users while engaged on their internet-connected TV, laptop, tablet, desktop computer, mobile, and over-the-top (or OTT) streaming media devices; and | |
· | gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by using ads in both image and video formats (known as rich media) to increase their awareness, customer base and traffic to their e-commerce site, voting site or physical locations. |
(Screenshot of ATOS Platform Campaign Management landing page.)
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Our ATOS platform engages with an average of approximately 10 billion advertisement opportunities per day, based on our daily logs. Our sales and marketing strategy for our ATOS platform is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for brands directly and small and medium sized advertisers.
Our ATOS technology is proprietary and primarily consists of know-how and trade secrets developed internally, as well as certain open-source software.
Users of the ATOS platform get access to benefits including among other things:
· | ease of set up; | |
· | targeting features based on audience profiles and location and context through an in-house data management platform (or DMP); | |
· | Inventory management and yield optimization; | |
· | support for all rich media creators’ ad tags; | |
· | machine learning and AI powered optimization which aids in delivering a higher click through rate on ad links; | |
· | support for third-party trackers and custom scripts for make-the-most-of-your media (or MOAT) analytics, Integral Ad Science (or IAS), and forensics to enable independent verification by advertisers for transparency; | |
· | detailed campaign wrap-up reporting that gives a breakdown on publishers, categories, demonstrations, and devices to better understand advertisement campaign performance; | |
· | access to business intelligence via an analytics dashboard; | |
· | advanced ad targeting; | |
· | easy campaign uploading; | |
· | automated performance optimization; | |
· | real time reporting; | |
· | fraud prevention tools; and | |
· | 24x7 support, along with guided managed services to enable users to rapidly harness and operate all the features of the ATOS platform. |
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Our ATOS platform includes:
· | Adserver; | |
· | Demand Side Platform; | |
· | Advertisement quality tools; | |
· | Analytics dashboard; | |
· | Avails Engine; | |
· | Advertisement prediction and delivery tools; | |
· | Supply quality tools; | |
· | Private marketplace tools; | |
· | Audience and location targeting; | |
· | Wrap up reports; | |
· | An Advertisement software development kit (or SDK); | |
· | Prebid adaptor; | |
· | contextual targeting; | |
· | identity graph capabilities; | |
· | cookie syncing; and | |
· | the updated version of our quality and security tools, among other things for our ATOS platform. |
Data Intelligence Platform
Our data intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research.
We operate our business through two wholly-owned subsidiaries. Advangelists LLC operates our ATOS Our data intelligence platform business,technology allows for the ingestion and Mobiquity Networks, Inc. operatesnormalization of various data sources, such as location data, transactional data, contextual data, and search data to reach the right target audience with the right message. Utilizing massively parallel cluster computing and machine learning algorithms and technology, our data intelligence platform business.
Critical Accounting Policies
Our discussionsolutions make available actionable data for marketers, researchers and application publishers through an automated platform. We are seeking to generate several revenue streams from our data collection and analysis, of our financial conditionincluding, among other things; advertising, data licensing, and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires management to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.
Revenue Recognition –On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), to update the financial reporting requirements for revenue recognition. Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance became effective for the Company beginning on January 1, 2018, and entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company adopted this standard using the modified retrospective approach on January 1, 2018.custom research.
In preparation
(Screenshot of Data Intelligence HomeGraph landing page.)
We also offer a self-service alternative through our MobiExchange product, which is a SaaS fee model. MobiExchange is a data focused technology solution that enables individuals and companies to rapidly build actionable data and insights for adoptiontheir own use. MobiExchange’s easy-to-use, self-service tools allow users to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the-box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk among other things.
Our data intelligence platform is hosted and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Specifically, our data intelligence platform uses the standard, the Company evaluated each of the five steps in Topic 606, which are as follows: 1) Identify the contractfollowing AWS services: EC2, Lambda, Kafka, Kinesis, S3, Storm, Spark, Machine Learning, RDS, Redshift, Elastic Map Reduction, CloudWatch, DataBricks, and Elastic Search Service with the customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction pricebuilt-in Kibana integration.
Publisher Platform for Monetization and Compliance
Our Content publisher platform is a single-vendor ad tech operating system that allows publishers to better monetize their opt-in user data and advertising inventory. The platform includes tools for: consent management, audience building, a direct advertising interface and inventory enhancement. Due to the performance obligations;much publicized developments in privacy and 5) Recognizedata security laws and regulations (such as the European Union’s General Data Protection Regulation or GDPR and the California Consumer Privacy Act of 2018 or CCPA by way of example) along with Apple and Google’s removal of identifiers, we believe that content publishers are facing two material issues: increased costs due to privacy compliance rules, and decreased revenue when (or as) performance obligations are satisfied.
Reported revenue will not be affected materially in any period due to the adoptionrestrictions selling user identifier data to third parties. We believe this is causing a paradigm shift in the publishing market. Previously content publishers could provide user identifier information to demand-side platforms (or DSP’s) to create user profiles for audience targeting. Now both the user identifier data and the functionality to create profiled data segments from that identifier data (known as first party data) must be owned by the content publisher. Additionally publishers must also manage the targeting of ASC Topic 606 because: (1) the Company expects to identify similar performance obligations under Topic 606 as compared with deliverablestheir audiences in-house utilizing these identifier and separate units of account previously identified; (2) the Company has determined the transaction price to be consistent; and (3) the Company records revenue at the same point in time, upon delivery of services, under both ASC Topic 605 and Topic 606, as applicable under the terms of the contract with the customer. Additionally, the Company does not expect the accounting for fulfillment costs or costs incurred to obtain a contract to be affected materially in any period due to the adoption of Topic 606.
There are also certain considerations related to accounting policies, business processes and internal control over financial reporting that are associated with implementing Topic 606. The Company has evaluated its policies, processes, and control framework for revenue recognition, and identified and implemented the changes neededtargeting data. We recently launched our SaaS publisher platform in response to the new guidance.
Lastly, disclosure requirements under the new guidance in Topic 606 have been significantly expanded in comparison to the disclosure requirements under the current guidance, including disclosures related to disaggregation of revenue into appropriate categories, performance obligations, the judgments made in revenue recognition determinations, adjustments to revenue which relate to activities from previous quarters or years, any significant reversals of revenue, and costs to obtain or fulfill contract.
The Company generates revenue from service contracts with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized in proportion to the value provided to the customer for each project as of each reporting date. We recognize revenues in the period in which the data transmission is provided to the licensee.
Allowance for Doubtful Accounts
We are required to make judgments as to the realizability of our accounts receivable. We make these assessments based on the following factors: (a) historical experience, (b) customer concentrations, (c) customer credit worthiness, (d) current economic conditions, and (e) changes in customer payment terms.
Accounting for Stock Based Compensation
Stock based compensation cost is measured at the grant date fair value of the award and is recognized as expense over the requisite service period. The Company uses the Black-Sholes option-pricing model to determine fair value of the awards, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the company’s common stock price over the expected term (“volatility”) and the number of options for which vesting requirements will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated statements of operations.
Goodwill and Intangible Assets
Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships and non-compete agreements. Their useful lives range from 1.5 to 10 years. The Company’s indefinite-lived intangible assets consist of trade names.needs.
GoodwillAll Publisher data is siloed and indefinite-lived assets are not amortized but are subjectsecured, using the highest industry standards, optimizing compliance with privacy and data laws that may be applicable. Our platform helps publishers worry less about the integrity of their first party data and allows them to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair valuefocus on effectively monetizing their inventory.
Users of the asset may be less than the carrying amount. Goodwill impairment testing ispublisher platform get access to benefits of our publisher platform, including among other things:
· | A Consent Manager for publishers to meet all privacy requirements in connection with their collection of an audience’s data. | |
· | An Audience Builder to build detailed databases of targeted audiences from the user identifier data. | |
· | A Direct Purchase Interface to increase revenue from direct advertising sales to target audiences; and | |
· | An Inventory Enhancer to enhance the publisher’s supply of audience data with compliant meta-tags. |
(Screenshot of Publisher Platform Audience Management landing page.)
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We believe that irrespective of whether a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unitpublisher chooses to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discountedengage with us to use our publisher platform or not, they will need to find a solution that allows advertisers to advertise to the present value using discount factors that considerpublisher’s audience directly through the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company specific risks. Other significant assumptions usedpublisher.
Our Strategy
Our strategy in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businessesadvertising technology space is to provide enterprises with three proprietary solutions that are comparablehighly efficient and are tradedeffective for monetization of data and advertising with privacy and data regulatory compliance. We believe that our platforms gives users in these markets the capability of running programmatic campaigns without the need for an extensive marketing team, which enables them to better compete with their larger competitors who have greater marketing financial and human capital resources. Our sales and marketing approach is focused on providing a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completedde-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess.
Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategictransact with each other. Mobiquity plans and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform impairment test prior to scheduled annual impairment tests.
The Company performed its annual fair value assessment at December 31, 2019, there were no impairment charges during the year. For the year ended December 31, 2020, there was a $4,000,000 impairment.
Plan of Operation
Mobiquity intends to hire several new sales and sales support individuals to help generate additional revenue through the use of the Advangelists platform. Mobiquity’s sales team will focus on Advertising Agencies, Brands and publishers to help increase both supply and demand across the Advangelists platform. The Advangelists platform createsour three revenue streams for Mobiquity. The first is licensing the Advangelists platform as a white-label product for use by Advertising Agencies, DSP’s, Publishers and Brands. Under the White-Label scenario, the user licenses the technology and is responsible for running its own business operations and is billed a percentage of volume run through the platform. The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through the platform, but all services are managed by the Mobiquity/Advangelists team. The third revenue model is a seat model, whereas the user is billed a percentage of revenue run through the platform and business operations are shared between the user and the Mobiquity/Advangelists team. The goal of the sales team is to inform potential users of the benefits in efficiency and effectiveness of utilizing the end-to-end, fully integrated ATOS created by Advangelists.
Results of Operations
Quarter Ended June 30, 2021 versus Quarter Ended June 30, 2020
The following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.
Quarter Ended | ||||||||
June 30, 2021 | June 30, 2020 | |||||||
Revenue | $ | 702,434 | $ | 657,269 | ||||
Cost of Revenues | (811,519 | ) | (871,000 | ) | ||||
Gross (Loss) | (109,085 | ) | (213,731 | ) | ||||
Selling, General and Administrative Expenses | 2,047,428 | 3,553,285 | ||||||
Loss from operations | (2,156,513 | ) | (3,767,016 | ) |
platforms.
Our strategy is based on problems we perceived in the advertising technology industry as it has rapidly grown over the last few years and the evolving privacy and data laws and regulations that make it more difficult to achieve desired results. Our goal is to help our clients increase revenue, decrease cost and add transparency while complying with privacy and data laws.
Our Revenue Sources
We target publishers, brands, advertising agencies and other advertising technology companies as our audience for our three platform products. We generate revenue from our platforms through two verticals:
The first is licensing one or more of our platforms as a white-label product for use by advertising agencies, demand-side platforms (or DSP’s), brands and publishers. Under the white-label scenario, the user licenses a platform from us and is responsible for running its own business operations and is billed a percentage of amounts spent on advertising run through the platform. | ||
· | The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through a platform, but all services are managed by us. |
Our Intellectual Property
Our portfolio of technology consists of various intellectual property including proprietary source code, trade secrets and know-how that we have developed internally. We generated revenues of $702,434own our technology, although we use open source software for certain aspects, and we protect it though trade secrets and confidentiality requirements set out in the second quarter of 2021 as comparedour employee handbook which each employee acknowledges, and assigning any technology creations and improvements to $657,269us. We also have two patents that relate to our location-based mobile advertising technology business which we are not operating. These patents and patents pending are not material to, or used in, the same period for 2020, a changeour platform related technology that we use in revenues of $45,165. The nationwide economic shutdown due to COVID-19 during the second quarter severely reducedour current operations.
CostGovernmental Regulations
Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of revenues was $811,519 or 115.5%data that we collect. We strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of revenues in the second quarter of 2021 as compared to 871,000 or 132,5% of revenues in the same fiscal period of fiscal 2020. Cost of revenues include web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability to capture and store data for sales does not translatemarketing purposes. As we develop and provide solutions that address new market segments, we may become subject to increased costadditional laws and regulations, which could create unexpected liabilities for us, cause us to incur additional costs or restrict our operations. From time to time, we may be notified of sales.
Gross (Loss) was $(109,085) or 15.5%otherwise become aware of additional laws and regulations that governmental organizations or others may claim should be applicable to our business. Our failure to anticipate the application of these laws and regulations accurately, or other failure to comply, could create liability for us, result in adverse publicity or cause us to alter our business practices, which could cause our net revenues for the second quarter of 2021 as compared to $213,731 in the same fiscal period of 2020decrease, our costs to increase or 32.5% of revenues. When the country comes out of COVID-19 and the economy begins to turn around we anticipate income to increase.
Selling, general, and administrative expenses were $2,047,428 for the second quarter of fiscal 2021 compared to $3,553,285 in the comparable period of the prior year, a decrease of approximately $1,505,857. Decreased cash expense salaries of $378,612, non-cash operating costs include stock-based compensation of $720,978, and warrant expense of $598,894.
The net loss from operations for the second quarter of fiscal 2021 was $2,156,513 as compared to $3,767,016 for the comparable period of the prior year. The continuing operating loss is attributable to the focused effort in creating the infrastructure required to move forward with our Mobiquity and Advangelists network business.
No benefit for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our abilitybusiness otherwise to be profitable in the future is dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.
Six months Ended June 30, 2021 versus Six months Ended June 30, 2020
The following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.
Six Months Ended | ||||||||
June 30, 2021 | June 30, 2020 | |||||||
Revenue | $ | 1,224,307 | $ | 1,602,368 | ||||
Cost of Revenues | (1,748,799 | ) | (1,659,911 | ) | ||||
Gross (Loss) | (524,492 | ) | (57,543 | ) | ||||
Selling, General and Administrative Expenses | 3,631,822 | 5,935,213 | ||||||
Loss from operations | (4,156,314 | ) | (5,992,756 | ) |
We generated revenues of $1,224,307 in the six months of 2021 as compared to $1,602,368 in the same period for 2020, a change in revenues of $378,061. The nationwide economic shutdown due to COVID-19 during the six months ended severely reduced current operations.
Cost of revenues was $1,748,799 or 142.8% of revenues in the six months of 2021 as compared to 1,659,911 or 103.4% of revenues in the same fiscal period of fiscal 2020. Cost of revenues include web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability to capture and store data for sales does not translate to increased cost of sales.
Gross (Loss) was $(524,492) or 42.8% of revenues for the six months of 2021 as compared to $57,543 in the same fiscal period of 2020 or 3.6% of revenues. When the country fully comes out of COVID-19 and the economy turns around we anticipate income to increase.
Selling, general, and administrative expenses were $3,631,822 for the six months of fiscal 2021 compared to $5,935,213 in the comparable period of the prior year, a decrease of approximately $2,303,391. Decreased operating costs include professional fees of $306,883, salaries of $378,612, non-cash expenses of stock-based compensation of $704,139, amortization costs of $400,000 and warrant expense of $598,894.harmed. See “Item 1A.”
The net loss from operations forWe are subject to general business regulations and laws as well as regulations and laws specifically governing the six monthsinternet, e-commerce and m-commerce in a number of fiscal 2021 was $4,156,314 as compared to $5,992,756 forjurisdictions around the comparable periodworld. Existing and future regulations and laws could impede the growth of the prior year. The continuing operating lossInternet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is attributablenot clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the focused effortInternet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in creating the infrastructure requireda manner that is inconsistent from one jurisdiction to move forwardanother and may conflict with other rules or our Mobiquitypractices. See “Risk Factors—Our business practices with respect to data and Advangelists network business.consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection”; and “Risk Factors-- Changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect data on consumer shopping behavior.”
No benefit for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability to be profitable in the future is dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.Competition
Year Ended December 31, 2020 versus Year Ended December 31, 2019
The following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.
Year Ended December 31 | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 6,184,010 | $ | 9,717,796 | ||||
Cost of Revenues | 4,360,645 | 7,297,550 | ||||||
Gross Profit | 1,823,365 | 2,420,246 | ||||||
Operating Expenses | 13,204,465 | 15,882,475 | ||||||
Loss from operations | (11,381,100 | ) | (13,462,229 | ) | ||||
Net Loss | (15,029,395 | ) | (43,747,375 | ) | ||||
Loss from operations per common share | (5.92 | ) | (22.55 | ) | ||||
Weighted average common shares outstanding | 2,537,811 | 1,952,538 |
We generated revenues of $6,184,010 in fiscal 2020 compared to $9,717,796compete in the same periodprogrammatic advertising, data management, and user compliance management industries and in all other facets of our business against small, medium and large companies throughout the United States. Some examples include companies such as Liveramp, The TradeDesk and OneTrust. Although we can give no assurance that our business will be able to compete against other companies with greater experience and resources, we believe we have a competitive advantage with our proprietary software and technology platform based on our view that our competitor’s products do not provide the end-to-end solutions that our product solutions do, and their minimum fees are substantially higher than ours for fiscal 2019, a changecomparative suite of solutions. See “Risk Factors — We face intense and growing competition, which could result in revenues of $3,533,786, which is a decrease of over 36%. Decreased revenues from the onset of COVID-19 started during the first quarter of 2020reduced sales and continues currently.reduced operating margins, and limit our market share.”
CostEmployees and Contractors
As of revenues was $4,360,645 or 70.5% of revenues in fiscal 2020 comparedDecember 31, 2022, we have 14 employees, including executive management, technical personnel, salespeople, and support staff employees. We also utilize several additional firms/persons who provide services to $7,297,550 or 75.1% of revenues inus on a non-exclusive basis as independent consultants.
Customers
For the same fiscal period of fiscal 2019. Cost of revenues include web services for storageyear ended December 31,2021 and processingthe nine months ended September 30, 2022, sales of our dataproducts to four customers generated approximately 31% and web engineers who are building52% of our revenues, respectively.. Our contracts with our customers generally do not obligate them to a specified term and maintaining our platforms.
Gross Profit was $1,823,365 for fiscal 2020 or 29.5%they can generally terminate their relationship with us at any time with a minimal amount of revenues compared to $2,420,246 in the same fiscal period of 2019 or 24.9% of revenues. The increase in gross profit margin from fiscal year 2019 to 2020 pertains to discounts given to our current customer base with some introductory rates for the new services we designed in 2019 have been removed in 2020.
Operating expenses were $13,204,465 for fiscal 2020 compared to $15,882,475 in the comparable period of the prior year, a decrease of $2,678,010. Such operating cost decreases include technology integration costs, payroll and related expenses, commissions, insurance, rents, professional (consulting) and public awareness fees. Non-cash stock-based compensation decreased $5,251,952 along with an increase in amortization costs of $1,076,488 and impairment expense of $4,000,000.
The loss from operations for 2020 was $11,381,100 as compared to $13,462,229 for the comparable period of the prior year, a $2,081,129 decrease. The loss from operations included the non-cash decrease in stock-based compensation of $1,347,048, amortization costs of $2,600,735, and warrant expense $598,894 and an increase in impairment costs of $4,000,000. Cash costs include a decrease in salaries of $783,474, rents $93,573 and commissions of $116,406 an increase in bad debts of $444,697 due to the COVID-19 pandemic.
The net loss for 2020 was $15,029,395 as compared to $43,747,375 for the comparable period of the prior year, a 34.4% decrease from the previous year. Decrease in net loss from 2020 include noncash expenses totaling $22,791,640, including $22,614,303 in warrant expense and stock-based compensation of $5,251,952.notice.
No benefit for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability to be profitable in the future is dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.
Liquidity and Capital Resources
We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2021, and 2020.
The Company had cash and cash equivalents of $173,571$855,246 at JuneSeptember 30, 2021.2022. Cash used in operating activities for the sixnine months ended JuneSeptember 30, 2021,2022, was $2,712,694.$5,502,991. This resulted primarily from a net loss of $4,823,399$5,791,201 offset by stock-based compensation of $572,731,$72,411, amortization of $900,367,$450,551, common stock issued for services of $119,800, accrued interest of $195,811, decrease$84,500, increase in accounts receivable of $840,740$592,362 and $519,474$384,284 decrease in accounts payable decrease in prepaidand accrued expenses, non-cash gain on settlement of $16,500.liability $389,495, loss on debt extinguishment of $55,296 and inducement expense of $101,000. Cash used in investing activities results from note converted tothe purchase of property and equipment of $8,004. Cash flows provided by financing activities of $980,996 resulted from cash paid on debt of $156,504 offset by net proceeds received from the sale of common stock of $671,602, common$1,137,500.
We had cash and cash equivalents of $5,385,245 at December 31, 2021. Restated cash used in operating activities for the year ended December 31, 2021, was $6,717,324. This resulted from a restated net loss of $18,333,383, partially offset by non-cash expenses, including depreciation and amortization of $808,300, stock-based compensation of $4,635,224, stock issued for service of $1,158,025, and impairment expense of $3,600,000.
For the year ended December 31, 2021, cash $898,990used in investing activities was $6,472 related to the purchase of property and Original issue discount of $268,150. Cash flow fromequipment.
Restated cash provided by financing activities of $445,342 resulted from$11,506,860 was the proceeds from theresult of issuance of notes totaling $4,143,000 and repayments of $1,310,000,notes totaling $2,840,337, as well as stock and warrants issued for cash paid on loans $598,816 and the forgivenessnet of Small Business Administrationdirect offering costs of $265,842.$10,204,197.
We had cash and cash equivalents of $602,182 at December 31, 2020. Cash used byin operating activities for the year ended December 31, 2020 was $4,750,443.$3,286,764 (as restated). This primarily resulted from a net loss of $15,032,404,$11,745,835 (as restated), partially offset by non-cash expenses, including depreciation and amortization of $1,807,007, stock-based compensation of $1,347,048, warrant expense of $1,472,367$993,512 (as restated), and impairment expense of $4,000,000. Cash provided by financing activities of $485,033$2,655,481 (as restated) was the result of issuance of notes payable and common stock, net, offset by cash payments on notes outstanding.
The Company had cash and cash equivalents of $440,075 at June 30, 2020. Cash used in operating activities for the six months ended June 30, 2020 was $1,116,388. This resulted primarily from a net loss of $7,019,253 offset by stock-based compensation of $1,276,870, warrant expense $1,354,817 amortization of $1,300,368, allowance for uncollectible receivables of $306,000, common stock issued for services of $375,000, decrease in accounts receivable of $1,930,915 and $625,562 decrease in accounts payable, increase in prepaid expenses of $14,000. Cash used in investing activities results from note converted to common stock of $30,695. Cash flow from financing activities of $282,694 resulted from the proceeds from the issuance of notes of $745,388, and cash paid on loans $462,694.
We had cash and cash equivalents of $1,240,064 at December 31, 2019. Cash used by operating activities for the year ended December 31, 2019 was $8,342,506. This resulted from a net loss of $44,027,719, partially offset by non-cash expenses, including depreciation and amortization of $1,528,644, stock-based compensation of $6,599,000, and warrant expense of $3,153,991, other warrant costs from the conversion/issuance of debt of $23,213,197. Cash provided by financing activities of $9,018,251 was the result of issuance of notes, proceeds from the issuance of common stock, sales of investments, and notes from bank.
Our company commenced operations in 1998 and was initially funded by our three founders, each of whom has made demand loans to our company that have been repaid. Since 1999, we have relied on equity financing and borrowings from outside investors to supplement our cash flow from operations and expect this to continue in 20192022 and beyond until cash flow from our proximity marketing operations become substantial.
Our company commenced operations in 1998 and was initially funded by our three founders, each of whom has made demand loans to our company that have been repaid. Since 1999, we have relied on equity financing and borrowings from outside investors to supplement our cash flow from operations and expect this to continue in 2021 and beyond until cash flow from our proximity marketing operations become substantial
Recent Financings
On October 19, 2021, the Company filed a Form S-1 Registration Statement (File no. 333-260364) with the Securities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NasdaqCM under the symbol “MOBQ.” This offering was completed on December 13, 2021, and the Company retired the loans of Talos Victory Fund, LLC and Blue Lake Partners LLC out of the gross proceeds it received of approximately $10.3 million. Also, Talos Victory Fund, LLC and Blue Lake Partners, LLC converted all of their warrants on a cashless basis into 24,692 common shares and 24,692 common shares, respectively.
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On December 30, 2022, we and Walleye Opportunities Master Fund Ltd, a Cayman Islands company (the “Investor”), entered into a Securities Purchase Agreement (the “Agreement”) for the Investor to purchase from the Company (i) a senior secured 20% OID nine-month promissory note in an aggregate original principal amount of $1,437,500 (the “Investor Note”), and (ii) a five year warrant to purchase 2,613,636 shares of the Company’s common stock at an exercise price of $.44 per share which is not exercisable until July 1, 2023 (the “Investor Warrant”). A total of 522,727 shares of Common Stock, or approximately 5.3% of the Company’s outstanding shares of Common Stock, were issued to the Investor as an incentive on the transaction, excluding the above referenced Investor Warrant, the shares of Common Stock exercisable pursuant to such Investor Warrant not being considered beneficially owned by the Investor until the Investor Warrant is exercisable within 60 days. A fee of $103,500 plus warrants to purchase 26,136 shares of Common Stock exercisable at $0.484 per share were issued to Spartan Capital Securities LLC. These warrants were subsequently cancelled on February 7, 2023. Approximately $163,000 of the loan proceeds were utilized to retire a small business loan originally in the principal amount of $150,000. The Investor Note will only become convertible into Common Stock upon the occurrence of an Event of Default under and as defined in the Investor Note on terms set forth in the Investor Note. This Note matures and is payable on or before September 30, 2023, and it provides that it is accelerated and becomes immediately payable if we complete a trigger financing of $3,000,000 or more, which closes subsequent to the earlier of the closing the offering in this prospectus or March 31, 2023. If we are unable to raise additional funding in a trigger financing after this offering or do not generate sufficient cashflow to repay the Note when due, or we will be default under the Note if we do not pay it. The Company granted a security interest in all of its assets to the Investor as collateral for its obligations under the Investor Note pursuant to a Security Agreement. In addition, the Company’s subsidiaries guaranteed the obligations of the Company under the Investor Note pursuant to a Subsidiary Guarantee and granted a first lien security interest in all of their assets to the Investor as additional collateral pursuant to the Security Agreement. All securities sold in the above described transaction contain certain piggy-back registration rights after the completion of the offering contemplated by this prospectus. See “Use of Proceeds” where we disclosed our intention to retire the Note utilizing the proceeds of this offering. We have completed various other financings as described as described under the Notes to Consolidated Financial Statements.
Off-Balance Sheet ArrangementsControls and Procedures
As of June 30, 2021, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation SK.
Internal Control over Financial Reporting
Underrequired by Rules 13a-15 and 15d-15 under the supervision and with the participation ofExchange Act, our management, including the Chief Executive Officer and Chief Financial Officer we have evaluated the effectiveness of ourthe disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered byDecember 31, 2021 and quarterly since this report.date. Based on thatupon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that theseour disclosure controls and procedures arewere not effective.effective as of December 31, 2021 and quarterly since this date, due solely to the material weakness in our internal control over financial reporting primarily related to the accounting for direct offering costs paid in an equity financing, the sale of warrants and the mark to market of our common stock sold to third parties as described below in “Management’s Report on Internal Control over Financial Reporting.”
In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this prospectus present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2020, our company determined that there were control deficiencies that constituted material weaknesses, as described below:
We did not maintain appropriate financial reporting controls – As of December 31, 2020, our company has not maintained sufficient internal controls over financial reporting for the financial reporting process. As at December 31, 2018, our company did not have sufficient financial reporting controls with respect to timely financial reporting and the ability to process complex accounting issues such as debt conversions. Subsequent to December 31, 2018, our company has obtained the necessary assistance to ensure that the performance of complex accounting issues can be performed accurately and on a timely basis.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was not effective as of December 31, 2018.2021 and quarterly since this date. There were no significant changes in our internal control over financial reporting during the year ended December 31, 20182021 and quarterly since this date, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our independent auditors have not audited and are not required to audit this assessment of our internal control over financial reporting for the fiscal year ended December 31, 2020.2021 and quarterly since this date.
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Internal Controls Remediation Efforts
Since December 2021, we are working to remediate the deficiencies and material weaknesses in our internal controls. We are taking steps to enhance our internal control environment establish and maintain effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance., In this regard, the Company will be adopting several corporate governance policies and it has established various committees of the Board of Directors, including an Audit Committee comprised of three independent directors in accordance with Nasdaq Rule 5605(c)(2), which will take effect at the time that our registration statement of which this prospectus is a part becomes effective. One of the Audit Committee’s priorities will be to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this process, the Company plans to implement the following initiatives under the oversight of the Audit committee.
· | Hire additional staff both internally and externally to the Finance department with sufficient GAAP and public company financial reporting experience. | |
· | Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. | |
· | Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis as described below. | |
· | Initiate a preliminary assessment of management’s internal controls over financial reporting. | |
· | Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed. |
We have hired Refidential One - SOX Consultants who have reviewed testing procedures and analysis as follows:
· | Phase 1, which was completed on or about the Company filing its form 10-K for December 31, 2021, to identify the gaps and suggested remediations in 2021. | |
· | Phase 2, which was completed on or about June 30, 2022 to update all the narratives and create risk control matrixes (“RCM”) for testing when a remediation plan is implemented. | |
· | Phase 3, which was completed on or about September 30, 2022, tested the key controls identified and implemented in Phases 1 and 2 above. | |
· | Phase 4, to be completed in the first quarter of 2023 will be to retest the failures in Phase 3. Phase 4 testing will enable the Company to rectify any failures in Phase 3 testing, thus reducing the likelihood of significant deficiencies. |
Although we plan to undertake and complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not be successful in remediating the deficiencies or material weaknesses.
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BUSINESS
Company Background
Mobiquity Technologies, Inc. is a next-generation advertising technology, data compliance and intelligence company which operates through our various proprietary software platforms. Our product solutions are comprised of three proprietary software platforms:
· | Advertising Technology Operating System (ATOS Platform) | |
· | Data Intelligence Platform | |
· | Publisher Platform for Monetization and Compliance |
Our Products
The ATOS Platform
Our ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and campaigns. The ATOS platform:
· | creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of digital advertising (known as digital real estate) targeted at users while engaged on their internet-connected TV, laptop, tablet, desktop computer, mobile, and over-the-top (or OTT) streaming media devices; and | |
· | gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by using ads in both image and video formats (known as rich media) to increase their awareness, customer base and traffic to their e-commerce site, voting site or physical locations. |
(Screenshot of ATOS Platform Campaign Management landing page.)
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Our ATOS platform engages with an average of approximately 10 billion advertisement opportunities per day, based on our daily logs. Our sales and marketing strategy for our ATOS platform is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for brands directly and small and medium sized advertisers.
Our ATOS technology is proprietary and primarily consists of know-how and trade secrets developed internally, as well as certain open-source software.
Users of the ATOS platform get access to benefits including among other things:
· | ease of set up; | |
· | targeting features based on audience profiles and location and context through an in-house data management platform (or DMP); | |
· | Inventory management and yield optimization; | |
· | support for all rich media creators’ ad tags; | |
· | machine learning and AI powered optimization which aids in delivering a higher click through rate on ad links; | |
· | support for third-party trackers and custom scripts for make-the-most-of-your media (or MOAT) analytics, Integral Ad Science (or IAS), and forensics to enable independent verification by advertisers for transparency; | |
· | detailed campaign wrap-up reporting that gives a breakdown on publishers, categories, demonstrations, and devices to better understand advertisement campaign performance; | |
· | access to business intelligence via an analytics dashboard; | |
· | advanced ad targeting; | |
· | easy campaign uploading; | |
· | automated performance optimization; | |
· | real time reporting; | |
· | fraud prevention tools; and | |
· | 24x7 support, along with guided managed services to enable users to rapidly harness and operate all the features of the ATOS platform. |
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Our ATOS platform includes:
· | Adserver; | |
· | Demand Side Platform; | |
· | Advertisement quality tools; | |
· | Analytics dashboard; | |
· | Avails Engine; | |
· | Advertisement prediction and delivery tools; | |
· | Supply quality tools; | |
· | Private marketplace tools; | |
· | Audience and location targeting; | |
· | Wrap up reports; | |
· | An Advertisement software development kit (or SDK); | |
· | Prebid adaptor; | |
· | contextual targeting; | |
· | identity graph capabilities; | |
· | cookie syncing; and | |
· | the updated version of our quality and security tools, among other things for our ATOS platform. |
Data Intelligence Platform
Our data intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research. Our data intelligence platform technology allows for the ingestion and normalization of various data sources, such as location data, transactional data, contextual data, and search data to reach the right target audience with the right message. Utilizing massively parallel cluster computing and machine learning algorithms and technology, our data intelligence solutions make available actionable data for marketers, researchers and application publishers through an automated platform. We are seeking to generate several revenue streams from our data collection and analysis, including, among other things; advertising, data licensing, and custom research.
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(Screenshot of Data Intelligence HomeGraph landing page.)
We also offer a self-service alternative through our MobiExchange product, which is a SaaS fee model. MobiExchange is a data focused technology solution that enables individuals and companies to rapidly build actionable data and insights for their own use. MobiExchange’s easy-to-use, self-service tools allow users to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the-box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk among other things.
Our data intelligence platform is hosted and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Specifically, our data intelligence platform uses the following AWS services: EC2, Lambda, Kafka, Kinesis, S3, Storm, Spark, Machine Learning, RDS, Redshift, Elastic Map Reduction, CloudWatch, DataBricks, and Elastic Search Service with built-in Kibana integration.
Publisher Platform for Monetization and Compliance
Our Content publisher platform is a single-vendor ad tech operating system that allows publishers to better monetize their opt-in user data and advertising inventory. The platform includes tools for: consent management, audience building, a direct advertising interface and inventory enhancement. Due to the much publicized developments in privacy and data security laws and regulations (such as the European Union’s General Data Protection Regulation or GDPR and the California Consumer Privacy Act of 2018 or CCPA by way of example) along with Apple and Google’s removal of identifiers, we believe that content publishers are facing two material issues: increased costs due to privacy compliance rules, and decreased revenue due to the restrictions selling user identifier data to third parties. We believe this is causing a paradigm shift in the publishing market. Previously content publishers could provide user identifier information to demand-side platforms (or DSP’s) to create user profiles for audience targeting. Now both the user identifier data and the functionality to create profiled data segments from that identifier data (known as first party data) must be owned by the content publisher. Additionally publishers must also manage the targeting of their audiences in-house utilizing these identifier and targeting data. We recently launched our SaaS publisher platform in response to these needs.
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All Publisher data is siloed and secured, using the highest industry standards, optimizing compliance with privacy and data laws that may be applicable. Our platform helps publishers worry less about the integrity of their first party data and allows them to focus on effectively monetizing their inventory.
Users of the publisher platform get access to benefits of our publisher platform, including among other things:
· | A Consent Manager for publishers to meet all privacy requirements in connection with their collection of an audience’s data. | |
· | An Audience Builder to build detailed databases of targeted audiences from the user identifier data. | |
· | A Direct Purchase Interface to increase revenue from direct advertising sales to target audiences; and | |
· | An Inventory Enhancer to enhance the publisher’s supply of audience data with compliant meta-tags. |
(Screenshot of Publisher Platform Audience Management landing page.)
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We believe that irrespective of whether a publisher chooses to engage with us to use our publisher platform or not, they will need to find a solution that allows advertisers to advertise to the publisher’s audience directly through the publisher.
Our Strategy
Our strategy in the advertising technology space is to provide enterprises with three proprietary solutions that are highly efficient and effective for monetization of data and advertising with privacy and data regulatory compliance. We believe that our platforms gives users in these markets the capability of running programmatic campaigns without the need for an extensive marketing team, which enables them to better compete with their larger competitors who have greater marketing financial and human capital resources. Our sales and marketing approach is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Mobiquity plans to hire several new sales and sales support individuals to help generate additional revenue through the use of our three platforms.
Our strategy is based on problems we perceived in the advertising technology industry as it has rapidly grown over the last few years and the evolving privacy and data laws and regulations that make it more difficult to achieve desired results. Our goal is to help our clients increase revenue, decrease cost and add transparency while complying with privacy and data laws.
Our Revenue Sources
We target publishers, brands, advertising agencies and other advertising technology companies as our audience for our three platform products. We generate revenue from our platforms through two verticals:
· | The first is licensing one or more of our platforms as a white-label product for use by advertising agencies, demand-side platforms (or DSP’s), brands and publishers. Under the white-label scenario, the user licenses a platform from us and is responsible for running its own business operations and is billed a percentage of amounts spent on advertising run through the platform. | |
· | The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through a platform, but all services are managed by us. |
Our Intellectual Property
Our portfolio of technology consists of various intellectual property including proprietary source code, trade secrets and know-how that we have developed internally. We own our technology, although we use open source software for certain aspects, and we protect it though trade secrets and confidentiality requirements set out in our employee handbook which each employee acknowledges, and assigning any technology creations and improvements to us. We also have two patents that relate to our location-based mobile advertising technology business which we are not operating. These patents and patents pending are not material to, or used in, our platform related technology that we use in our current operations.
Governmental Regulations
Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. As we develop and provide solutions that address new market segments, we may become subject to additional laws and regulations, which could create unexpected liabilities for us, cause us to incur additional costs or restrict our operations. From time to time, we may be notified of or otherwise become aware of additional laws and regulations that governmental organizations or others may claim should be applicable to our business. Our failure to anticipate the application of these laws and regulations accurately, or other failure to comply, could create liability for us, result in adverse publicity or cause us to alter our business practices, which could cause our net revenues to decrease, our costs to increase or our business otherwise to be harmed. See “Item 1A.”
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We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet, e-commerce and m-commerce in a number of jurisdictions around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. See “Risk Factors—Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection”; and “Risk Factors-- Changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect data on consumer shopping behavior.”
Competition
We compete in the programmatic advertising, data management, and user compliance management industries and in all other facets of our business against small, medium and large companies throughout the United States. Some examples include companies such as Liveramp, The TradeDesk and OneTrust. Although we can give no assurance that our business will be able to compete against other companies with greater experience and resources, we believe we have a competitive advantage with our proprietary software and technology platform based on our view that our competitor’s products do not provide the end-to-end solutions that our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions. See “Risk Factors — We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share.”
Employees and Contractors
As of December 31, 2022, we have 14 employees, including executive management, technical personnel, salespeople, and support staff employees. We also utilize several additional firms/persons who provide services to us on a non-exclusive basis as independent consultants.
Customers
For the year ended December 31,2021 and the nine months ended September 30, 2022, sales of our products to four customers generated approximately 31% and 52% of our revenues, respectively.. Our contracts with our customers generally do not obligate them to a specified term and they can generally terminate their relationship with us at any time with a minimal amount of notice.
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Corporate Structure
We operate our business through two wholly owned subsidiaries, Advangelists, LLC and Mobiquity Networks, Inc. Our corporate structure is as follows:
Properties
The Company is presently utilizing the office space of its Chief Financial Officer as its principal executive office located at 35 Torrington Lane, Shoreham, NY 11786. All employees of the Company are working remotely.
Legal Proceedings
We are not a party to any pending material legal proceedings.
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MANAGEMENT
The following table presentssets forth the name, age, position and tenure of our directors
Name | Age | Position(s) | Served as a Director Since | |||
Dean L. Julia | 55 | Chief Executive Officer, President, Treasurer, Director, Co-Founder, Secretary | 1998 | |||
Dr. Gene Salkind, M.D. | 70 | Chairman of the Board | 2019 | |||
Peter L. Zurkow | 69 | Director | 2021 | |||
Michael A. Wright | 60 | Director | 2021 | |||
Anne S. Provost | 58 | Director | 2022 |
Directors
Our Board currently consists of five members.. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.
The following biographical descriptions set forth certain information with respect to our officers, directors and significant employees as of the date of this prospectus:
Our Company is governed by our board. Directors are elected at the annual meeting of stockholders and hold office until the following annual meeting. The terms of all officers expire at the annual meeting of directors following the annual stockholders meeting. Officers serve at the pleasure of our board of directors and may be removed, either with or without cause, by our board of directors, and a successor elected by a majority vote of our board of directors, at any time. Nevertheless, the foregoing is subject to the employment contracts of our executive officers.
Independent Directors
Currently we have no independent directors. The following persons have consented to become directors of the Company upon the effectiveness of this registration statement to fill vacancies on the board. Each of them are deemed to be independent directors under NASDAQ listing rules. When Messrs. Zurkow, Wright and Iacovone become directors, only they will be independent directors; and all standing committees of our board of directors will be composed entirely of independent directors, in each case under NASDAQ’s independence definition applicable to boards of directors.
For a director to be considered independent, our board of directors must determine that the director has no relationship which, in the opinion of our board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Business Experience of our Directors, Officers and Significant Employeesdirector:
Dean L. Julia. Mr. Julia works at Mobiquity Technologies, Inc. where he has served as its Chief Executive Officer since December 2000. Mr. Julia co-founded Mobiquity in 1998. Mr. Julia is responsible for establishing our overall strategy and fostering key relationships with technology partners and developers. Mr. Julia also works at Mobiquity Networks, Inc., Mobiquity’s wholly-ownedwholly owned subsidiary, since its formation in 2011. Mr. Julia is responsible for the integration of the sales and intellectual property departments of Mobiquity. From September 1996 through February 1998, Mr. Julia served as President and Chief Executive Officer of DLJ Consulting, a financial intermediary consultant for public and private companies. Mr. Julia has served on the board since its inception. Mr. Julia is a graduate of Hofstra University with a Bachelor of Business Administration in 1990. Except for Mobiquity Technologies, Inc., Mr. Julia does not hold, and has not previously held, any directorships in any publicly-tradedpublicly traded reporting companies.
Paul Bauersfeld. Mr. Bauersfeld works at Mobiquity Technologies, Inc. where he has served as the Chief Technology Officer since June 2013. From 2003 to 2013, he worked at Varsity Networks, an online media and services company dedicated to serving the local sports market through technology, which he founded and where he served as its Chief Executive Officer. From 2000 to 2001, he worked at MessageOne, where he served as its Chief Executive Officer. From 1999 to 2000, he worked at Ziff-Davies where he served as its Vice President of eCommerce. From 1997 to 1999, he worked at Viacom’s Nickelodeon Online, where he served as its Technology Director. From 1996 to 1997, he worked at GiftOne, where he served as its President. From 1988 to 1993, he worked at Apple Computer where he served in various engineering positions. From 1986 to 1988 he worked at Xerox Corporation. Mr. Bauersfeld brings over 20 years of knowledge and experience as an executive, engineer and entrepreneur in the technology, and software product development industries. His experience in these industries will help the company develop its products and technologies. Mr. Bauersfeld is a graduate of the Rochester Institute of Technology with a B.S. in Electrical Engineering in 1986. Mr. Bauersfeld does not hold, and has not previously held, any directorships in any publicly-traded reporting companies.
Sean J. McDonnell, CPA. Mr. McDonnell works at Mobiquity Technologies, Inc. where he has served as the Chief Financial Officer since January 2005. From January 1990 to present, he has owned and operated Sean J. McDonnell CPA, P.C., a private accounting and tax practice. From 1985 to 1990, he worked at Breiner & Bodian CPAs where he served as a senior staff member. Mr. McDonnell brings knowledge and experience in the accounting, finance and tax industries. Mr. McDonnell is a graduate of Dowling College with a Bachelor of Business Administration in 1984. Mr. McDonnell does not hold, and has not previously held, any directorships in any reporting companies.
Sean Trepeta. Mr. Trepeta works at our wholly-owned subsidiary, Mobiquity Networks, Inc. where he has served as President since January 2011. From 2007 to 2011, he worked at Varsity Networks where he served as its President. From 1998 to 2007, Mr. Trepeta worked at OPEX Communications, Inc., a telecommunication service provider specializing in traditional long-distance, wireless, and dedicated services, where he served as its President. From 1996 to 1998 he worked at U.S. Buying Group, Inc., where he served as Vice President of Sales and Marketing and was responsible for developing a small business-buying program, which included value added services such as overnight shipping, office supplies, and computer software products, as well as a full line of telecommunications services. Mr. Trepeta also developed and implemented the agent and carrier divisions of U.S. Buying Group. Mr. Trepeta brings 25 years of knowledge and experience in sales and marketing to our Company to help us grow sales and develop marketing strategies. Mr. Trepeta is a graduate of the State University of New York at Cortland with a B.S. in Education in 1990. Except for Mobiquity Technologies, Inc., Mr. Trepeta does not hold, and has not previously held, any directorships in any publicly-traded reporting companies. We plan to have a board of directors comprised of five members, including three independent directors if and when we are approved to have our common stock listed on the NASDAQ Capital Market. Mr. Trepeta is expected to resign from the board if this occurs, on the listing date of our common stock on the Nasdaq Capital Market to accommodate this board restructure.
Gene Salkind, M.D. Dr. Salkind has served as a director of Mobiquity since January 2019 and Chairman of our board of directors since October 2019. Dr. Salkind is a prominent practicing neurosurgeon, and he has been a shareholder and has worked as President of Bruno & Salkind M.D. P.C. since 1985. He has also worked at Holy Redeemer Hospital where he is the Chief of Neurosurgery, a position he has held since 2001. Dr. Salkind is board certified in neurological surgery by the American Board of Neurological Surgery. He served as Chief of Neurosurgery of Albert Einstein Medical Center in Philadelphia from 1997 to 2002, and of Jeanes Hospital in Philadelphia from 1990 to 2000. In addition to Dr. Salkind’s medical career, he is a tech-company investor, with experience guiding small and micro-cap companies in their development and growth, including up-listings to national securities exchanges. His experience will help the Company with its business growth and corporate finance strategies. Dr. Salkind is a graduate of Lewis Katz School of Medicine at Temple University with a Doctor of Medicine in 1979. Dr. Salkind is a graduate of the University of Pennsylvania with a B.A. in Biology, cum laude in 1974. From 2021 to present, Dr. Salkind has served as a director at Grove Holdings, Inc., which expects to be a publicly traded company in sixty to ninety days. From 2018 to present, Dr. Salkind has served as a director at CURE Pharmaceutical Holding Corp., a publicly traded company. From 2014 to 2020, Dr. Salkind served as a director at Dermtech Intl., a publicly traded company.
Deepanker Katyal. Mr. Katyal works at the Company’s wholly-owned subsidiary, Advangelists, LLC where he has served as the Chief Executive Officer since the 2017 (prior to the Company’s acquisition of an interest in Advangelists by merger in November 2018). From January 2017 to present, he has also served as an advisor providing business and product advice to Q1media, a digital media services company. Additionally, from 2016 to present, he has served as a strategic advisor to Silicon Valley Stealth Mode Products, a private company. From May 2016 to April 2017, he served as a strategic advisor to Airupt Inc., a mobile marketing platform for brands. From May 2016 to March 2017, he was head of Partnership and Strategy for Adtile Technologies, a mobile publishing and advertising solution company. From November 2015 to 2016, he served as a strategic advisor to Moonraft Innovation Labs, a company that creates customer experiences to differentiate the entities’ clients in the market by creating and designing interactive experiences across physical and digital customer touch points. From April 2014 to May 2016, he also served as a member of the innovation team at Opera Mediaworks, a mobile advertising platform company. Mr. Katyal brings knowledge and experience in software engineering, leading business development efforts, strategic partnerships, and product development and strategy. His experience will help the Company grow and develop its technology and product strategies. Mr. Katyal was a director of our Company from December 2018 following our merger transaction with Advangelists until May 2020, when he stepped down from that position to attend to family matters and focus his working-time commitment on running the day-to-day operations of Advangelists. He does not hold any directorships in any publicly-traded reporting companies.
Business Experience of our Director Candidates
Peter L. Zurkow. Mr. Zurkow serves as a consultant to Sustainability Industries since 2019. From 2014 to 2019, he worked at Perpetual Recycling Solutions LLC where he served as the Chief Executive Officer and the head of sales and raw materials procurement. From 2011 to 2013, Mr. Zurkow worked at Britton Hill Capital where he served as Managing Director and Head of Corporate Finance. From 2010 to 2012, Mr. Zurkow worked at Advanced Brain Technologies where he served as Acting EVP and Director of Finance and Business Development. Prior to that Mr. Zurkow worked in management positions in investment banking, fixed income and asset management as various securities firms and funds. Mr. Zurkow brings knowledge and experience in corporate finance, financial matters, and investments, with a background in law. His experience will help the Company with its corporate financing strategies and financial matters. Mr. Zurkow is a graduate of Harvard College, with an A.B., cum laude, in 1975 and a graduate of Syracuse University College of Law, with a J.D., magna cum laude, in 1978. From 2012 to 2014, Mr. Zurkow served as a director and member of the audit committee for National Holdings Corporation, a public company until it was acquired by Fortress Biotech. From 1992 through 2005 Mr. Zurkow served a Directoras director (and Chairman of the Board from 1999 to 2002) of Penn Traffic, a public company until it acquired by Giant Eagle and Tops Markets. From 1996 to 1998 he served as a Director of Streamline, Inc., a former public company. From 1994 through 1996 Mr. Zurkow served as a Directordirector and representative of majority investor for Kash n’ Karry Supermarkets, then a public company.
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Michael A. Wright. Mr. Wright works at Seiden Krieger Associates, where he has served as an Executive Vice President and the head of Human Resources and Diversity Practice since 2018.2021. From 2009 to 2019, Mr. Wright worked at Covanta Holding Corporation where he served as Chief Human Resources Officer. From 1984 to 2008, Mr. Wright worked at the Atria family of companies (Kraft and Philip Morris) where he served in various roles including Vice President of Human Resources and HR Technology. Mr. Wright brings knowledge and experience in human resources, human resources technology and diversity. Mr. Wright is a graduate of North Carolina State University, with a B.S. in 1984, and a graduate of Columbia University with aan MBA in 1996. Mr. Wright currently serves as the Chair of the HR/Legal committee and Vice Chair of the Board of Directors of the YMCA of Greater Monmouth County. He is also a member of the Board of Trustees and President of the Advisory Council for Lunch Break.
Anthony IacovoneAnne S. Provost. Mr. Iacovone is currently the Co-Founder and, has been employed full-time with TNR Technical, Inc. in various capacities since 2018,1996. She has served as its Chief Financial Officer since 2008 and was recently elected as Acting President. Prior to TNR, she worked as a Business Manager with the Chief Executive OfficerOrlando Business Journal. She graduated from the University of BioSymetrics, Inc. and Barometric Inc. From 2010 to 2018, Mr. Iacovone worked at AdTheorent/Ad Tech where he served as the Chief Executive Officer. Mr. Iacovone brings knowledge and experienceCentral Florida in 1991 with a BSBA, Accounting. She completed her undergraduate degree while working full-time in the technology and advertising industries. His experience will helpaccounting departments of various Orlando law firms. In 2008, she obtained an Executive MBA from the Company with its business development strategies. Mr. Iacovone serves as an advisory board memberUniversity of Accelerate NY Biotech Seed Fund, BrandVerge, Commerce Signals, EVZDRP, PainQX, Prospect Dugout, Targagenix and Wylie. As an advisory board member Mr. Iacovone provides counsel on business and advertising technology industry issues. He is also the founder of the Beautiful Lives Project, a not-for-profit organization that brings sports and leisure accessibility to disabled individuals throughout the United States. He previously served as a director of Mobiquity from January 2019 to May 2019, when he stepped down to for personal reasons and he has now agreed to rejoin our board of directors.Central Florida.
Family RelationshipsBoard Committees
There are no family relationships among any of our executive officers and directors.
Director Attendance at Meetings
Our board of directors conducts its business through meetings, both in person and telephonic, and by actions taken by written consent in lieu of meetings. During the year ended December 31, 2020, our board of directors held no meetings and acted through unanimous written consents six times. Our board of directors encourages all directors to attend our future annual meetings of stockholders unless it is not reasonably practicable for a director to do so.
Corporate Governance
Our business, property and affairs are managed by, or under the direction of, our Board, in accordance with the New York Business Corporation Law and our by-laws. Members of the Board are kept informed of our business through discussions with the Chief Executive Officer and other key members of management, by reviewing materials provided to them by management.
We continue to review our corporate governance policies and practices by comparing our policies and practices with those suggested by various groups or authorities active in evaluating or setting best practices for corporate governance of public companies. Based on this review, we have adopted, and will continue to adopt, changes that the Board believes are the appropriate corporate governance policies and practices for our Company. We have adopted changes and will continue to adopt changes, as appropriate, to comply with the Sarbanes-Oxley Act of 2002 and subsequent rule changes made by the SEC, and the listing rules of the NASDAQ Capital Market and any applicable securities exchange.
Director Qualifications and Diversity
The board seeks independent directors who represent a diversity of backgrounds and experiences that will enhance the quality of the board’s deliberations and decisions. Candidates shall have substantial experience with one or more publicly traded companies or shall have achieved a high level of distinction in their chosen fields. The board is particularly interested in maintaining a mix that includes individuals who are active or retired executive officers and senior executives, particularly those with experience in the finance and capital market industries.
In evaluating nominations to the board of directors, our board also looks for certain personal attributes, such as integrity, ability and willingness to apply sound and independent business judgment, comprehensive understanding of a director’s role in corporate governance, availability for meetings and consultation on Company matters, and the willingness to assume and carry out fiduciary responsibilities. Qualified candidates for membership on the board will be considered without regard to race, color, religion, sex, ancestry, national origin or disability.
Oversight of Risk Management
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, financial risks, legal and regulatory risks and others, such as the impact of competition. Management is responsible for the day-to-day management of the risks that we face, while our board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors is responsible for satisfying itself that the risk management processes designed and implemented by management are adequate and functioning as designed. Our board of directors assesses major risks facing our Company and options for their mitigation in order to promote our stockholders’ interests in the long-term health of our Company and our overall success and financial strength. A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for us. The involvement of our full board of directors in the risk oversight process allows our board of directors to assess management’s appetite for risk and also determine what constitutes an appropriate level of risk for our Company. Our board of directors regularly includes agenda items at its meetings relating to its risk oversight role and meets with various members of management on a range of topics, including corporate governance and regulatory obligations, operations and significant transactions, risk management, insurance, pending and threatened litigation and significant commercial disputes.
While our board of directors is ultimately responsible for risk oversight, we plan to establish various committees of our board of directors to oversee risk management in their respective areas and regularly report on their activities to our entire board of directors. In particular, the Audit Committee will have the primary responsibility for the oversight of financial risks facing our Company. The Audit Committee’s charter will provide that it will discuss our major financial risk exposures and the steps we have taken to monitor and control such exposures. Our board of directors will also delegate primary responsibility for the oversight of all executive compensation and our employee benefit programs to the Compensation Committee. The Compensation Committee will strive to create incentives that encourage a level of risk-taking behavior consistent with our business strategy.
We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing our Company and that our board’s leadership structure provides appropriate checks and balances against undue risk taking.
Code of Business Conduct and Ethics
Our board of directors has adopted a code of ethical conduct that applies to our principal executive officer, principal financial officer and senior financial management. This code of ethical conduct is embodied within our Code of Business Conduct and Ethics, which applies to all persons associated with our Company, including our directors, officers and employees (including our principal executive officer, principal financial officer, principal accounting officer and controller). In order to satisfy our disclosure requirements under the Exchange Act, we will disclose amendments to, or waivers of, certain provisions of our Code of Business Conduct and Ethics relating to our chief executive officer, chief financial officer, chief accounting officer, controller or persons performing similar functions on our website promptly following the adoption of any such amendment or waiver. The Code of Business Conduct and Ethics provides that any waivers of, or changes to, the code that apply to the Company’s executive officers or directors may be made only by the Audit Committee. In addition, the Code of Business Conduct and Ethics includes updated procedures for non-executive officer employees to seek waivers of the code.
Board Leadership Structure
In accordance with the Company's by-laws, the Chairman of the Board presides at all meetings of the board. Currently, the Chief Executive Officer is held by a person who is not the Chairman. The Company has no fixed policy with respect to the separation of these titles.
Committees of our board of directors
Our board of directors will establish and delegate certain responsibilities to its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, to be formed.
Audit Committee
We will establish a separately designatedThe Board has established an Audit Committee in accordance with Section 3(a)(58)(A)currently consisting of the Exchange Act.Ms. Provost (Chairman) and Messrs. Zurkow and Wright. The Audit Committee’s primary dutiesfunctions are to oversee and responsibilities include monitoringreview: the integrity of ourthe Company’s consolidated financial statements monitoringand other financial information furnished by the independence and performance of our external auditors, and monitoring ourCompany, the Company’s compliance with applicable legal and regulatory requirements. The functionsrequirements, the Company’s systems of internal accounting and financial controls, the independent auditor’s engagement, qualifications, performance, compensation and independence, related party transactions, and compliance with the Company’s Code of Business Conduct and Ethics.
Each member of the Audit Committee also include reviewing periodically with our independent registered public accounting firmis “independent” as that term is defined under the performance of the services for which they are engaged, including reviewing the scope of the annual audit and its results, reviewing with management and the auditors the adequacy of our internal accounting controls, reviewing with management and the auditors the financial results prior to the filing of quarterly and annual reports, reviewing fees charged by our independent registered public accounting firm and reviewing any transactions between our Company and related parties. Our independent registered public accounting firm reports directly and is accountable solely to the Audit Committee. The Audit Committee has the sole authority to hire and fire the independent registered public accounting firm and is responsible for the oversight of the performance of their duties, including ensuring the independence of the independent registered public accounting firm. The Audit Committee also approves in advance the retention of, and all fees to be paid to, the independent registered public accounting firm. The rendering of any auditing services and all non-auditing services by the independent registered public accounting firm is subject to prior approval of the Audit Committee.
The Audit Committee will operate under a written charter. The Audit Committee is required to be composed of directors who are independent under theapplicable rules of the SEC and the listing standardsapplicable rules of the NASDAQ Stock Market.Nasdaq. The SEC’s independence requirement providesBoard has determined that members of the Audit Committee may not accept directly or indirectly any consulting, advisory or other compensatory fee from us or any of our subsidiaries other than their directors’ compensation. In addition, under SEC rules, aneach Audit Committee member who is an affiliate ofhas sufficient knowledge in financial and auditing matters to serve on the issuer (other than through service as a director) cannot be deemed to be independent.
Committee. The proposed members of the Audit Committee are Peter Zurkow, the Chairperson of the Audit Committee, Michael Wright and Dean Julia. Messrs. Zurkow and Wright have been determined by the board of directors to be independent under the NASDAQ listing standards and rules adopted by the SEC applicable to audit committee members when they become directors. The board of directors hasBoard determined that Ms. Provost and Mr. Zurkow qualifies asis an “audit committee financial expert”expert,” as defined under the applicable rules adopted byof the SEC and the Sarbanes Oxley Act.applicable rules of The Nasdaq Stock Market.
Compensation Committee
The Compensation Committee of the Board of Directors is currently composed of the following three non-employee directors: Mr. Wright (Chairman) and Mr. Zurkow and Ms. Provost. None of these Compensation Committee members was an officer or employee of the Company during the year. Each member of the Compensation Committee is “independent” as that term “Financial Expert” is defined under the Sarbanes-Oxley Actapplicable rules of 2002 as a person who has the following attributes: an understandingSEC and the applicable rules of generally accepted accounting principles and financial statements; has the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the company’s financial statements, or experience actively supervising one or more persons engaged in such activities; an understanding of internal controls and procedures for financial reporting; and an understanding of audit committee functions.
Nasdaq. The Audit Committee has not been formed yet.
Compensation Committee
We will establish a separately designated Compensation Committee. The primary duties and responsibilities of the Compensation Committee are to review, modify and approveinclude overseeing the overall compensation policies forevaluation of executive officers (including the Chief Executive Officer) of the Company, includingdetermining the compensation of executive officers of the Company, and overseeing the management of risks associated therewith. The Compensation Committee determines and approves the Chief Executive Officer’s compensation. The Compensation Committee also administers the Company’s equity-based plans and makes recommendations to the board with respect to actions that are subject to approval of the board regarding such plans. The Compensation Committee also reviews and makes recommendations to the board with respect to the compensation of directors. The Compensation Committee monitors the risks associated with the Company’s compensation policies and practices as contemplated by Item 402(s) of Regulation S-K.
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board of Directors is currently composed of Messrs. Zurkow (Chairman) and Wright and Ms. Provost. None of these members was an officer or employee of the Company during the year. Each member of the Nominating and Corporate Governance Committee is “independent” as that term is defined under the applicable rules of the SEC and the applicable rules of NasdaqCM. The Nominating and Corporate Governance Committee nominates individuals to be elected to the board of directors by our stockholders. The Nominating and Corporate Governance Committee considers recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in our bylaws and will apply the same criteria to all persons being considered.
Executive Officers
The following table sets forth certain information regarding our current executive officers:
NAME | AGE | POSITION | ||
Dean L. Julia | 55 | Chief Executive Officer/President/Treasurer/Director/Co-Founder/Secretary | ||
Paul Bauersfeld | 59 | Chief Technology Officer | ||
Sean J. McDonnell, CPA | 62 | Chief Financial Officer | ||
Sean Trepeta | 55 | President of Mobiquity Networks /Secretary of the Company | ||
Deepanker Katyal | 37 | Chief Executive Officer of Advangelists |
Our executive officers are elected by, and serve at the discretion of, our Board. The business experience for the past five years, and in some instances, for prior years, of each of our executive officers is as follows:
Dean L. Julia. For Mr. Julia’s biography, please see the section entitled “Directors.”
Paul Bauersfeld. Mr. Bauersfeld works at Mobiquity Technologies, Inc. where he has served as the Chief Technology Officer since June 2013. From 2003 to 2013, he worked at Varsity Networks, an online media and services company dedicated to serving the local sports market through technology, which he founded and where he served as its Chief Executive Officer. From 2000 to 2001, he worked at MessageOne, where he served as its Chief Executive Officer. From 1999 to 2000, he worked at Ziff-Davies where he served as its Vice President of eCommerce. From 1997 to 1999, he worked at Viacom’s Nickelodeon Online, where he served as its Technology Director. From 1996 to 1997, he worked at GiftOne, where he served as its President. From 1988 to 1993, he worked at Apple Computer where he served in various engineering positions. From 1986 to 1988 he worked at Xerox Corporation. Mr. Bauersfeld brings over 20 years of knowledge and experience as an executive, engineer and entrepreneur in the technology, and software product development industries. His experience in these industries will help the company develop its products and technologies. Mr. Bauersfeld is a graduate of the Rochester Institute of Technology with a B.S. in Electrical Engineering in 1986. Mr. Bauersfeld does not hold, and has not previously held, any directorships in any publicly traded reporting companies.
Sean J. McDonnell, CPA. Mr. McDonnell works at Mobiquity Technologies, Inc. where he has served as the Chief Financial Officer since January 2005. From January 1990 to present, he has owned and operated Sean J. McDonnell CPA, P.C., a private accounting and tax practice. From 1985 to 1990, he worked at Breiner & Bodian CPAs where he served as a senior staff member. Mr. McDonnell brings knowledge and experience in the accounting, finance and tax industries. Mr. McDonnell is a graduate of Dowling College with a Bachelor of Business Administration in 1984. Mr. McDonnell does not hold, and has not previously held, any directorships in any reporting companies.
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Sean Trepeta. Mr. Trepeta works at our wholly owned subsidiary, Mobiquity Networks, Inc. where he has served as President since January 2011. He is also the Secretary of the Company since November 2021. From 2007 to 2011, he worked at Varsity Networks where he served as its President. From 1998 to 2007, Mr. Trepeta worked at OPEX Communications, Inc., a telecommunication service provider specializing in traditional long-distance, wireless, and dedicated services, where he served as its President. From 1996 to 1998 he worked at U.S. Buying Group, Inc., where he served as Vice President of Sales and Marketing and was responsible for developing a small business-buying program, which included value added services such as overnight shipping, office supplies, and computer software products, as well as a full line of telecommunications services. Mr. Trepeta also developed and implemented the agent and carrier divisions of U.S. Buying Group. Mr. Trepeta brings 25 years of knowledge and experience in sales and marketing to our Company to help us grow sales and develop marketing strategies. Mr. Trepeta is a graduate of the State University of New York at Cortland with a B.S. in Education in 1990. Except for Mobiquity Technologies, Inc., Mr. Trepeta does not hold, and has not previously held, any directorships in any publicly traded reporting companies. We plan to have a board of directors comprised of five members, including three independent directors if and when we are approved to have our common stock listed on the NASDAQ Capital Market. Mr. Trepeta is expected to resign from the board if this occurs, on the listing date of our common stock on the Nasdaq Capital Market to accommodate this board restructure.
Deepanker Katyal. Mr. Katyal works at the Company’s wholly owned subsidiary, Advangelists, LLC where he has served as the Chief Executive Officer since the 2017 (prior to the Company’s acquisition of an interest in Advangelists by merger in November 2018). From January 2017 to present, he has also served as an advisor providing business and other senior management; establishproduct advice to Q1media, a digital media services company. Additionally, from 2016 to present, he has served as a strategic advisor to Silicon Valley Stealth Mode Products, a private company. From May 2016 to April 2017, he served as a strategic advisor to Airupt Inc., a mobile marketing platform for brands. From May 2016 to March 2017, he was head of Partnership and assessStrategy for Adtile Technologies, a mobile publishing and advertising solution company. From November 2015 to 2016, he served as a strategic advisor to Moonraft Innovation Labs, a company that creates customer experiences to differentiate the adequacy of director compensation;entities’ clients in the market by creating and approve the adoption, amendmentdesigning interactive experiences across physical and terminationdigital customer touch points. From April 2014 to May 2016, he also served as a member of the Company’s stock option plans, pensioninnovation team at Opera Mediaworks, a mobile advertising platform company. Mr. Katyal brings knowledge and profit-sharing plans, bonus plansexperience in software engineering, leading business development efforts, strategic partnerships, and similar programs. The Compensation Committee may delegate to one or more officers the authority to make grants of optionsproduct development and restricted stock to eligible individuals other than officers and directors, subject to certain limitations. Additionally, the Compensation Committeestrategy. His experience will have the authority to form subcommittees and to delegate authority to any such subcommittee. The Compensation Committee will also have the authority, in its sole discretion, to select, retain and obtain, at the expense ofhelp the Company advicegrow and assistancedevelop its technology and product strategies. Mr. Katyal was a director of our Company from internal or external legal, accounting or other advisorsDecember 2018 following our merger transaction with Advangelists until May 2020, when he stepped down from that position to attend to family matters and consultants. Moreover,focus his working-time commitment on running the Compensation Committee will have the sole authority to retain and terminateday-to-day operations of Advangelists. He does not hold any compensation consultant to assistdirectorships in the evaluation of director, Chief Executive Officer or senior executive compensation, including sole authority to approve such consultant’s reasonable fees and other retention terms, all at the Company’s expense.any publicly traded reporting companies.
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The Compensation Committee will operate under a written charter. All members of the Compensation Committee must satisfy the independence requirements of NASDAQ applicable to Compensation Committee members. In determining the independence of members of the Compensation Committee, NASDAQ listing standards require our board of directors to consider certain factors, including, but not limited to:
Under our planned Compensation Committee Charter, members of the Compensation Committee also must qualify as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, and as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act.
The Compensation Committee will consist of Michael Wright, Peter Zurkow and Anthony Iacovone. Mr. Wright is the Chairperson of the Compensation Committee. Each of the Compensation Committee members has been determined by the board of directors to be independent under NASDAQ listing standards applicable to compensation committee members, outside directors under the Internal Revenue Code, and non-employee directors under Rule 16b-3 under the Exchange Act.
The Compensation Committee has not been formed yet.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee identifies, reviews and evaluates candidates to serve on the Board; reviews and assesses the performance of the board of directors and the committees of the Board; and assesses the independence of our directors. The Nominating and Corporate Governance Committee is also responsible for reviewing the composition of the Board’s committees and making recommendations to the entire board of directors regarding the chairpersonship and membership of each committee. In addition, the Nominating and Corporate Governance Committee is responsible for developing corporate governance principles and periodically reviewing and assessing such principles, as well as periodically reviewing the Company’s policy statements to determine their adherence to the Company’s Code of Business Conduct and Ethics.
The Nominating and Corporate Governance Committee has adopted a charter that identifies the procedures whereby Board of Director candidates are identified primarily through suggestions made by directors, management and stockholders of the Company. We have implemented no material changes in the past year to the procedures by which stockholders may recommend nominees for the Board. The Nominating and Corporate Governance Committee will consider director nominees recommended by stockholders that are submitted in writing to the Company’s Corporate Secretary in a timely manner and which provide necessary biographical and business experience information regarding the nominee. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the criteria considered by the Nominating Committee, based on whether or not the candidate was recommended by a stockholder. The board of directors does not prescribe any minimum qualifications for director candidates, and all candidates for director will be evaluated based on their qualifications, diversity, age, skill and such other factors as deemed appropriate by the Nominating and Corporate Governance Committee given the current needs of the board of directors, the committees of the board of directors and the Company. Although the Nominating and Corporate Governance Committee does not have a specific policy on diversity, it considers the criteria noted above in selecting nominees for directors, including members from diverse backgrounds who combine a broad spectrum of experience and expertise. Absent other factors which may be material to its evaluation of a candidate, the Nominating and Corporate Governance Committee expects to recommend to the board of directors for selection incumbent directors who express an interest in continuing to serve on the Board. Following its evaluation of a proposed director’s candidacy, the Nominating and Corporate Governance Committee will make a recommendation as to whether the board of directors should nominate the proposed director candidate for election by the stockholders of the Company.
The Nominating and Corporate Governance Committee operates under a written charter. No member of the Nominating and Corporate Governance Committee may be an employee of the Company, and each member must satisfy the independence requirements of NASDAQ and the SEC.
The Nominating and Corporate Governance Committee currently consists of Gene Salkind, who is the Chairperson of the committee, Dean Julia and Peter Zurkow. Peter Zurkow has been determined by the board of directors to be independent under NASDAQ listing standards.
The Nominating and Corporate Governance Committee has not been formed yet.
EXECUTIVE COMPENSATION
The following table sets forth the overall compensation earned over the fiscal years ended December 31, 20202022, and 20192021 by:
· | each person who served as the principal executive officer of the company during fiscal year |
· | the Company’s most highly compensated (up to a maximum of two) executive officers as of December 31, |
· | those two individuals, if any, who would have otherwise been in included in bullet point above but for the fact that they were not serving as an executive of the company as of December 31, |
Name and Principal | Salary | Bonus | Stock | Option Awards | All Other Compensation | Total | |||||||||||||||||||||
Position | Year | ($) | ($) | Awards | ($)(1) | ($)(2)(3) | ($) | ||||||||||||||||||||
Dean L. Julia | 2020 | $ | 275,539 | $ | 65,318 | – | $ | – | $ | 61,716 | $ | 402,573 | |||||||||||||||
CEO of the company | 2019 | $ | 360,000 | $ | 15,900 | – | $ | 3,575,000 | $ | 70,474 | $ | 4,021,374 | |||||||||||||||
Deepanker Katyal | 2020 | $ | 306,154 | $ | 7,622 | – | $ | – | $ | 38,119 | $ | 351,895 | |||||||||||||||
CEO of Advangelists | 2019 | $ | 400,000 | $ | – | – | $ | – | $ | 29,799 | $ | 429,799 | |||||||||||||||
Paul Bauersfeld | 2020 | $ | 229,616 | $ | 39,970 | – | $ | – | $ | 30,533 | $ | 300,119 | |||||||||||||||
Chief Technology Officer | 2019 | $ | 300,000 | $ | 7,950 | – | $ | 500,500 | $ | 35,166 | $ | 835,666 |
Name and Principal | Salary | Bonus | Stock | Option Awards | All Other Compensation | Total | ||||||||||||||||||||
Position | Year | ($) | ($) | Awards | ($)(1) | ($)(2)(3) | ($) | |||||||||||||||||||
Dean L. Julia | 2022 | $ | 346,154 | $ | – | – | $ | – | $ | 59,605 | $ | 405,759 | ||||||||||||||
CEO of the company | 2021 | $ | 286,615 | $ | – | – | $ | 925,200 | $ | 58,590 | $ | 1,270,405 | ||||||||||||||
Deepanker Katyal | 2022 | $ | 387,666 | $ | – | – | $ | – | $ | 40,086 | $ | 427,752 | ||||||||||||||
CEO of Advangelists | 2021 | $ | 324,616 | $ | – | – | $ | – | $ | 39,702 | $ | 364,318 | ||||||||||||||
Paul Bauersfeld | 2022 | $ | 288,462 | $ | – | – | $ | – | $ | 31,800 | $ | 320,262 | ||||||||||||||
Chief Technology Officer | 2021 | $ | 238,846 | $ | – | – | $ | 514,000 | $ | 27,365 | $ | 780,211 |
(1)The options and restricted stock awards presented in this table for fiscal years 20202021 and 20192021 reflect the full grant date fair value, as if the total dollar amount were earned in the year of grant. The stock awards are valued based on the fair market value of such shares on the date of grant and are charged to compensation expense over the related vesting period. The options are valued at the date of grant based upon the Black-Scholes method of valuation, which is expensed over the service period over which the options become vested. As a general rule, for time-in-service-based options, the company will immediately expense any option or portion thereof which is vested upon grant, while expensing the balance on a pro rata basis over the remaining vesting term of the option.
(2)Includes all other compensation not reported in the preceding columns, including (i) perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000; (ii) any “gross-ups” or other amounts reimbursed during the fiscal year for the payment of taxes; (iii) discounts from market price with respect to securities purchased from the company except to the extent available generally to all security holders or to all salaried employees; (iv) any amounts paid or accrued in connection with any termination (including without limitation through retirement, resignation, severance or constructive termination, including change of responsibilities) or change in control; (v) contributions to vested and unvested defined contribution plans; (vi) any insurance premiums paid by, or on behalf of, the company relating to life insurance for the benefit of the named executive officer; and (vii) any dividends or other earnings paid on stock or option awards that are not factored into the grant date fair value required to be reported in a preceding column.
(3)Includes compensation for service as a director described under Director Compensation, below.
For a description of the material terms of each named executive officers’ employment agreement, including the terms of the terms of any common share purchase option grants, see that section of this prospectus captioned “Employment Agreements.”
No outstanding common share purchase option or other equity-based award granted to or held by any named executive officer in the past two years were re-priced or otherwise materially modified, including extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined, nor was there any waiver or modification of any specified performance target, goal or condition to payout, except as follows:
For a description of the material terms of any contract, agreement, plan or other arrangement that provides for any payment to a named executive officer in connection with his or her resignation, retirement or other termination, or a change in control of the company see “Employment Agreements” in this prospectus.
The number of shares of common stock referred to in this “Executive Compensation” section gives effect to the one-for 400 share reverse stock split that we effectuated on September 9, 2020, unless the context clearly indicates otherwise.
Executive Officer Outstanding Equity Awards at Fiscal Year-End
The following table provides certain information concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive officers that were outstanding as of December 31, 2020.2022. The number of shares of common stock referred to in this “Executive Compensation” section gives effect to the one-for 400 share reverse stock split that we effectuated on September 9, 2020, unless the context clearly indicates otherwise.
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options(#) Exercisable | Number of Securities Underlying Unexercised Options(#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Market Value of Shares or Units of Stock That Have Not Vested Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested Employment Agreements In April of 2020, due to the COVID-19 pandemic all employees’ salaries were reduced by 40% and we terminated one employee. In October of 2020 the employees pay reduction was reduced to a 20% reduction where it stands Dean Julia Dean Julia is employed as the Company’s Chief Executive Officer under an employment agreement with an initial term of three years which commenced on April 2, 2019. Paul Bauersfeld Paul Bauersfeld is employed as the Company’s Chief Technology Officer under an at-will employment agreement which commenced on April 2, 2019. Mr. Bauersfeld’s monthly salary is $25,000. Mr. Bauersfeld is entitled to a quarterly bonus of at least 1% of gross revenue for each completed fiscal quarter, so long as the Company’s gross revenue meets or exceeds management’s stated goal. The quarterly bonus may be paid either in cash, common stock or stock options, at Mr. Bauersfeld’s election. Should his employment agreement be terminated prior to the end of any fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly bonus shall be paid within 30 days of termination. The Company's board of directors will determine a revenue target each year for the purpose of calculating the quarterly bonus in that year. Mr. Bauersfeld also received a signing bonus of 10-year options to purchase 25,000 shares, exercisable at $60 per share; 35% of which vested immediately, 35% of which vested on April 2, 2020 and 30% of which vested on April 2, 2021. Mr. Bauersfeld is entitled to participate in the Company’s health plans as well as indemnification by the Company to the fullest extent permitted by law, and the Company’s certificate of incorporation and bylaws. Mr. Bauersfeld’s employment agreement contains customary non-competition and non-solicitation of Company customers or Sean Trepeta Sean Trepeta is employed as President of our Deepanker Katyal Deepanker Katyal is employed as Chief Executive Officer of our During the term of the employment agreement, Mr. Katyal is entitled to a monthly allowance of up to $550 per month to cover lease or purchase finance costs of an automobile. Mr. Katyal’s employment agreement provides for indemnification by the Company to the fullest extent permitted by the Company’s certificate of incorporation and bylaws, as well as participation in all benefit plans, programs and perquisites as are generally provided by Advangelists to its employees, including medical, dental, life insurance, disability and 401(k) participation. Mr. Katyal’s employment agreement contains customary non-solicitation of Company customers or employees provisions during the term of the agreement and for one year after termination. The agreement provides for termination by Advangelists for cause upon 30 days’ prior written notice; and without cause after 60 days’ prior written notice. The employment agreement terminates automatically upon Mr. Katyal’s death, and it may also be terminated by Advangelists if Mr. Katyal is disabled for more than six consecutive months in any 12-month period—disability being the inability to substantially perform Mr. Katyal's duties and responsibilities by reason of mental or physical illness or injury. Mr. Katyal is entitled to terminate the agreement for “good reason”. If Mr. Katyal is terminated by Advangelists for cause, Advangelists is obligated only to pay Mr. Katyal amounts of base salary and expense reimbursements that were due or accrued prior to the termination date. If Mr. Katyal is terminated by Advangelists without cause, and provided Mr. Katyal is not in breach under the agreement, Advangelists is obligated to pay Mr. Katyal his compensation and expense reimbursements that would payable to Mr. Katyal for the remainder of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal’s employment is terminated as a result of his death, Advangelists is obligated to pay Mr. Katyal his salary though the date of termination, and his other compensation for the remainder of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal’s employment is terminated as a result of his disability, provided Mr. Katyal provides a general release, Advangelists is obligated to pay Mr. Katyal his salary though the date of termination, and his other compensation for the remainder of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal terminates his employment for good reason, and provided Mr. Katyal provides a general release, Advangelists is obligated to pay Mr. Katyal his compensation and expense reimbursements that would payable to Mr. Katyal for the remainder of the contractual employment term had Mr. Katyal remained an employee. Mr. Kaytal’s employment agreement provides for assignment of ownership rights regarding intellectual property created by Mr. Katyal relating to the Company’s business. On January 4, 2022, the Company entered into a new one-year employment agreement with Deepankar Katyal. His compensation and benefits under the new contract have not changed from the Agreement summarized above. Sean McDonnell Sean McDonnell is employed as the Company’s Chief Executive Officer on a non-full-time basis as an employee at-will with no employment agreement. He has a monthly base salary of $11,000 and he is eligible to receive options and other bonuses at the discretion of the board. Currently, Employee Benefit and Consulting Services Compensation Plans On January 3, 2005, our company established the 2005 Employee Benefit and Consulting Services Compensation Plan covering 5,000 shares, which 2005 Plan was ratified by our shareholders in February 2005. On August 12, 2005, the company’s stockholders approved a Administration Our board of directors administers the Plans, has the authority to determine and designate officers, employees, directors and consultants to whom awards shall be made; and the terms, conditions and restrictions applicable to each award (including, among other things, the option price, any restriction or limitation, any vesting schedule or acceleration of vesting, and any forfeiture restrictions). Types of Awards The Plans are designed to enable us to offer certain officers, employees, directors and consultants of us and our subsidiaries equity interests in us and other incentive awards in order to attract, retain and reward such individuals and to strengthen the mutuality of interests between such individuals and our stockholders. In furtherance of this purpose, the Plans contain provisions for granting non-statutory stock options and incentive stock options and common stock awards. Stock Options A “stock option” is a contractual right to purchase a number of shares of common stock at a price determined on the date the option is granted. An incentive stock option is an option granted under the Internal Revenue Code of 1986 to our employees with certain tax advantages to the grantee over non-statutory stock options. The option price per share of common stock purchasable upon exercise of a stock option and the time or times at which such options shall be exercisable shall be determined by the Board at the time of grant. Such option price in the case of incentive stock options shall not be less than 100% of the fair market value of the common stock on the date of grant and may be granted below fair market value in the case of non-statutory stock options. Incentive stock options granted to owners of 10% or more of our common stock must be granted at an exercise price of at least 110% of the fair market value of our common stock and may not have a term greater than five years. Also, the value of incentive options vesting to any employee cannot exceed $100,000 in any calendar year. The option price of our options must be paid in cash, money order, check or common stock of the company. The non-statutory stock options may also contain at the time of grant, at the discretion of the board, certain other cashless exercise provisions. These cashless exercise provisions are included in the currently outstanding non-statutory stock options granted by the board. Options shall be exercisable at the times and subject to the conditions determined by the Board at the date of grant, but no option may be exercisable more than ten years after the date it is granted. If the optionee ceases to be an employee of our company for any reason other than death, any incentive stock option exercisable on the date of the termination of employment may be exercised for a period of thirty days or until the expiration of the stated term of the option, whichever period is shorter. In the event of the optionee’s death, any incentive stock option exercisable at the date of death may be exercised by the legal heirs of the optionee from the date of death until the expiration of the stated term of the option or six months from the date of death, whichever event first occurs. In the event of disability of the optionee, any incentive stock options shall expire on the stated date that the Option would otherwise have expired or 12 months from the date of disability, whichever event first occurs. The termination and other provisions of a non-statutory stock option shall be fixed by the board of directors at the date of grant of each respective option. Common Stock Award Common stock awards are shares of common stock that will be issued to a recipient at the end of a restriction period, if any, specified by the board if he or she continues to be an employee, director or consultant of us. If the recipient remains an employee, director or consultant at the end of the restriction period, the applicable restrictions will lapse and we will issue a stock certificate representing such shares of common stock to the participant. If the recipient ceases to be an employee, director or consultant of us for any reason (including death, disability or retirement) before the end of the restriction period unless otherwise determined by the board, the restricted stock award will be terminated. Awards As of December 31, It is not possible to predict the individuals who will receive future awards under the Plans or outside the Plans or the number of shares of Common Stock covered by any future award because such awards are wholly within the discretion of the Board. The table below contains information as of December 31, Number of Shares Subject to Options/Warrants Average Exercise Price ($) per Share Value of Unexercised Options/ Warrants at Dec. 31, 2020 (1) Number of Shares Subject to Options/Warrants Average Exercise Price ($) per Share Value of Unexercised Options/ Warrants at Dec. 31, 2022 (1) (1)Value is normally calculated by multiplying (a) the difference between the market value per share at period end (i.e. Eligibility Our officers, employees, directors and consultants of Mobiquity and our subsidiaries are eligible to be granted stock options, and common stock awards. Termination or Amendment of the Plans The board may at any time amend, discontinue, or terminate all or any part of the Plans, provided, however, that unless otherwise required by law, the rights of a participant may not be impaired without his or her consent, and provided that we will seek the approval of our stockholders for any amendment if such approval is necessary to comply with any applicable federal or state securities laws or rules or regulations. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth certain information regarding beneficial ownership of our voting stock as of Unless otherwise noted below, the address of each person listed on the table is c/o Mobiquity Technologies, Inc. at the address set forth herein. To our knowledge, each person listed below has sole voting and investment power over the shares shown as beneficially owned except to the extent jointly owned with spouses or otherwise noted below. Beneficial ownership is determined in accordance with the rules of the SEC. The information does not necessarily indicate ownership for any other purpose. Under these rules, shares of stock which a person has the right to acquire (i.e., by the exercise of any option or the conversion of such person’s outstanding Preferred Stock) within 60 days after Percentage Prior to Offering Percentage After Offering * Less than one percent. CERTAIN We describe below all transactions and series of similar transactions, other than compensation arrangements, during our last three fiscal years, to which we were a party or will be a party in which: Compensation arrangements for our directors and named executive officers are described herein under Employment Agreements and Executive Compensation We have entered into various employment agreements as described under the heading “Executive Compensation”. These agreements also provide for us to indemnify such officers and/or directors to the maximum extent permitted by law. We also carry directors’ and officers’ liability insurance which protects each of our officers and directors up to the policy maximum of Related Party Debt Financing On September 13, 2019, Dr. Gene Salkind, who is a director of the Company, and an affiliate of Dr. Salkind subscribed for 15% Senior Secured Convertible Promissory Notes and loaned the Company an aggregate of $2,300,000. These notes were amended and restated on December 31, 2019, by Amended and Restated 15% Senior Secured Convertible Promissory Notes which deferred interest payments from the date of the original notes to December 31, 2020, and added an aggregate interim payment of $250,000 payable on December 31, 2020, that covered the deferred interest payments. These notes were again amended and restated on April 1, 2021, by the Second Amended and Restated 15% Senior Secured Convertible Promissory Notes which reflected an additional principal amount of $150,000 loaned by Dr. Salkind, and also amended the interim payment date to December 31, 2021, and the conversion price from $32 to $4 per share. The notes are secured by the assets of the Company and its subsidiaries. The total amount loaned under the notes, as amended and restated, including the principal amount and the interim payment amount The notes, as amended and restated, The outstanding principal plus any accrued and unpaid interest, and the interim payment under the notes, The notes contain customary events of default, which, if uncured, entitle the holders to accelerate payment of the principal and all accrued and unpaid interest under their notes. In connection with the subscription of the notes and upon conversion thereof (if at all), the Company In the second quarter of 2020, we halted required interest payments under the September 2019 and June 30, 2021, Notes to Dr. Salkind and his affiliate due to economic hardships stemming from a downturn in our business and the related decline of our revenue resulting from the COVID 19 pandemic. Shares issued upon conversion of debt: During the nine months ended September 30, 2022, Dr. Gene Salkind, his wife, and a trust converted an aggregate of $2,562,500 of secured debt in exchange for 1,776,333 shares of common stock (at reduced exercise prices between $1.25 and $1.50 per share) as well as warrants to purchase 888,166 shares of common stock at an exercise price of $4.00 per share through September 2029. During the nine months ended September 30, 2022, a lender also converted $150,000 of debt into 75,000 shares of common stock at a reduced exercise price. The Company recorded an inducement expense of $101,000. During the nine months ended September 30, 2022, the three remaining convertible notes automatically converted $100,000 of outstanding debt and accrued interest of $8,425 into 27,107 shares of common stock at a conversion price of $4.00 per share. Notes to the Financial Statements and Other Disclosures The disclosures contained in this prospectus, in particular in the notes to our consolidated financial statements DESCRIPTION OF SECURITIES SOLD IN OFFERING Securities Offered in this General The following is a brief summary of certain terms and conditions of the Duration and Exercise Price The Series 2023 Warrants offered hereby have an exercise price of $___ per one and one-half share. The Series 2023 Warrants will be immediately exercisable and may be exercised at any time on or after the initial exercise date and on or before the five-year anniversary of the date of issuance. The exercise prices and numbers of shares of common stock issuable upon exercise are subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock. Series 2023 Warrants will be issued in certificated form only. Exercisability The Series 2023 Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of such holder’s Series 2023 Warrants to the extent that the holder would own more than 4.99% (or 9.99%, at the holder’s election) of our outstanding common stock immediately after exercise, except that upon notice from the holder to us, the holder may decrease or increase the limitation of ownership of outstanding stock after exercising the holder’s Series 2023 Warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series 2023 Warrants, provided that any increase in such limitation shall not be effective until 61 days following notice to us. Cashless Exercise If, at the time a holder exercises its Series 2023 Warrants, a registration statement registering the issuance of the shares of common stock underlying the Series 2023 Warrants under the Securities Act, Redemption On or after _____, 2023 (i.e. 180 days after the date of this prospectus), in the event that the Nasdaq CM closing price of our Transferability A Series 2023 Warrant may be transferred at the option of the holder upon surrender of the Series 2023 Warrant to us together with the appropriate instruments of transfer. Fractional Shares No fractional shares of common stock will be issued upon the exercise of the Series 2023 Warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price. Trading Market There is no established trading market for any of the Series 2023 Warrants, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Series 2023 Warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series 2023 Warrants will be limited. Rights as a Shareholder Except as otherwise provided in the warrants or by virtue of the holders’ ownership of shares of our common stock, the holders of Series 2023 Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until such Series 2023 Warrant holders exercise their Series 2023 Warrants. Fundamental Transaction In the event of a fundamental transaction, as described in the Series 2023 Warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the Series 2023 Warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Series 2023 Warrants immediately prior to such fundamental transaction. Waivers and Amendments No term of the Series 2023 Warrants may be amended or waived without the written consent of the holders of such Series 2023 Warrants. Pre-Funded Warrants General The term “pre-funded” refers to the fact that the purchase price of the pre-funded warrants in this offering includes almost the entire exercise price that will be paid under the pre-funded warrants, except for a nominal remaining exercise price of $0.0001. The purpose of the pre-funded warrants is to enable investors that may have restrictions on their ability to beneficially own more than The following is a brief summary of certain terms and conditions of the pre-funded warrants being offered by us. The following description is subject in all respects to the provisions contained in the form of pre-funded warrant, the form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part. Exercise Price Pre-funded warrants have an exercise price of $0.0001 per share. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets, including cash, stock or other property to our stockholders. Exercisability The pre-funded warrants are exercisable at any time after their original issuance and until exercised in full. The pre-funded warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and by payment in full of the exercise price in immediately available funds for the number of shares of common stock purchased upon such exercise. As an alternative to payment in immediately available funds, the holder may elect to exercise the pre-funded warrant through a cashless exercise, in which the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the pre-funded warrant. No fractional shares of common stock will be issued in connection with the exercise of a pre-funded warrant. Exercise limitations The pre-funded warrants may not be exercised by the holder to the extent that the holder, together with its affiliates, would beneficially own, after such exercise more than 4.99% of the shares of our common stock then outstanding (including for such purpose the shares of our common stock issuable upon such exercise). However, any holder may increase or decrease such beneficial ownership limitation upon notice to us, provided that such limitation cannot exceed 9.99%, and provided that any increase in the beneficial ownership limitation shall not be effective until 61 days after such notice is delivered. Purchasers of pre-funded warrants in this offering may also elect prior to the issuance of the pre-funded warrants to have the initial exercise limitation set at 9.99% of our outstanding shares of common stock. Transferability Subject to applicable laws, the pre-funded warrants may be offered for sale, sold, transferred or assigned without our consent. Exchange listing There is no established trading market for the pre-funded warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the pre-funded warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of the pre-funded warrants will be limited. Fundamental transactions In the event of a fundamental transaction, as described in the pre-funded warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, upon consummation of such a fundamental transaction, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the pre-funded warrants immediately prior to such fundamental transaction without regard to any limitations on exercise contained in the pre-funded warrants. No rights as a stockholder Except as otherwise provided in the pre-funded warrant or by virtue of such holder’s ownership of shares of our common stock, the holder of a pre-funded warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the pre-funded warrant. The pre-funded warrants will provide that holders have the right to participate in distributions or dividends paid on our common stock. DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Common Stock As of Dividends Each share of our common stock is entitled to receive an equal dividend, if one is declared. We cannot provide any assurance that we will declare or pay cash dividends on our common stock in the future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant. Our Board of Directors may determine it to be necessary to retain future earnings (if any) to finance our growth. See “Risk Factors” and “Dividend Policy.” Liquidation If our Company is liquidated, then assets that remain (if any) after the creditors are paid and the owners of preferred stock receive liquidation preferences (as applicable) will be distributed to the owners of our common stock pro rata. At the date of this prospectus, none of the Company’s series of preferred stock have liquidation preferences and they are treated the same as common shares on an as-converted basis for the purposes of distribution of assets upon liquidation. Voting Rights Each share of our common stock entitles the owner to one vote. There is no cumulative voting. A simple majority can elect all of the directors at a given meeting, and the minority would not be able to elect any director at that meeting. Preemptive Rights Owners of our common stock have no preemptive rights. We may sell shares of our common stock to third parties without first offering such shares to current stockholders. Redemption Rights We do not have the right to buy back shares of our common stock except in extraordinary transactions, such as mergers and court approved bankruptcy reorganizations. Owners of our common stock do not ordinarily have the right to require us to buy their common stock. We do not have a sinking fund to provide assets for any buy back. Conversion Rights Shares of our common stock cannot be converted into any other kind of stock except in extraordinary transactions, such as mergers and court approved bankruptcy reorganizations. All outstanding shares of our common stock are fully paid and non-assessable. The Exercisability The warrants are exercisable on the original issuance date and expire on the date that is five years after their original issuance. The warrants are exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice. In no event may the warrants be net cash settled or through a cashless exercise. Exercise Limitation A holder does not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of either 4.99% (or at the election of the holder, 9.99%) of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any increase in the beneficial ownership percentage will not be effective until the 61st day after the election is made. Exercise Price The warrants have an Adjustments The exercise price of the warrants and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment and in the case of stock splits, stock dividends, combinations, reclassifications and the like. Cashless Exercise If, at the time a holder exercises its warrant, there is no effective registration statement registering, or the prospectus contained therein is not available for an issuance to the holder of, the shares underlying the warrant, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares Transferability Subject to applicable laws, the warrants may be offered for sale, sold, transferred or assigned without our consent. Exchange Listing The warrants are listed on the Nasdaq Capital Market under the symbol “MOBQW”. There is no established trading market for the warrants being offered and Fundamental Transactions In the event of a “Fundamental Transaction” by the Company, such as a merger or consolidation of it with another company, the Rights as a Stockholder Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holder of a warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the warrant. Outstanding Derivative Securities Unless we indicate otherwise, all information in this prospectus does not include the following outstanding securities: · excludes 1,162,721 shares of our common stock issuable upon exercise of outstanding stock options by the members of our board of directors and third parties at a weighted average exercise price of $16.16 per share as of January 6, 2023; · excludes 2,613,636 shares of our common stock issuable upon exercise of warrants issued to our secured lender at an exercise price of $.44 per share; excludes 2,807,937 shares of our common stock issuable upon exercise of outstanding 2021 Warrants held by investors at an exercise price of $4.98 per share as of January 6, 2023; excludes 74,458 shares of common stock issuable upon the full exercise of the warrants at an exercise price of $5.1875 per share we granted to Spartan as an underwriter of our 2021 public offering; excludes 1,800,155 shares of our common stock issuable upon the exercise of other warrants that are outstanding as of the date of this prospectus exercisable at an average exercise price of $25.86 per share; and Authorized and Issued Preferred Stock The Company has 5,000,000 shares of Preferred Stock, par value $.0001 per share authorized. The Board has the right in its sole discretion to designate the rights and preferences of various series of Preferred Stock. It has designated the rights and preferences of the following outstanding preferred shares: Number of shares at February 6, 2023 Series AAA Preferred Stock The rights, preferences and limitations of the Series AAA Preferred Stock (the “Series AAA Shares”), are as follows: Series E Preferred Stock The rights, preferences and limitations of the Series E Preferred Stock (the “Series E Shares”), are as follows: Redemption Rights Conversion Rights New York Anti-Takeover Law Section 912 of the New York Business Corporation Law (the “BCL”), prohibits a New York corporation from engaging in certain business combinations with an interested shareholders and prevents certain persons from making a takeover bid for a New York corporation unless certain prescribed requirements are satisfied, or there is an exception. We are excepted from the provisions of Section 912 of the BCL because our shares of common stock are registered under Section 12 of the Securities Exchange Act of 1934. Limitation on Liability and Indemnification Matters The Company indemnifies directors, officers, employees and agents, and the heirs of personal representatives of such persons, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgement, actually and reasonably incurred by such person arising out of their function as a director, officer, employee or agent to the Company. Limitation of Liability of Directors Section 402(b) of the BCL permits a New York corporation to include in its certificate of incorporation a provision eliminating the potential monetary liability of a director to the corporation or its shareholders for breach of fiduciary duty as a director; provided that this provision may not eliminate the liability of a director (i) for acts or omissions in bad faith or which involve intentional misconduct or a knowing violation of law, (ii) for any transaction from which the director receives an improper personal benefit or (iii) for any acts in violation of Section 719 of the BCL. Section 719 provides that a director who votes or concurs in a corporate action will be liable to the corporation for the benefit of its creditors and shareholders for any damages suffered as a result of an action approving (i) an improper payment of a dividend, (ii) an improper redemption or purchase by the corporation of shares of the corporation, (iii) an improper distribution of assets to shareholders after dissolution of the corporation without adequately providing for all known liabilities of the corporation or (iv) the making of an improper loan to a director of the corporation. Our restated certificate of incorporation, as amended, provides that our directors shall not be liable to us or our shareholders for a breach of their duties to the fullest extent in which elimination or limitation of the liability of directors is permitted by the BCL. Indemnification of Officers and Directors Our restated certificate of incorporation, as amended, provides that we shall indemnify and hold harmless, to the fullest extent permitted by the BCL, each person (and their heirs, executors, or administrators) who was or is a party or is threatened to be made a party to, or is involved in, any civil, criminal, administrative or investigative action, suit or proceeding, by reason of the fact that such person is or was a director or officer of our Company or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. We are also obligated to pay the cost of the expenses incurred by our officers and directors (including attorney’s fees) in defending themselves in such proceedings in advance of final disposition if the officer or director agrees to repay the amount advanced in the event it is ultimately determined that the officer or director was not entitled to be indemnified by us as authorized by our restated certificate of incorporation, as amended. We are not obligated to indemnify any director or officer (or his or her heirs, executors or administrators) in connection with a proceeding initiated by such person unless the proceeding was authorized or consented to by our Board. We have entered into indemnification agreements with each of our current directors to effectuate the indemnification provisions of our restated certificate of incorporation, as amended. SEC Position on Indemnification for Securities Act Liabilities Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. Listing Our common stock Our Transfer Agent and Warrant Agent We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all liabilities, including judgments, costs and reasonable counsel fees that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity. UNDERWRITING Subject to the terms and conditions set forth in the underwriting agreement between us and the underwriters named below, for which Spartan Capital Securities, LLC, is acting as the representative (the Under the terms of the underwriting agreement, the underwriters are committed to purchase all of the The underwriters initially propose to offer our Over-Allotment Option We have granted to the underwriters an option, Discounts and Commissions
(1) We have agreed to pay the underwriters a total cash fee equal to 8% of the gross proceeds raised in this offering. We have also agreed to reimburse the underwriters for certain of its offering-related expenses of up to $200,000 plus 1% of the gross proceeds of this offering. In addition, we have agreed to issue Representative Warrants to purchase up to a number of shares of our common stock equal to 5% of the aggregate number of shares of common stock and pre-funded warrants being offered at an exercise price equal to 110% of the public offering price of the shares common stock. See “Plan of Distribution” for additional information and a description of the compensation payable to the underwriters.
We have also agreed to reimburse the
We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately
In connection with and upon closing of this offering, we shall pay to the Representative a non-accountable expense allowance equal to 1% of the gross proceeds received by us from the sale of the securities in this offering. Representative Warrants
We have agreed to issue to Spartan Capital Securities, LLC warrants (the “Representative Warrants”) to purchase up to
Stabilization
In accordance with Regulation M under the Exchange Act, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock, including short sales and purchases to cover positions created by short positions, stabilizing transactions, syndicate covering transactions, penalty bids and passive market making.
These activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result of these activities, the price of our common stock and warrants may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq Capital Market or otherwise and, if commenced, may be discontinued at any time.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common
Indemnification
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of such liabilities.
Discretionary Accounts
The underwriters have informed us that they do not expect to make sales to accounts over which they exercise discretionary authority in excess of 5% of the
Determination of the Public Offering Price
Prior to this offering, there has been a limited public market for our common
Lock-Up Agreements and Right of First Refusal
The foregoing restrictions Following the
Other Relationships
The representative and its affiliates may provide various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which they may receive customary fees and commissions. The
The
Electronic Distribution
A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters or selling group members, if any, participating in the offering. The representative may allocate a number of shares to the underwriters and selling group members, if any, for sale to their online brokerage account holders. Any such allocations for online distributions will be made by the representative on the same basis as other allocations.
Selling Restrictions
Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45 106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory.
The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33 105 Underwriting Conflicts (NI 33 105), the underwriters are not required to comply with the disclosure requirements of NI 33 105 regarding underwriter conflicts of interest in connection with this offering.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each, a Relevant Member State, an offer to the public of any shares of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
For the purposes of this provision, the expression an “offer to the public” in relation to any shares of our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our common stock to be offered so as to enable an investor to decide to purchase any shares of our common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United Kingdom
Each underwriter has represented and agreed that:
Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of shares.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or the ASIC, in relation to the offering.
This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons, the Exempt Investors, who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
LEGAL MATTERS
The validity of the
EXPERTS
The financial statements included in this prospectus as of years ended December 31,
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 233 Broadway, New York, New York 10279. You can obtain copies of these materials from the Public Reference Section of the SEC upon payment of fees prescribed by the SEC. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC’s website contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of that site is http://www.sec.gov.
We have filed a registration statement on Form S-1 with the SEC under the Securities Act of 1933, as amended, with respect to the securities offered in this prospectus. This prospectus, which is filed as part of a registration statement, does not contain all of the information set forth in the registration statement, some portions of which have been omitted in accordance with the SEC’s rules and regulations. Statements made in this prospectus as to the contents of any contract, agreement or other document referred to in this prospectus are not necessarily complete and are qualified in their entirety by reference to each such contract, agreement or other document that is filed as an exhibit to the registration statement. The registration statement may be inspected without charge at the public reference facilities maintained by the SEC, and copies of such materials can be obtained from the Public Reference Section of the SEC at prescribed rates. You may obtain additional information regarding our Company on our website, located at
MOBIQUITY TECHNOLOGIES, INC. Index to Financial Statements
Mobiquity Technology, Inc. Condensed Consolidated Balance Sheets (Unaudited)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Mobiquity Technology, Inc. Condensed Consolidated Statements of Operations (Unaudited)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Mobiquity Technology, Inc. Condensed Consolidated Statements of Stockholders' Equity (Unaudited) September 30, 2022
continued
Mobiquity Technology, Inc. Condensed Consolidated Statements of Stockholders' Equity (Unaudited) September 30, 2022
The accompanying notes are an integral part of these unaudited condensed consolidated financial
Mobiquity Technology, Inc. Condensed Consolidated Statements of
The accompanying notes are an integral part of these unaudited condensed consolidated financial
MOBIQUITY TECHNOLOGIES, INC. AND SUBSIDIARIES
September 30,
NOTE 1
NATURE OF OPERATIONS Mobiquity Technologies, Inc.
The
Liquidity, Going Concern and Management’s Plans These condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, for the nine months ended September 30, 2022, the Company had:
We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and
Without sufficient revenues from operations, if the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company may explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels. These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these condensed consolidated financial statements are issued. These condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Management’s strategic plans include the following:
Coronavirus (“COVID-19”) Pandemic During the three months and nine months ended September 30, 2022, the Company’s financial results and operations were not materially adversely impacted by the COVID-19 pandemic. However, in the prior two (2) years, the Company suffered from the Pandemic and drastically curtailed its operations. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends on future developments that are highly uncertain and cannot be predicted at this time. 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. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.
Business Segments and Concentrations The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as a single reporting segment. Customers in the United States accounted for 100% of our revenues. We do not have any property or equipment outside of the United States. Use of Estimates Preparing financial statements in conformity with U.S. GAAP requires management 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 and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material. Significant estimates include the fair value of equity instruments issued for services, valuation allowance of deferred tax assets, and useful life of intangible assets. Risks and Uncertainties The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure. The Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which Fair Value of Financial Instruments The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is The Company uses a three-tier fair value hierarchy to
The Company’s financial instruments, including cash, accounts receivable, and accounts payable and accrued expenses are carried at historical cost. At September 30, 2022 and December 31, 2021, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. The fair value of the Company’s convertible notes payable and notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. Cash and Cash Equivalents and Concentration of Credit Risk For purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to At September 30, 2022 and The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000. At September 30, 2022 and December 31, 2021, the Company did not experience any losses on cash balances in excess of FDIC insured limits. At September 30, 2022, and December 31, 2021, the Company exceeded FDIC insured limits by $582,321 and $5,103,273, respectively. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral. Two of our customers combined accounted for approximately 45% of accounts receivable. In addition, two customers combined accounted for approximately 48% of the Company’s revenue for the nine months ended September 30, 2022.
Management
operations.
Management evaluates the recoverability of the Company’s identifiable intangible assets and If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets. Expenditures for repair and maintenance which do not
Goodwill The Company’s goodwill of $1,352,865 represents the
The Company
Intangible Assets
In In 2020 and 2021, the Company identified triggering events due to the reduction in its projected revenue from adverse economic conditions caused by the COVID-19 pandemic and uncertainty for recovery given the volatility of the a net book value of zero.
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The Company uses a binomial model to determine fair value. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives, and debt discounts, and recognizes a net gain or loss on debt extinguishment. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. As of September 30, 2022, and December 31, 2021, the Company had no derivative liabilities. Debt Issue Cost Debt issuance cost paid to lenders, or third parties are amortized to interest expense in the condensed consolidated statements of operations, over the life of the underlying debt instrument, with the unamortized portion reported net with related principal outstanding on the condensed consolidated balance sheet. Revenue Recognition The Company’s revenues are generated from internet advertising, the Company recognizes revenue in accordance with ASC 606, Identify the contract with a customer A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. Identify the performance obligations Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with
significant financing component.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. Currently, the Company does not have any contracts that contain multiple performance obligations. Recognize revenue when or as the Company satisfies a performance obligation. The Company satisfies performance obligations at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days. Contract Liabilities Contract liabilities represent deposits made by customers before the satisfaction of performance obligation and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer based on the terms of the contract, the liability for the customer deposit is relieved and revenue is recognized. Revenues All revenues recognized was from internet advertising for all periods ended September 30, 2022, and September 30, 2021. Advertising Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the condensed consolidated statements of operations. The Company recognized $0 Stock-Based Compensation The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value of stock-based compensation, the Company considers the following assumptions in the Black-Scholes model:
Stock Warrants In connection with certain financing, consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that Income Taxes The
The Company
Diluted earnings per share is computed by dividing net income
The following potentially dilutive equity securities outstanding as of
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company,
Recent Accounting Pronouncements Changes to accounting principles are established by Credit Losses: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. In May 2019, the FASB issued ASU 2019-05, which provides transition relief for entities adopting ASU 2016-13. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt ASU No. 2019-05 in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date of ASU 2016-13. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). Under ASU 2021-08, an acquirer in a Fair Value Measurement of Equity Securities Subject to Recently Adopted Accounting Pronouncement In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), as
We adopted this pronouncement on January 1, 2022; however, the adoption of this standard did not have a material effect on the Company’s consolidated financial statements.
Certain prior period amounts have been reclassified for consistency with current period presentation. These reclassifications had no effect on the reported results of
On December
As a result of
NOTE 4 – INTANGIBLE ASSETS
The
The ATOS platform:
The
The ATOS platform was determined to be fully impaired as of December 31,
Future amortization, for the years ending December 31, is as follows:
NOTE 5 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE Summary of notes payable and convertible notes payable:
__________________
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(d) |
| |
On September 13, 2019, Dr. Gene Salkind, who is a director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible promissory notes (the “Notes”) and loaned to the Company an aggregate of $2,300,000 (the “Loans”) on a secured basis payable in three installments in September 13 received net $720.000, balance received October and November 2019.
On June 30, 2021, Dr. Gene Salkind, director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible promissory notes (the “Notes”) and loaned to the Company $150,000 (the “Loan”) on a secured basis.
The Notes bear interest at a fixed rate of 15% per annum, computed based on a 360-day year of twelve 30-day months and will be payable monthly in arrears. Interest on the Notes is payable in cash or, at the Lenders’ option, in shares of the Company’s common stock. The principal amount due under the Notes will be payable on September 30, 2029, unless earlier converted pursuant to the terms of the Notes.
Subject to the Company obtaining prior approval from the Company’s shareholders for the issuance of shares of common stock upon conversion of the Notes, if and to the extent required by the New York Business Corporation Law, the Notes will be convertible into equity of the Company upon the following events on the following terms:
· | The Salkind lenders may convert the notes at any time at a conversion rate of $4.00. |
· | The Company may convert the notes at any time that the trailing thirty (30) day volume weighted average price per share (as more particularly described in the Notes) of the Company’s common stock is above |
Upon conversion of the debt principal, the Company is to issue warrants to the debt holders for the purchase of common shares of the Company. The Notes containnumber of shares granted under the warrants is equivalent to 50% of the total shares issued under the debt principal converted. The warrants are immediately exercisable at a price of $4.00 per share through September 2029.
F-18 |
The notes contained customary events of default, which, if uncured, entitle the Lenders thereofholders to accelerate the due datepayment of the unpaid principal amount of, and all accrued and unpaid interest on,under their Notes.notes.
In connection withDuring the subscriptionnine months ended September 30, 2022, the debt holders converted all the remaining $2,052,500 of outstanding debt in two separate conversion transactions at mutually and board approved reduced conversion prices of $1.50 and $1.25 per share which also resulted in additional warrants being issued due to 50% warrant coverage based on the Notes, the Company issued to each Lender a warranttotal shares issued. A total of restricted common shares and warrants to purchase one share of the Company’s888,166 restricted common stock for every two shares of common stock issuable upon conversion of the Notes, at an exercise price of $48.00$4.00 per post-split share (the “Lender Warrants”).
On May 16, 2019,through September 2029 were issued in connection with these conversions. The Company determined that these transactions resulted in debt extinguishment accounting under Accounting Standards Codification 470-50, Debt Modifications and Extinguishments. As a result, the Company assumedrecorded a promissory note (the “AVNG Note”) payable to Deepankar Katyal (the “Payee”), as representativetotal loss on debt extinguishment for the nine months ended September 30, 2022, of $855,296, which represented the excess of the former owners of AVNG, whichdebt reacquisition price over its carrying value at the time of assumption had a remaining principalthe conversions. Accrued and unpaid interest on the Salkind convertible notes of $235,563 remains outstanding at September 30, 2022 and is included in accounts payable and accrued expenses on the accompanying balance sheet which can be converted at the original conversion rate of $7,512,500. Simultaneously with$4.
NOTE 6 – STOCKHOLDERS’ EQUITY
Shares Issued for Cash
During the assumption of the AVNG Note, the AVNG Note was amended and restated (the “First Amended AVNG Note”). Effective as ofnine months ended September 13, 2019,30, 2022, the Company and Payee entered into a Second Amended and Restated Promissory Note (the “Second Amended AVNG Note”), in the principal amount of $6,750,000, pursuant to which the repayment terms under the First Amended AVNG Note were amended and restated as follows:
The Second Amended AVNG Note provides that upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class E Preferred Stock issuable pursuant tocommon stock for $1,137,500 of cash proceeds. During the terms ofnine months ended September 30, 2021, the Second Amended AVNG Note, and anyCompany issued shares of the Company’s common stock issued upon the conversionfor $898,990 of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First Amended AVNG Note.cash proceeds.
NOTE 5: INCOME TAXES
The Company accountsShares Issued for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income TaxesServices”. 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 carry forwards. 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.
The Company conducts business, and files federal and state income, franchise or net worth, tax returns in the United States, in various states within the United States. The Company determines it’s filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year statutes of limitations for income tax assessment vary from state to state. Tax authorities of the U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years.
NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIT)
Shares issued for services:
During the sixnine months ended JuneSeptember 30, 2020,2022, the Company issued shares of common stock, at $12.00 to $40.00$1.69 per share for $375,00084,500 in exchange for services rendered. During the six monthsquarter ended JuneSeptember 30, 2021, the Company issued shares of common stock, at $7.50 to $9.73 per share for $119,800173,30081,825 in exchange for services rendered.
Shares issued for interest:upon conversion of debt:
During the sixnine months ended JuneSeptember 30, 20202022, Dr. Gene Salkind, his wife, and June 30, 2021, the Company did not issue any sharesa trust converted an aggregate of $2,562,500 of secured debt in exchange for interest.
In the six months ended June 30, 2020, one holder of our Series E Preferred Stock converted shares of common stock as well as warrants to purchase 9,843888,166 post-split shares of our common stock and warrants at an exercise price of $48.00$4.00 per share with an expiration date of January 8, 2025. During the six months ended June 30, 2021 there were no conversion of our Series E Preferred stock.through September 2029, see Note 5.
During the sixnine months ended JuneSeptember 30, 2020, , post-split, warrants were converted to common stock, at $8.00 to $28.00 per share. No warrants were converted during the six months ended June 30, 2021.
In the six months ended June 30, 2020, one note holder2022, a lender also converted $30,695150,000 of their notedebt into post-split common shares at a conversion rate of $16 per post-split share and cash payment of $5,000. During the six months ended June 30, 2021 four note holders converted $584,000 of their notes into common shares at a conversion at $4.81 to $5.00 per share.
Stock and Loan Transactions for Cash
On April 8, 2021, the Company sold shares of its restricted common stock at $ per share to one investor.
On April 14, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $100,000 note and restricted shares of common stock asat a loan origination fee.reduced exercise price of $2.00 per share. The Company recorded an inducement expense of $101,000, see Note 5.
During the nine months ended September 30, 2022, the three remaining convertible notes automatically converted $100,000 of outstanding debt and accrued interest of $8,425 into shares of common stock at a conversion price of $ per share, see Note 5.
On April 16, 2021, the Company sold shares of restricted common stock at $ per share to one investor.
On April 21, 2021, the $100,000 loan from April 14, 2021, was retired out of the proceeds and sale by the Company of shares of its common stock at $ per share.
On April 30, 2021, the Company issued a two-month loan to an investor in exchange for $100,000. The principal of the note together with an origination fee and accrued interest thereon totaling $105,000 and shares of restricted common stock is due on June 30, 2021.
On May 10, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $105,000 note which includes a $5,000 loan origination fee.
On May 17, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $100,000 note and restricted common stock as a loan origination fee.
On May 18, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $100,000 note and restricted common stock as a loan origination fee.
On May 19, 2021, the Company received a short-term $50,000 loan from one investor. The Company issued a $50,000 note and restricted common stock as a loan origination fee.
On May 24, 2021, the Company received a short-term $50,000 loan from one investor. The Company issued a $50,000 note and restricted common stock as a loan origination fee.
On June 9, 2021, the Company received short-term $400,000 loans from three investors. The Company issued $420,000 notes including $20,000 loan origination fee and restricted common stock as a loan origination fees.
On June 18, 2021, the Company received short-term $120,000 loans from two investors. The Company issued $132,000 notes including $12,000 loan origination fees.
Consulting Agreements
On May 28, 2021, the Company entered into a consulting agreement with Sterling Asset Management to provide business advisory services. The company will provide assistance and recommendations to help build strategic partnerships, to provide the Company with advice regarding revenue opportunities, mergers and acquisitions. The six- month engagement commenced on May 28, 2021. The consultant receives 2,500 restricted common shares each month of the agreement with a retainer of $10,000.
NOTE 7: OPTIONS AND WARRANTS
The Company’s results for the quarters ended June 30, 2021, and June 30, 2020, include employee share-based compensation expense totaling $555,892 and $1,618,686, respectively. Such amounts have been included in the Statements of Operations within selling, general and administrative expenses and other expenses. No income tax benefit has been recognized in the statement of operations for share-based compensation arrangements due to a history of operating losses.
Schedule of stock based compensation expense
The following table summarizes stock-based compensation expense for the quarters ended June 30, 2021, and 2020:
Quarters Ended June 30, | ||||||||
2021 | 2020 | |||||||
Employee stock-based compensation - option grants | $ | 516,323 | $ | 1,196,120 | ||||
Employee stock-based compensation - stock grants | 0 | 0 | ||||||
Non-Employee stock-based compensation - option grants | 0 | 0 | ||||||
Non-Employee stock-based compensation - stock grants | 0 | 0 | ||||||
Non-Employee stock-based compensation - warrants | 39,569 | 422,566 | ||||||
$ | 555,892 | $ | 1,618,686 |
The Company’s results for the six months ended June 30, 2021, and June 30, 2020, include employee share-based compensation expense totaling $572,731 and $1,875,764, respectively. Such amounts have been included in the Statements of Operations within selling, general and administrative expenses and other expenses. No income tax benefit has been recognized in the statement of operations for share-based compensation arrangements due to a history of operating losses.
The following table summarizes stock-based compensation expense for the six months ended June 30, 2021 and 2020:
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Employee stock-based compensation - option grants | $ | 533,162 | $ | 1,276,870 | ||||
Employee stock-based compensation - stock grants | 0 | 0 | ||||||
Non-Employee stock-based compensation - option grants | 0 | 0 | ||||||
Non-Employee stock-based compensation - stock grants | 0 | 0 | ||||||
Non-Employee stock-based compensation - warrants for retirement of debt | 39,569 | 598,894 | ||||||
$ | 572,731 | $ | 1,875,764 |
Stock Options
During Fiscal 2005, the Company established, and the stockholders approved, an Employee Benefit and Consulting Services Compensation Plan (the “2005 Plan”) for the granting of up to 5,000 post-split non-statutory and incentive stock options and stock awards to directors, officers, consultants and key employees of the Company. On June 9, 2005, the Board of Directors amended the Plan to increase the number of stock options and awards to be granted under the Plan to 10,000 post-split shares. During Fiscal 2009, the Company established a plan of long-term stock-based compensation incentives for selected Eligible Participants of the Company covering 10,0000 post-split10,000 shares. This plan was adopted by the Board of Directors and approved by stockholders in October 2009 and shall be known as the 2009 Employee Benefit and Consulting Services Compensation Plan (the “2009 Plan”). In September 2013, the Company’s stockholders approved an increase in the number of shares covered by the 2009 Plan to 25,000 post-split shares. In February 2015, the Board approved, subject to stockholder approval within one year, an increase in the number of shares under the 2009 Plan to 50,000 post-split shares; however, stockholder approval was not obtained within the requisite one year and the anticipated increase in the 2009 Plan was canceled. In the first quarter of 2016, the Board approved, and stockholders ratified a 2016 Employee Benefit and Consulting Services Compensation Plan covering 25,000 post-split shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits to the 2016 Plan. In December 2018, the Board of Directors adopted and in February 2019. the stockholders ratified the 2018 Employee Benefit and Consulting Services Compensation Plan covering 75,000 post-split shares (the “2018 Plan”). On April 2, 2019, the Board approved the “2019 Plan” identical to the 2018 Plan, except that the 2019 Plan covers post-split shares. The 2019 Plan required stockholder approval by April 2, 2020, in order to be able to grant incentive stock options under the 2019 Plan. On October 13, 2021, the Board approved the “2021 Plan” identical to the 2018 Plan, except that the 2019 Plan covers 1,100,000 post-split shares. The 2005, 2009, 2016, 2018, 2019 and 20192021 plans are collectively referred to as the “Plans.”
In March of 2022, Anne S. Provost was elected to the board of directors and was granted 25,000 options from the Company’s 2021 stock option plan with immediate vesting, at an exercise price of $4.57, and expiration of December 2031.
In April of 2022, Dean Julia was granted 12,500 options from the Company’s 2021 stock option plan with immediate vesting, at an exercise price of $1.55, and expiration of April 2031.
All stock options under the Plans are granted at or above the fair market value of the common stock at the grant date. Employee and non-employee stock options vest over varying periods and generally expire either 5 or 10 years from the grant date. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. For option grants, the Company will take into consideration payments subject to the provisions of ASC 718 “Stock Compensation”, previously Revised SFAS No. 123 “Share-Based Payment” (“SFAS 123 (R)”). The fair values of these restricted stock awards are equal to the market value of the Company’s stock on the date of grant, after taking into certain discounts. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. Previously, such assumptions were determined based on historical data. The weighted average assumptions made in calculating the fair values of options granted during the three months and sixnine months ended JuneSeptember 30, 2021,2022, and JuneSeptember 30, 2020,2021 are as follows:
Assumptions used | ||||||||||||||||||||||||
Schedule of assumptions used | ||||||||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
Expected volatility | 0 | 0 | 0 | 439.23% | - % | |||||||||||||||||||
Expected dividend yield | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Risk-free interest rate | 0 | 0 | 0 | 1.21% | - % | |||||||||||||||||||
Expected term (in years) | – | – | – | |||||||||||||||||||||
Expected life (in years) | - |
Schedule of options outstanding | ||||||||||||||||
Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding, January 1, 2021 | 302,846 | 45.85 | $ | 0 | ||||||||||||
Granted | 0 | 0 | – | – | ||||||||||||
Exercised | 0 | 0 | – | – | ||||||||||||
Cancelled & Expired | (1,001 | ) | 0 | – | – | |||||||||||
Outstanding, June 30, 2021 | 301,845 | 45.68 | $ | 0 | ||||||||||||
Options exercisable, June 30, 2021 | 280,869 | 44.95 | $ | 0 |
Schedule of options outstanding | ||||||||||||||||
Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding, January 1, 2022 | 1,135,909 | $ | 16.69 | $ | – | |||||||||||
Granted | 37,500 | $ | 3.56 | $ | – | |||||||||||
Cancelled and expired | (10,688 | ) | $ | 21.77 | – | $ | – | |||||||||
Outstanding, September 30, 2022 | 1,162,721 | $ | 16.22 | $ | – | |||||||||||
Options exercisable, September 30, 2022 | 1,154,483 | $ | 16.16 | $ | – |
The weighted-average grant-date fair value of options granted during the sixnine months ended JuneSeptember 30, 2021, and 20202022, was $ and $, respectively..
The aggregate intrinsic value of options outstanding and options exercisable at JuneSeptember 30, 20212022 is calculated as the difference between the exercise price of the underlying options and the market price of the Company's common stock for the shares that had exercise prices, that were lower than the $ closing price of the Company's common stock on JuneSeptember 30, 2021.2022.
The Company’s results for the quarters ended September 30, 2022, and September 30, 2021, include employee share-based compensation expense totaling $
and $ , respectively. Such amounts have been included in the condensed consolidated statements of operations within general and administrative expenses. The Company’s results for the nine months ended September 30, 2022, and September 30, 2021, include employee share-based compensation expense totaling $ and $ respectively. Such amounts have been included in the condensed consolidated statements of operations within general and administrative expenses
As of JuneSeptember 30, 2021,2022, the fair value of unamortized compensation cost related to unvested stock option awards is $.
, expected to be recognized in fiscal year 2023.
Warrants
During the nine months ended September 30, 2022, the Company issued
warrants to a consulting company and were issued for the conversion of secured convertible notes to a related party (see Note 5 for the accounting for these warrants) for a total issuance of .Effective January 2022, the Company entered into a consulting agreement in which the consultant was paid a total of 12,724 and was recognized as general and administrative expense on the accompanying condensed consolidated statement of operations.
warrants during the nine-month period ended September 30, 2022 for such services. The total fair value of the warrants issued to the consultant totaled $
The weighted average assumptions made in calculating the fair value of warrants granted during the three and sixnine months ended JuneSeptember 30, 20212022, and 20202021 are as follows:
Assumptions used | ||||||||||||||||||||||||
Schedule of warrant assumptions | ||||||||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
Expected volatility | 144.81% | 456.09% | 144.81% | 449.47% | % | % | ||||||||||||||||||
Expected dividend yield | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Risk-free interest rate | 0.81% | 0.35% | 0.81% | 0.91% | % | % | ||||||||||||||||||
Expected term (in years) | 5.00 | |||||||||||||||||||||||
Expected life (in years) |
Schedule of warrants outstanding | ||||||||||||||||
Warrant Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding, January 1, 2022 | 3,800,202 | $ | 15.19 | $ | – | |||||||||||
Granted | 899,416 | $ | 4.01 | $ | – | |||||||||||
Expired | (19,568 | ) | $ | 22.73 | – | $ | – | |||||||||
Outstanding, September 30, 2022 | 4,680,050 | $ | 13.01 | $ | – | |||||||||||
Warrants exercisable, September 30, 2022 | 4,680,050 | $ | 13.01 | $ | – |
The weighted-average grant-date fair value of warrants granted during the nine months ended September 30, 2022 and 2021 was $
and $ , respectively.
Schedule of warrants outstanding | ||||||||||||||||
Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding, January 1, 2021 | 466,636 | $ | 52.50 | $ | 0 | |||||||||||
Granted | 6,250 | $ | – | – | $ | 13,750 | ||||||||||
Exercised | – | $ | – | – | $ | – | ||||||||||
Expired | 0 | $ | – | – | $ | – | ||||||||||
Outstanding, June 30, 2021 | 472,886 | $ | 6.00 | $ | 0 | |||||||||||
Warrants exercisable, June 30, 2021 | 472,886 | $ | 5.80 | $ | 13,750 |
NOTE 8 – LITIGATION
NOTE 9: LITIGATIONIn a Current Report on Form 8-K filed by the Company on March 23, 2022, the Company reported the termination of the Employment Agreement of Donald (Trey) Barrett III as Chief Operations and Strategy Officer. On April 12, 2022, Mr. Barrett commenced an arbitration against the Company before the American Arbitration Association alleging among other things that the Company terminated Mr. Barrett without cause in breach of the Employment Agreement. On August 12, 2022, the Company and Mr. Barrett reached a settlement in which, among other things, the Company and Mr. Barrett mutually deemed that the termination was not for-cause, the Company agreed to pay Mr. Barrett a sum which is not material to the business or financial condition of the Company, and Mr. Barrett’s non-competition restrictive covenant was canceled. The amount was paid in full settlement of the liability as of September 30, 2022 and the expense is included in general and administrative expenses on the accompanying condensed consolidated statement of operations.
We are not a party to any pending material legal proceedings, except as follow:NOTE 9 – SUBSEQUENT EVENTS
Washington Prime Group, Inc.(“WPG”), a successorOn November 2, 2022, we sold 40,000 restricted common shares for $50,000 in interest to Simon Property Group, L.P., commenced an action in the Marion Superior Court, County of Marion, State of Indiana against the Company alleging default on 36 commercial leases which the Company had entered into in 36 separate shopping mall locations across the United States. Plaintiff alleges damages from unpaid rent of $892,332. Plaintiff is seeking a judgment from the Court to collect said unpaid rent plus attorneys’ fees and other costs of collection. On September 18,2020, the Parties entered into a settlement agreement with respect to this lawsuit. Subject to the terms, conditions, and provisions of the settlement Agreement, Mobiquity paid WPG One Hundred Thousand Dollars and No/100 Cents ($100,000.00).cash proceeds.
In the Supreme Court of New York, county of Nassau, Carter, Deluca & Farrell LP, a law firm filed a summons and Complaint against the Company seeking $113,654 in past due legal fees allegedly owed. The Company disputed the amount owed to said firm. On March 13, 2020, the Company entered into a settlement agreement and paid the law firm $60,000 to settle the lawsuit.
The Company’s wholly-owned subsidiary, Advangelists LLC is a defendant in a lawsuit filed in Tel Aviv brought by the Plaintiff Fyber Monetization, a private Israeli company, in the business of digital advertising. In its statement of claim, Fyber alleges June through November 3 of 2019 unpaid invoices totaling $584,945 US Dollars. Advangelists has disputed any monies being owed and it intends to vigorously defend this lawsuit.
FunCorp Limited has filed a lawsuit in Superior Court, State of Washington, County of King alleging Advangelists owes for services rendered unpaid invoices totaling $42,464. Advangelists has disputed any monies being owed and it intends to vigorously defend this lawsuit.
NOTE 10: COMMITMENTS:
The following are outstanding commitments as of June 30, 2021:
NOTE 11: OTHER MATERIAL EVENTS
In May of 2020, Deepankar Katyal resigned from the board to spend more time necessary to run the day to day operations of Advangelists, LLC focusing on technology and revenue growth.
Interest payments due on Dr. Salkind notes have been halted in the second quarter of 2020 due to COVID-19 issues affecting our collections on our accounts receivable.
As a result of our declining revenue, during the COVID-19 pandemic, our management team decided it was necessary to reduce overhead. The following steps were taken to lower expenses, while still keeping the business operational and ready to expand when needed; salaries were cut between 10% and 40%, several employees were laid-off or resigned, all travel and advertising were suspended and office space rent was suspended, allowing the entire staff to work remotely.
NOTE 12: SUBSEQUENT EVENTS
On July 7, 2021, a note holder converted their $105,000 secured convertible note to 21,000 common shares.
On July 6, 2021, a note holder converted their $50,000 secured convertible note to 10,000 common shares.
On July 8, 2021, a note holder converted their $50,000 secured convertible note to 10,000 common shares.
On July 9, 2021, a note holder converted their $55,000 secured convertible note to 10,462 common shares.
On July 22, 2021, two note holder converted their $110,000 secured convertible note to 19,678 common shares.
On July 29, 2021, the Company received a short term note of $300,000 payable at $2,531.25 for 160 payments.
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Mobiquity Technology,Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mobiquity Technology,Technologies, Inc. as of December 31, 20202021, and 2019,2020, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202021, and 2019,2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Restatement of December 31, 2021 Financial Statements
As discussed in Note 3 to the financial statements, the financial statements have been restated to correct certain misstatements.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
F-22 |
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition — identification of contractual terms in certain customer arrangements
As described in Note 2 to the consolidated financial statements, management assesses relevant contractual terms in its customer arrangements to determine the transaction price and recognizes revenue upon transfer of control of the promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Management applies judgment in determining the transaction price which is dependent on the contractual terms. In order to determine the transaction price, management may be required to estimate variable consideration when determining the amount and timing of revenue recognition.
The principal considerations for our determination that performing procedures relating to the identification of contractual terms in customer arrangements to determine the transaction price is a critical audit matter are there was significant judgment by management in identifying contractual terms due to the volume and customized nature of the Company’s customer arrangements. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms used in the determination of the transaction price and the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness of management’s estimates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including those related to the identification of contractual terms in customer arrangements that impact the determination of the transaction price and revenue recognition. These procedures also included, among others, (i) testing the completeness and accuracy of management’s identification of the contractual terms by examining customer arrangements on a test basis, and (ii) testing management’s process for determining the appropriate amount and timing of revenue recognition based on the contractual terms identified in the customer arrangements.
/S/ BF Borgers CPA PC
BF Borgers CPA PC (PCAOB ID 5041)
We have served as the Company's auditor sincefrom 2018 to 2022
Lakewood, CO
March 31, 202129, 2022, except for the effects of the restatement disclosed in Note 3, as to which the date is November 28, 2022
F-23 |
Mobiquity Technologies, Inc.
Consolidated Balance Sheets
(As Restated)
December 31, 2021 (Restated) | December 31, 2020 (Restated) | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash | $ | 5,385,245 | $ | 602,182 | ||||
Accounts receivable, net | 388,112 | 1,698,719 | ||||||
Prepaid expenses and other current assets | 11,700 | 46,396 | ||||||
Total Current Assets | 5,785,057 | 2,347,297 | ||||||
Property and equipment (net of accumulated depreciation of $20,200 and $12,635, respectively) | 20,335 | 21,428 | ||||||
Goodwill | 1,352,865 | 1,352,865 | ||||||
Intangible assets (net of accumulated amortization of $4,156,657 and $3,355,922, respectively) | 1,247,019 | 5,647,754 | ||||||
Other assets | ||||||||
Security deposits | – | 9,000 | ||||||
Investment in corporate stock | – | 91 | ||||||
Total Assets | $ | 8,405,276 | $ | 9,378,435 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 2,367,600 | $ | 3,140,467 | ||||
Notes payable | 656,504 | 901,283 | ||||||
Total Current Liabilities | 3,024,104 | 4,041,750 | ||||||
Long term portion convertible notes, net | 2,462,500 | 2,450,000 | ||||||
Total Liabilities | 5,486,604 | 6,491,750 | ||||||
Stockholders' Deficit | ||||||||
AAA Preferred stock; 4,930,000 and 5,000,000 authorized; $0.0001 par value 31,413 and 56,413 shares issued and outstanding at December 31, 2021 and December 31, 2020 | 493,869 | 868,869 | ||||||
Preferred stock Series C; $.0001 par value; 1,500 shares authorized 0 and 1,500 shares issued and outstanding at December 31, 2021 and December 31, 2020 | – | 15,000 | ||||||
Preferred stock Series E; 70,000 authorized; $80 par value 61,688 and 61,688 shares issued and outstanding at December 31, 2021 and December 31, 2020 | 4,935,040 | 4,935,040 | ||||||
Common stock: 100,000,000 authorized; $0.0001 par value 6,460,751 and 2,803,685 shares issued and outstanding at December 31, 2021 and December 31, 2020 | 652 | 282 | ||||||
Treasury stock $0.0001 par value 37,500 and 37,500 shares outstanding at December 31, 2021 and December 31, 2020 | (1,350,000 | ) | (1,350,000 | ) | ||||
Additional paid in capital | 201,284,007 | 182,529,005 | ||||||
Accumulated deficit | (202,444,894 | ) | (184,111,511 | ) | ||||
Total Stockholders' Equity | 2,918,672 | 2,886,685 | ||||||
Total Liabilities and Stockholders' Equity | $ | 8,405,276 | $ | 9,378,435 |
See notes to consolidated financial statements
F-24 |
Mobiquity Technologies, Inc.
Consolidated Statements of Operations of Comprehensive Loss
(As Restated)
Year Ended | ||||||||
December 31, | ||||||||
2021
| 2020 | |||||||
Restated | Restated | |||||||
Revenue | $ | 2,672,615 | $ | 6,184,010 | ||||
Cost of Revenues | 1,954,383 | 4,360,645 | ||||||
Gross Profit | 718,232 | 1,823,365 | ||||||
General and administrative expenses | 13,607,759 | 8,850,929 | ||||||
Loss from operations | (12,889,527 | ) | (7,027,564 | ) | ||||
Other Income (Expenses) | ||||||||
Impairment expense | (3,600,000 | ) | (4,000,000 | ) | ||||
Interest Expense | (1,417,268 | ) | (715,262 | ) | ||||
Amortization of debt discount/issue costs | (692,430 | ) | – | |||||
Forgiveness of SBA – PPP loan | 265,842 | – | ||||||
Unrealized gain (loss) on investments | – | (3,009 | ) | |||||
Total Other Income (Expense) | (5,443,856 | ) | (4,718,271 | ) | ||||
Net Loss | $ | (18,333,383 | ) | $ | (11,745,835 | ) | ||
Net Loss Per Common Share: | ||||||||
Basic and Diluted | $ | (5.47 | ) | $ | (4.63 | ) | ||
Weighted Average Common Shares Outstanding, basic and diluted | 3,351,335 | 2,537,811 |
See notes to consolidated financial statements
F-25 |
Mobiquity Technologies, Inc.
Consolidated Statement of Stockholders' Equity
(As Restated)
Series AAA Preferred Stock | Series C Preferred Stock | Series E Preferred Stock | Common Stock | Additional Paid-in | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | ||||||||||||||||||||||||||||||||||||
December 31, 2020 (as restated) | 56,413 | $ | 868,869 | 868,869 | 1,500 | $ | 15,000 | 61,688 | $ | 4,935,040 | 2,803,685 | $ | 282 | $ | 182,529,005 | |||||||||||||||||||||||||||||
Stock issued for services | – | – | – | – | – | – | 265,000 | 25 | 1,158,001 | |||||||||||||||||||||||||||||||||||
Stock issued for cash and warrants - net of offering costs of $974,000 (as restated) | – | ��� | – | – | – | – | – | 2,631,764 | 264 | 10,203,933 | ||||||||||||||||||||||||||||||||||
Stock based compensation (as restated) | – | – | – | – | – | – | – | – | 4,635,224 | |||||||||||||||||||||||||||||||||||
Conversion of convertible debt to common stock | – | – | – | – | – | – | 236,768 | 24 | 1,347,134 | |||||||||||||||||||||||||||||||||||
Stock issued with debt recorded as a debt discount | – | – | – | – | – | – | 92,900 | 14 | 700,567 | |||||||||||||||||||||||||||||||||||
Warrants issued for interest expense (as restated) | – | – | – | – | – | – | – | – | 320,188 | |||||||||||||||||||||||||||||||||||
Exercise of warrants for common stock (as restated) | – | – | – | – | – | – | 49,384 | 4 | (4 | ) | ||||||||||||||||||||||||||||||||||
Conversion of Series AAA, preferred stock | (25,000 | ) | (375,000 | ) | – | – | – | – | 6,250 | 1 | 374,999 | |||||||||||||||||||||||||||||||||
Conversion of Series C, preferred stock | – | – | (1,500 | ) | (15,000 | ) | – | – | 375,000 | 38 | 14,962 | |||||||||||||||||||||||||||||||||
Net loss (as restated) | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||
December 31, 2021 (as restated) | 31,413 | $ | 493,869 | – | – | $ | – | 61,688 | $ | 4,935,040 | 6,460,751 | $ | 652 | $ | 201,284,007 |
Mezzanine | Series C Preferred Stock | Series E Preferred Stock | Additional | |||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | ||||||||||||||||||||||||||||||||||||
Balance, at January 1, 2020 (as restated) | 46,413 | $ | 714,869 | 1,500 | $ | 15,000 | 65,625 | $ | 52,50,000 | 2,335,792 | $ | 234 | $ | 178,656,678 | ||||||||||||||||||||||||||||||
Common stock issued for services | – | – | – | – | – | – | 38,125 | 3 | 547,448 | |||||||||||||||||||||||||||||||||||
Common stock issued for note conversion | – | – | – | – | – | – | 1,919 | – | 30,794 | |||||||||||||||||||||||||||||||||||
Common stock issued for cash | – | – | – | – | – | – | 340,786 | 40 | 1,477,000 | |||||||||||||||||||||||||||||||||||
Preferred stock series E | 10,000 | 154,000 | – | – | (3,937 | ) | (314,960 | ) | 9,843 | 1 | 160,959 | |||||||||||||||||||||||||||||||||
Warrant conversions | – | – | – | – | – | – | 77,220 | 4 | 662,754 | |||||||||||||||||||||||||||||||||||
Stock based compensation | – | – | – | – | – | – | – | – | 993,512 | |||||||||||||||||||||||||||||||||||
Net Loss | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||
Balance, at December 31, 2020 (as restated) | 56,413 | $ | 868,869 | 1,500 | $ | 15,000 | 61,688 | $ | 49,35,040 | 2,803,685 | $ | 282 | $ | 182,529,005 |
F-26 |
Total | ||||||||||||||||
Treasury Stock | Accumulated | Stockholders' | ||||||||||||||
Shares | Amount | Deficit | Deficit | |||||||||||||
December 31, 2020 (as restated) | 37,500 | $ | (1,350,000 | ) | $ | (184,111,511 | ) | 2,886,685 | ||||||||
Stock issued for services | – | – | – | 1,158,026 | ||||||||||||
Stock issued for cash and warrants - net of offering costs of $974,000 (as restated) | – | – | – | 10,204,197 | ||||||||||||
Stock based compensation (as restated) | – | – | – | 4,635,224 | ||||||||||||
Conversion of debt | – | – | – | 2,004,432 | ||||||||||||
Stock issued with debt recorded as a debt discount | – | – | – | 700,581 | ||||||||||||
Warrants issued for interest expense (as restated) | – | – | – | 320,188 | ||||||||||||
Exercise of warrants for common stock (as restated) | – | – | – | – | ||||||||||||
Conversion of Series AAA, preferred stock | – | – | – | – | ||||||||||||
Conversion of Series C, preferred stock | – | – | – | – | ||||||||||||
Net loss (as restated) | – | – | (18,333,383 | ) | (18,333,383 | ) | ||||||||||
December 31, 2021 (as restated) | 37,500 | $ | (1,350,000 | ) | $ | (202,444,894 | ) | 2,918,672 |
Treasury Shares | Accumulated | Total Stockholders’ | ||||||||||||||
Shares | Amount | Deficit | Deficit | |||||||||||||
Balance, at January 1, 2020 (as restated) | 37,500 | (1,350,000 | ) | $ | (172,365,676 | ) | $ | 10,921,105 | ||||||||
Common stock issued for services | – | – | – | 547,451 | ||||||||||||
Common stock issued for note conversion | – | – | – | 30,794 | ||||||||||||
Common stock issued for cash | – | – | – | 1,477,000 | ||||||||||||
Preferred stock series E | – | – | – | – | ||||||||||||
Warrant conversions | – | – | – | 662,758 | ||||||||||||
Stock based compensation | – | – | – | 993,512 | ||||||||||||
Net Loss | – | – | (11,745,835 | ) | (11,745,835 | ) | ||||||||||
Balance, at December 31, 2020 (as restated) | 37,500 | $ | (1,350,000 | ) | $ | (184,111,511 | ) | $ | 2,886,685 |
See notes to consolidated financial statements
F-27 |
Mobiquity Technologies, Inc.
Consolidated Statements of Cash Flows
(As Restated)
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
(As Restated) | (As Restated) | |||||||
Operating activities | ||||||||
Net loss | $ | (18,333,383 | ) | $ | (11,745,835 | ) | ||
Adjustments to reconcile net loss to net cash used in operations | ||||||||
Bad debt expense | 434,390 | 306,000 | ||||||
Depreciation | 7,565 | 6,271 | ||||||
Amortization of intangibles | 800,735 | 1,800,736 | ||||||
Amortization of debt discount/issue costs | 780,081 | – | ||||||
Recognition of share based compensation | 4,635,224 | 993,512 | ||||||
Stock issued for services | 1,158,026 | 547,451 | ||||||
Warrants issued for interest expense | 320,188 | – | ||||||
Impairment of intangibles | 3,600,000 | 4,000,000 | ||||||
Gain on forgiveness of PPP loan | (265,842 | ) | – | |||||
Change in fair value of marketable securities | – | 3,009 | ||||||
Changes in operating assets and liabilities | ||||||||
(Increase) decrease in | ||||||||
Accounts receivable | 876,217 | 1,606,659 | ||||||
Prepaids and other | 43,788 | (26,196 | ) | |||||
Increase (decrease) in | ||||||||
Accounts payable and accrued expenses | (774,311 | ) | (778,371 | ) | ||||
Net cash used in operating activities | (6,717,324 | ) | (3,286,764 | ) | ||||
Investing activities | ||||||||
Purchase of property and equipment | (6,472 | ) | (6,599 | ) | ||||
Net cash used in investing activities | (6,472 | ) | (6,599 | ) | ||||
Financing activities | ||||||||
Proceeds from issuance of notes payable - net | 4,143,000 | 1,005,842 | ||||||
Repayments on notes payable | (2,840,337 | ) | (490,115 | ) | ||||
Proceeds from exercise of common stock warrants | – | 662,754 | ||||||
Proceeds from stock and warrants issued for cash - net of offering costs | 10,204,197 | 1,477,000 | ||||||
Net cash provided by financing activities | 11,506,860 | 2,655,481 | ||||||
Net increase (decrease) in cash | 4,783,063 | (637,882 | ) | |||||
Cash - beginning of year | 602,182 | 1,240,064 | ||||||
Cash - end of year | $ | 5,385,245 | $ | 602,182 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest | $ | 424,616 | $ | 442,326 | ||||
Cash paid for income tax | $ | 2,065 | $ | 7,272 | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||
Conversion of Series AAA preferred stock to common stock | $ | 375,000 | $ | – | ||||
Conversion of Series C preferred stock into common stock | $ | 15,000 | $ | – | ||||
Conversion of Series E preferred stock into common stock | $ | – | $ | 314,960 | ||||
Exercise of warrants for common stock | $ | 4 | $ | – | ||||
Conversion of convertible debt into common stock | $ | 2,004,432 | $ | 30,694 |
See notes to consolidated financial statements
F-28 |
Mobiquity Technology, Inc.
Consolidated Balance Sheets
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash | $ | 602,182 | $ | 1,240,064 | ||||
Accounts receivable, net | 1,698,719 | 3,611,378 | ||||||
Prepaid expenses and other current assets | 46,396 | 20,200 | ||||||
Total Current Assets | 2,347,297 | 4,871,642 | ||||||
Property and equipment (net of accumulated depreciation of $12,635 and $6,364, respectively) | 21,428 | 21,100 | ||||||
Goodwill | 1,352,865 | 1,352,865 | ||||||
Intangible assets (net of accumulated amortization of $3,355,922 and $1,555,186, respectively) | 5,647,754 | 11,448,490 | ||||||
Other assets | ||||||||
Security deposits | 9,000 | 9,000 | ||||||
Investment in corporate stock | 91 | 3,100 | ||||||
Total Assets | $ | 9,378,435 | $ | 17,706,197 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 2,055,175 | $ | 2,958,108 | ||||
Accrued expenses | 1,085,292 | 960,734 | ||||||
Notes payable | 901,283 | 566,250 | ||||||
Total Current Liabilities | 4,041,750 | 4,485,092 | ||||||
Long term portion convertible notes, net | 2,450,000 | 2,300,000 | ||||||
Total Liabilities | 6,491,750 | 6,785,092 | ||||||
Stockholders' Deficit | ||||||||
AAA Preferred stock; 4,930,000 and 5,000,000 authorized; $0.0001 par value 56,413 and 46,413 shares issued and outstanding at December 31, 2020 and December 31, 2019 | 868,869 | 714,869 | ||||||
Preferred stock Series C; $.0001 par value; 1,500 shares authorized 1,500 and 1,500 shares issued and outstanding at December 31, 2020 and December 31, 2019 | 15,000 | 15,000 | ||||||
Preferred stock Series E; 70,000 authorized; $80 par value 61,688 and 65,625 shares issued and outstanding at December 31, 2020 and December 31, 2019 | 4,935,040 | 5,250,000 | ||||||
Common stock: 100,000,000 authorized; $0.0001 par value 2,803,685 and 2,335,792 shares issued and outstanding at December 31, 2020 and December 31, 2019 | 282 | 234 | ||||||
Treasury stock $36 par value 37,500 and 37,500 shares outstanding at December 31, 2020 and December 31, 2019 | (1,350,000 | ) | (1,350,000 | ) | ||||
Additional paid in capital | 184,586,420 | 177,427,524 | ||||||
Accumulated deficit | (186,168,926 | ) | (171,136,522 | ) | ||||
Total Stockholders' Equity | 2,886,685 | 10,921,105 | ||||||
Total Liabilities and Stockholders' Equity | $ | 9,378,435 | $ | 17,706,197 |
The accompanying notes are an integral part of these consolidated financial statements
Mobiquity Technology, Inc.
Consolidated Statements of Operations
For the Year Ended | ||||||||
December 31, | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 6,184,010 | $ | 9,717,796 | ||||
Cost of Revenues | 4,360,645 | 7,297,550 | ||||||
Gross Profit | 1,823,365 | 2,420,246 | ||||||
Operating Expenses | ||||||||
Selling, general and administrative | 5,226,300 | 5,867,884 | ||||||
Salaries | 2,631,117 | 3,415,591 | ||||||
Stock based compensation | 1,347,048 | 6,599,000 | ||||||
Impairment expense | 4,000,000 | – | ||||||
Total Operating Expenses | 13,204,465 | 15,882,475 | ||||||
Loss from operations | (11,381,100 | ) | (13,462,229 | ) | ||||
Other Income (Expenses) | ||||||||
Interest Expense | (715,262 | ) | (346,204 | ) | ||||
Acquisition expense | – | (2,970,364 | ) | |||||
Warrant expense | 63,864 | (23,213,197 | ) | |||||
Loss on sale of investments | – | (3,755,381 | ) | |||||
Loss on sale of company stock | (2,996,897 | ) | – | |||||
Total Other Income (Expense) | (3,648,295 | ) | (30,285,146 | ) | ||||
Loss from continuing operations | $ | (15,029,395 | ) | $ | (43,747,375 | ) | ||
Other Comprehensive Income | ||||||||
Unrealized holding gain (loss) arising during period | (3,009 | ) | (280,344 | ) | ||||
Net Comprehensive Loss | $ | (15,032,404 | ) | $ | (44,027,719 | ) | ||
Net Comprehensive Loss Per Common Share: | ||||||||
For continued operations, basic and diluted | (5.92 | ) | (22.55 | ) | ||||
Weighted Average Common Shares Outstanding, basic and diluted | 2,537,811 | 1,952,538 |
The accompanying notes are an integral part of these consolidated financial statements
Mobiquity Technology, Inc.
Consolidated Statement of Stockholders' Equity
AAAA | Mezzanine | Series E Preferred Stock | Series C Preferred Stock | |||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance, at January 1, 2020 | – | $ | – | 46,413 | $ | 714,869 | 65,625 | $ | 5,250,000 | 1,500 | $ | 15,000 | ||||||||||||||||||||
Common stock issued for services | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Common stock issued for note conversion | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Common stock issued for cash | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Warrant conversions | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Warrants issued | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Stock based compensation | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Preferred stock series E | – | – | 10,000 | 154,000 | (3,937 | ) | (314,960 | ) | – | – | ||||||||||||||||||||||
Net Loss | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Balance, at December 31, 2020 | – | $ | – | 56,413 | $ | 868,869 | 61,688 | $ | 4,935,040 | 1,500 | $ | 15,000 |
Additional | Non | Total | ||||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Subscription | Controlling | Treasury Shares | Accumulated | Stockholders' | ||||||||||||||||||||||||||||||
Shares | Amount | Capital | Receivable | Interest | Shares | Amount | Deficit | Deficit | ||||||||||||||||||||||||||||
Balance, at January 1, 2020 | 2,335,792 | $ | 234 | $ | 177,427,524 | $ | – | $ | – | 37,500 | $ | (1,350,000 | ) | $ | (171,136,522 | ) | $ | 10,921,105 | ||||||||||||||||||
Common stock issued for services | 38,125 | 3 | 547,448 | – | – | – | – | – | 547,451 | |||||||||||||||||||||||||||
Common stock issued for note conversion | 1,919 | – | 30,694 | – | – | – | – | – | 30,694 | |||||||||||||||||||||||||||
Common stock issued for cash | 340,786 | 40 | 3,600,384 | – | – | – | – | – | 3,600,424 | |||||||||||||||||||||||||||
Warrant conversions | 77,220 | 4 | 873,469 | – | – | – | – | – | 873,473 | |||||||||||||||||||||||||||
Warrants issued | – | – | 598,894 | – | – | – | – | – | 598,894 | |||||||||||||||||||||||||||
Stock based compensation | – | – | 1,347,048 | – | – | – | – | – | 1,347,048 | |||||||||||||||||||||||||||
Preferred stock series E | 9,843 | 1 | 160,959 | – | – | – | – | – | – | |||||||||||||||||||||||||||
Net Loss | – | – | – | – | – | – | – | (15,032,404 | ) | (15,032,404 | ) | |||||||||||||||||||||||||
Balance, at December 31, 2020 | 2,803,685 | $ | 282 | $ | 184,586,420 | $ | – | $ | – | 37,500 | $ | (1,350,000 | ) | $ | (186,168,926 | ) | $ | 2,886,685 |
The accompanying notes are an integral part of these consolidated financial statements
Mobiquity Technology, Inc.
Consolidated Statement of Stockholders' Equity
(continued)
AAAA | Mezzanine | Series E Preferred Stock | Series C Preferred Stock | |||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance, at January 1, 2019 | 800 | $ | 8,000 | 1,090,588 | 11,552,513 | – | $ | – | 1,500 | $ | 15,000 | |||||||||||||||||||||
Common stock issued for services | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Treasury shares | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Purchase of Common stock | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Preferred stock series E | – | – | – | – | 65,625 | 5,250,000 | – | – | ||||||||||||||||||||||||
Stock based compensation | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Exchange shares | (800 | ) | (8,000 | ) | (1,044,175 | ) | (10,837,644 | ) | – | – | – | – | ||||||||||||||||||||
Warrant conversions | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Warrants issued | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Net Loss | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Balance, at December 31, 2019 | – | $ | – | 46,413 | $ | 714,869 | 65,625 | $ | 5,250,000 | 1,500 | $ | 15,000 |
Additional | Non | Total | ||||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Subscription | Controlling | Treasury Shares | Accumulated | Stockholders' | ||||||||||||||||||||||||||||||
Shares | Amount | Capital | Receivable | Interest | Shares | Amount | Deficit | Deficit | ||||||||||||||||||||||||||||
Balance, at January 1, 2019 | 1,572,667 | $ | 157 | $ | 129,286,167 | $ | – | $ | 663,478 | – | $ | – | $ | (127,108,103 | ) | $ | 14,417,212 | |||||||||||||||||||
Common stock issued for services | 15,963 | 2 | 717,575 | – | – | – | – | – | 717,577 | |||||||||||||||||||||||||||
Treasury shares | – | – | – | – | – | 37,500 | (1,350,000 | ) | – | (1,350,000 | ) | |||||||||||||||||||||||||
Purchase of Common stock | 123,038 | 12 | 3,629,488 | – | – | – | – | – | 3,629,500 | |||||||||||||||||||||||||||
Preferred stock series E | – | – | – | – | – | – | – | 5,250,000 | ||||||||||||||||||||||||||||
Stock based compensation | – | – | 6,599,000 | – | – | – | – | – | 6,599,000 | |||||||||||||||||||||||||||
Exchange shares | 511,044 | 51 | 10,828,118 | – | – | – | – | – | (17,475 | ) | ||||||||||||||||||||||||||
Warrant conversions | 113,080 | 12 | 3,153,979 | – | – | – | – | – | 3,153,991 | |||||||||||||||||||||||||||
Warrants issued | – | – | 23,213,197 | – | – | – | – | – | 23,213,197 | |||||||||||||||||||||||||||
Net Loss | – | – | – | – | (663,478 | ) | – | – | (44,028,419 | ) | (44,691,897 | ) | ||||||||||||||||||||||||
Balance, at December 31, 2019 | 2,335,792 | $ | 234 | $ | 177,427,524 | $ | – | $ | – | 37,500 | (1,350,000 | ) | $ | (171,136,522 | ) | $ | 10,921,105 |
The accompanying notes are an integral part of these consolidated financial statements
Mobiquity Technology, Inc.
Consolidated Statements of Cash Flows
Year Ended | ||||||||
December 31, | ||||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (15,032,404 | ) | $ | (44,027,719 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation expense | 6,271 | 4,397 | ||||||
Amortization- Intangible Assets | 1,800,736 | 1,524,247 | ||||||
Allowance for uncollectible receivables | 306,000 | – | ||||||
Common stock issued for services | 547,451 | 717,577 | ||||||
Warrant expense | 1,472,367 | 3,153,991 | ||||||
Impairment expense | 4,000,000 | – | ||||||
Warrant cost from the conversion/issuance of debt | – | 23,213,197 | ||||||
Stock-based compensation | 1,347,048 | 6,599,000 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | 1,606,659 | (1,132,015 | ) | |||||
Prepaid expenses and other assets | (26,196 | ) | (8,500 | ) | ||||
Accounts payable | (902,933 | ) | 1,702,671 | |||||
Accrued expenses and other current liabilities | (138,367 | ) | (7,816 | ) | ||||
Accrued interest | 262,925 | (81,536 | ) | |||||
Total Adjustments | 10,281,961 | 35,685,213 | ||||||
Net cash used in Operating Activities | (4,750,443 | ) | (8,342,506 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Common stock issued for cash, net | 3,600,424 | – | ||||||
Purchase of property and equipment | (6,599 | ) | (18,835 | ) | ||||
Note conversion to common stock | 30,694 | – | ||||||
Proceeds from the sale of investments | – | 167,400 | ||||||
Issuance of Series E Preferred stock | – | 5,250,000 | ||||||
Addition to Goodwill and Intangibles | – | (5,074,750 | ) | |||||
Net cash provided by Investing Activities | 3,624,519 | 323,815 | ||||||
Cash Flows from Financing Activities | ||||||||
Proceeds from the issuance of notes, net | 1,005,842 | 2,550,000 | ||||||
Proceeds from the issuance of common stock | – | 3,629,500 | ||||||
Loss on the sale of company stock | – | 2,483,600 | ||||||
Accrued interest converted to note | – | 74,727 | ||||||
Preferred stock converted to common stock | – | (17,475 | ) | |||||
Cash received from bank notes | – | 750,000 | ||||||
Cash paid on bank notes | (520,809 | ) | (452,101 | ) | ||||
Net cash provided by Financing Activities | 485,033 | 9,018,251 | ||||||
Net change in Cash and Cash Equivalents | (640,891 | ) | 999,560 | |||||
Cash and Cash Equivalents, Beginning of period | 1,240,064 | 624,338 | ||||||
Non-controlling interest | – | (664,178 | ) | |||||
Unrealized holding change on securities | 3,009 | 280,344 | ||||||
Cash and Cash Equivalents, end of period | $ | 602,182 | $ | 1,240,064 | ||||
Supplemental Disclosure Information | ||||||||
Cash paid for interest | $ | 442,326 | $ | 2,524 | ||||
Cash paid for taxes | $ | 7,272 | $ | – | ||||
Non-cash Disclosures: | ||||||||
Common stock issued for interest | $ | – | $ | – | ||||
Conversion of notes and interest into AAA & AAAA Preferred and Common Stock | $ | – | $ | – |
The accompanying notes are an integral part of these consolidated financial statements
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 AND 2019
(AS RESTATED)
NOTE 1: ORGANIZATION AND GOING CONCERN
We operate our business through two wholly owned subsidiaries, Advangelists, LLC and Mobiquity Networks, Inc. Our corporate structure is as follows:
Subsidiaries
Advangelists, LLC
Advangelists LLC operates our ATOS platform business.
We originally acquired a 48% membership interest and Glen Eagles Acquisition LP acquired a 52% membership interest in Advangelists in a merger transaction in December 2018 for consideration valued at $20 Million. At the time Glen Eagles was a shareholder of the Company, owning 412,500 shares of our common stock. The Company became, and remains, the sole manager of Advangelists following the merger with sole management power. In consideration for the merger:
· | Mobiquity issued warrants for 269,384 shares of common stock at an exercise price of $56 per share to the pre-merger Advangelists’ members, and, in February 2019, upon the attainment of the vesting threshold of Advangelists’ combined revenues for the months of December 2018 and January 2019 being at least $250,000, the Company transferred 9,209,722 shares of Gopher Protocol, Inc. common stock to the pre-merger Advangelists members. The Mobiquity warrants were valued at a total of $3,844,444, and the Gopher shares of common stock were valued at a total of $6,155,556. |
· | Glen Eagles paid the pre-merger Advangelists members $10 million. $500,000 was paid at closing in cash (which the Company advanced on behalf of Glen Eagles without any agreement regarding repayment of the advance), and $9,500,000 was paid by Glen Eagles’ promissory note to Deepankar Katyal, as representative of pre-merger Advangelists members, payable in 19 monthly installments of $500,000 each. |
F-29 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
The Company acquired 3% of the Advangelists’ membership interests from Glen Eagles in April 2019 in satisfaction of the Company’s $500,000 closing payment advance to Glen Eagles, resulting in Mobiquity owning 51% and Glen Eagles owning 49% of Advangelists.
In May 2019 the Company acquired the remaining 49% of Advangelists’ membership interests from Glen Eagles, becoming the 100% owner of Advangelists, in a transaction involving the Company, Glen Eagles, and Gopher Protocol, Inc. In that transaction, Gopher acquired the 49% Advangelists membership interest from Glen Eagles and assumed Glen Eagles’ promissory note to Deepankar Katyal, as representative of the pre-merger Advangelists owners, which had a remaining balance of $7,512,500, in satisfaction of indebtedness owed by Glen Eagles to Gopher. Concurrently with that transaction, the Company acquired the 49% of Advangelists membership interest from Gopher and assumed the promissory note in consideration. Additionally, warrants for 300,000 shares of Company common stock which are issuable upon the conversion of Mobiquity Class AAA preferred stock owned by Gopher were amended to provide for a cashless exercise. In September 2019, the assumed note, which then had a principal balance of $6,780,000, was amended and restated to provide that:
· | $5,250,000 of the principal was payable in 65,625 shares of the Company’s Class E Preferred Stock, which is convertible into 164,062.50 shares the Company’s common stock, plus warrants to purchase 82,031.25 Company shares of common stock, at an exercise price of $48 per share: and | |
· | $1,530,000 of the principal balance, plus all accrued and unpaid interest under the promissory note was payable in three monthly installments of $510,000 each. |
The promissory note was paid in full in November 2019.
Mobiquity Networks, Inc.
We have established Mobiquity Networks, Inc and have operated it since January 2011. Mobiquity Networks started and developed as a mobile advertising technology company focused on driving foot-traffic throughout its indoor network and has evolved and grown into a next generation data intelligence company. Mobiquity Networks operates our data intelligence platform business.
Going Concern
These condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. We have a history of losses and may continue to incur losses in the future, which could negatively impact the trading value of our common stock. WeThe continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of December 31, 2021, and 2020, the Company had an accumulated deficit (as restated) of $202,444,894 and $184,111,511, respectively. The Company incurred net losses from operations of $15,029,395$18,333,383 and $11,745,835 for the yearyears ended December 31, 2021 and 2020, $43,747,375respectively. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the year ended December 31, 2019.issuance of these financial statements. We may continue to incur operating and net losses in future periods. These losses may increase, and we may never achieve profitability for a variety of reasons, including increased competition, decreased growth in the unified advertising industry and other factors described elsewhere in this “Risk Factors” section. If we cannot achieve sustained profitability, our stockholders may lose all or a portion of their investment in our company.
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The recently acquired Advangelists LLC has also incurred losses and experienced negative cash flows from operations during the most recent fiscal year. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional capital through private and public offerings of its common stock, and the attainment of profitable operations. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
F-30 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Reverse stock-split OnStock Split
In September 2, 2020, the Company amended and restated certificatefiled a Certificate of incorporationAmendment the Articles of Incorporation with the Secretary of State of the state of New York to implement a 1 for 400 reverse stock- splitstock-split of its common stock.stock effective September 9, 2020. The reverse stock split did not cause an adjustment to the par value of common stock. As a result of the reverse stock split, the Company adjusted the share amounts under its employee incentive plans, outstanding options and common stock warrant agreements, treasury shares and preferred shares.
Impacts of COVID-19 to Business and the general economy
The Company’s financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic. Since March 2020, COVID -19 has caused a material and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will likely continue to experience a reduction in projects, longer sales and collection cycles, deferral or delay of purchase commitments for our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially adversely affect revenue and our ability to remain a going concern. In the event we remain a going concern, the impacts of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and then general economy, are currently not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing events, among other modifications. We lost a purchase order of more than one million dollars with major US sports organization. We have observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, although we do anticipate it to continue to negatively impact our financial results during fiscal years 2022 and 2023.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS – Mobiquity Technologies, Inc., a New York corporation (the “Company”), is the parent company of its operating subsidiaries; Mobiquity Networks, Inc. (“Mobiquity Networks”) and Advangelists, LLC (Advangelists). Mobiquity Networks has evolved and grown from a mobile advertising technology company focused on driving Foot-traffic throughout its indoor network, into a next generation location data intelligence company. Mobiquity Networks provides precise unique, at-scale location data and insights on consumer’s real-world behavior and trends for use in marketing and research. Mobiquity Networks provides one of the most accurate and scaled solution for mobile data collection and analysis, utilizing multiple geo-location technologies. Mobiquity Networks is seeking to implement several new revenue streams from its data collection and analysis, including, but not limited to;to, Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research. Advangelists is a developer of advertising and marketing technology focused on the creation, automation, and maintenance of an advertising technology operating system (or ATOS). Advangelists’ ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages and runs digital advertising campaigns.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
The ATOS platform:
· | creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of ad time slots (known as digital real estate) targeted at users while engaged on their connected TV, computer or mobile device, and |
· | gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by |
Advangelists’ marketplace engages with approximately 2010 billion advertisement opportunities per day. Our sales and marketing strategy is focused on creating a de-fragmented operating system that makes it considerably more efficient and effective for advertisers and publishers to transact with each other. Our goal is to create a standardized and transparent medium.
Advangelists' technology is proprietary and has all been developed internally. We own all of our technology.
Recent Developments and Employment Agreement with Deepanker Katyal
Deepanker Katyal’s employment agreement which commenced December 7, 2018 has a term of three years. Mr. Katyal is required to devote at least 40 hours per week pursuant to his responsibility as CEO of Advangelists. The agreement provides for full indemnification and participation in all benefit plans, programs and perquisites as are generally provided by the Company to its employees, including medical, dental, life insurance, disability and 401(k) participation. The agreement provides for termination for cause after giving employee 30 days’ prior written notice. The agreement provides for termination by the Company without cause after 60 days’ prior written notice with severance pay as described in his agreement. His employment agreement also provides for termination by disability for a period of more than six consecutive months in any 12-month period, termination by employee for good reason as defined in the agreement and restrictive covenants for a period of one year following the termination date.
Effective as of September 13, 2019, Mobiquity Technologies, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “GTECH SPA”) with GBT Technologies, Inc. (“GTECH”), pursuant to which the Company acquired from GTECH 15,000,000 shares of the Company’s common stock that was owned by GTECH (the “MOBQ Shares”). In consideration for the purchase of the MOBQ Shares from GTECH, the Company transferred to GTECH 110,000 shares of GTECH’s common stock that was owned by the Company.
On September 13, 2019, Advangelists, LLC (“AVNG”), a wholly-owned subsidiary of the Company, entered into Amendment No. 1 to Employment Agreement (the “Katyal Amendment”) with Deepankar Katyal, the CEO of AVNG, which amends Mr. Katyal’s original employment agreement (the “Original Katyal Agreement”), dated as of December 7, 2018. Pursuant to the Katyal Amendment, among other things, (i) the Company agreed to indemnify Mr. Katyal to the extent provided in the Company’s Certificate of Incorporation (the “Certificate”) and By-laws and to include Mr. Katyal as an insured under the Company’s applicable directors’ and officers’ liability insurance policies; (ii) AVNG agreed to provide Mr. Katyal with an automobile allowance of $550.00 per month, and (iii) the non-compete restrictive covenants contained in the Original Katyal Agreement ceased. In addition, the Katyal Amendment provides for the Company to redeem the shares of the Company’s Class B Preferred Stock (the “Class B Stock”) owned by Mr. Katyal, and entitles Mr. Katyal to the following additional compensation:
In connection with the Katyal Amendment, on September 13, 2019, the Company entered into a Class B Preferred stock Redemption Agreement (the “Katyal Redemption Agreement”), pursuant to which the Company redeemed the Company’s Class B Stock owned by Katyal.
On September 13, 2019, AVNG entered into Amendment No. 1 to Employment Agreement (the “Katyal Amendment”) with Lokesh Mehta, which amends Mr. Mehta’s original employment agreement (the “Original Mehta Agreement”), dated as of December 7, 2018. Pursuant to the Mehta Amendment, among other things, (i) the Company agreed to indemnify Mr. Mehta to the extent provided in the Company’s Certificate and By-laws and to include Mr. Mehta as an insured under the Company’s applicable directors’ and officers’ liability insurance policies; (ii) AVNG agreed to provide Mr. Mehta with an automobile allowance of $550.00 per month, and (iii) the non-compete restrictive covenants contained in the Original Mehta Agreement ceased. In addition, the Mehta Amendment provides for the Company to redeem the shares of the Company’s Class B Preferred Stock (the “Class B Stock”) owned by Mr. Mehta, and entitles Mr. Mehta to the following additional compensation:
In connection with the Mehta Amendment, on September 13, 2019, the Company entered into a Class B Preferred Stock Redemption Agreement (the “Mehta Redemption Agreement”), pursuant to which the Company redeemed the Company’s Class B Stock owned by Mehta in exchange for an employment agreement and other good and valuable consideration including an automobile allowance.
Risks Related to Our Financial Results and Financing Plans
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan related to technology. Management will continue to seek out equity and/or debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders and investors will continue to advance capital to the Company or that the new business operations will be profitable.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s efforts to raise equity and debt at acceptable terms or that the planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
Related Parties
Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. We consider the following individuals / companies to be related parties:parties as of December 31, 2021:
Dean Julia - Principal Executive Officer President and Director
Sean McDonnell - Chief Financial Officer
Deepanker Katyal, Chief Executive Officer of Advangelists
Sean Trepeta – President of Mobiquity Networks and Secretary of the Company
Dr. Gene Salkind – Chairman of the Board of Directors
Dr. Eugene Salkind
Michael Wright – Board of Directors
Anthony Iacovone – Board of Directors
Peter Zurkow – Board of Directors
F-32 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
PRINCIPLES OF CONSOLIDATION -– The accompanying condensed consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing& Promotions, Inc., and its wholly owned subsidiaries,subsidiary, Mobiquity Networks, Inc. and its wholly- owned subsidiary, Advangelists, LLC. All intercompany accounts and transactions have been eliminated in consolidation.
ESTIMATES -– The preparation of financial statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS -– The Company considers all highly liquid debt instruments with a maturity of three months or less as well as bank money market accounts,at the time of issuance to be cash equivalents. As of December 31, 2020, and December 31, 2019, the balances are $602,182 and $1,240,064, respectively.
CONCENTRATION OF CREDIT RISK -– Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and cash and cash equivalents.
Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, consequently, believes that its receivable credit risk exposure is limited. Our current receivables at December 31, 20202021 consist of 58.3%55% held by six of our largest customers. Our current receivables at December 31, 2019, receivables2020 consist of 47%58% held by foursix of our largest customers.
The Company places its temporary cash investments with high credit quality financial institutions. At times, the Company maintains bank account balances which exceed FDIC limits. As of December 31, 2020,2021, and December 31, 2019,2020, the Company exceeded FDIC limits by $114,986$5,103,273, and $749,037,$114,986, respectively.
REVENUE RECOGNITION
REVENUE RECOGNITION – On May 28, 2014, theThe Company accounts for revenue recognition in accordance with accounting guidance codified as FASB issued ASU No. 2014-09, RevenueASC 606 “Revenue from Contracts with CustomersCustomers” (“TopicASC 606”), to update the financial reporting requirements foras amended, regarding revenue recognition. Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based oncustomers. Under the principle thatstandard an entity shouldis required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance became effective for the Company beginning on January 1, 2018, and entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company adopted this standard using the modified retrospective approach on January 1, 2018.goods.
In preparation for adoption of the standard, the Company evaluated each of the five steps in TopicUnder ASC 606, which are as follows: 1) Identify the contract with the customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations; and 5) Recognize revenue when (or as) performance obligations are satisfied.
Reported revenue was not affected materially in any period due to the adoption of ASC Topic 606 because: (1) the Company expects to identify similar performance obligations under Topic 606 as compared with deliverables and separate units of account previously identified; (2) the Company has determined the transaction price to be consistent; and (3) the Company records revenueis recognized at the same point in time, upon delivery of services, under both ASC Topic 605 and Topic 606, as applicable under the terms of the contract (i.e., performance obligations). In evaluating our contracts with our customers under ASC 606, we have determined that there is no future performance obligation once delivery has occurred.
The Company’s revenues are primarily derived from consideration paid by customers. There are no material upfront costs for operations that are incurred from contracts with customers.
The Company’s rights to payments for services transferred to customers are conditional only on the customer. Additionally, the Company doespassage of time and not expect the accounting for fulfillment costs or costs incurredon any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to obtain a contract to be affected materially in any period due to the adoption of Topic 606.90 days.
ALLOWANCE FOR DOUBTFUL ACCOUNTS -– Management must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of December 31, 2020,2021, and December 31, 2019,2020, allowance for doubtful accounts were $820,990, and $386,600, and $80,600, respectively.
F-33 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
PROPERTY AND EQUIPMENT -– Property and equipment are stated at cost. Depreciation is expensed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are being amortized using the straight-line method over the estimated useful lives of the related assets or the remaining term of the lease. The costs of additions and improvements, which substantially extend the useful life of a particular asset, are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the account and the gain or loss on disposition is reflected in operating income.
LONG LIVED ASSETS – In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair valuevalue. The Company recognized a four million dollar write down loss due to the COVID-19 pandemican impairment charge of $3,600,000 and $4,000,000 for the periodperiods ended December 31, 2020.2021, and December 31, 2020, respectively.
Transactions with major customers
During the year ended December 31, 2021, four customers accounted for approximately 31% of revenues. During the year ended December 31, 2020, five customers accounted for approximately 42% of revenues.
During the year ended December 31, 2021, five customers accounted for approximately 55% of receivables. During the year ended December 31, 2020, six customers accounted for approximately 58% of revenues and for the year ended December 31, 2019, four customers accounted for 47% our revenues.receivables.
ADVERTISING COSTS -– Advertising costs are expensed as incurred. For the year ended December 31, 20202021, and for the year ended December 31, 2019,2020, there were advertising costs of $1,400$1,454 and $70,042,$1,400 respectively.
ACCOUNTING FOR STOCK BASED COMPENSATION.COMPENSATION – Stock based compensation cost is measured at the grant date fair value of the award and is recognized as expense over the requisite service period. The Company uses the Black-Sholes option-pricing model to determine fair value of the awards, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”) and the number of options for which vesting requirements will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated statements of operations. Refer to Note 79 “Stock Option Plans” in the Notes to Consolidated Financial Statements in this report for a more detailed discussion.
OFFERING COSTS (RESTATED) – Offering costs consist of legal, accounting, underwriting fees and other costs incurred in connection with the sale of the Company’s common stock. These costs are deducted from the total proceeds raised with a charge to additional paid-in capital.
BENEFICIAL CONVERSION FEATURES -– Debt instruments that contain a beneficial conversion feature are recorded as deemed interest to the holders of the convertible debt instruments. The beneficial conversion is calculated as the difference between the fair values of the underlying common stock less the proceeds that have been received for the debt instrument limited to the value received.
INCOME TAXES -– Deferred income taxes are recognized for temporary differences between financial statement and income tax basis of assets and liabilities for which income tax or tax benefits are expected to be realized in future years. A valuation allowance is established to reduce deferred tax assets, if it is more likely than not, that all or some portion of such deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
F-34 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We adopted the lease standard ACS 842 effective January 1, 2019, and have elected to use January 1, 2019, as our date of initial application. Consequently, financial information will not be updated, and disclosures required under the new standard will not be provided for periods presented before January 1, 2019, as these prior periods conform to the Accounting Standards Codification 840. We elected the package of practical expedients permitted under the transition guidance within the new standard. By adopting these practical expedients, we were not required to reassess (1) whether an existing contract meets the definition of a lease; (2) the lease classification for existing leases; or (3) costs previously capitalized as initial direct costs. As of December 10, 2019,31, 2021, we are not a lessor or lessee under any lease arrangements.
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or result of operations.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants. The number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted loss per common share calculation was approximately 748,505 because they4,925,000 common stock equivalents since these are anti-dilutive, as a result of a net loss for the year ended December 31, 2020.2021.
NOTE 3: ACQUISITION OF ADVANGELISTS, LLCRECLASSIFICATIONS (RESTATED)
In December 2018, pursuantCertain prior year amounts have been reclassified for consistency with the current year presentation due to an Agreement and Plan of Merger (the “Merger Agreement”) with Glen Eagles Acquisition LP (“GEAL”) and Mobiquity Technologies, Inc. purchased of all the issued and outstanding capital stock and membership interest of Advangelists LLC. The Company closed and completed the acquisition on December 6, 2018.
The purchase price paid includes the assumption of certain assets, liabilities and contracts associated with Advangelists, LLC, at closing the sellers received $500,000 cash, warrants and stock and the issuance of a nineteen- month promissory note in aggregate principal amount of $9,500,000.
The following table summarizes the allocation of the purchase price as of the acquisition date:
Purchase Price
$9,500,000 Promissory note | $ | 9,500,000 | ||
Cash | 500,000 | |||
Mobiquity Technologies, Inc. warrants | 3,844,444 | |||
Gopher Protocol Inc. common stock | 6,155,556 | |||
$ | 20,000,000 |
On April 30, 2019, the Company entered into a Membership Interest Purchase Agreement with GEAL, which the Company acquired from GEAL 3% of the membership interest of Advangelists, LLC for $600,000 in cash. Giving the Company a 51% interest.
On May 8, 2019, the Company entered into a Membership Purchase Agreement with Gopher Protocol, Inc. to acquire the 49% interest of Advangelists, LLC which it contemporaneously purchased from GEAL. The purchase price was paid by the issuance of a $7,512,500 promissory note. As a result of the transaction, the Company owns 100% of Advangelists LLC.
On September 13, 2019, the Company repurchased fifteen million shares of common stock for the aggregate by exchanging 110,000 shares of GTCH common stock held for investment purposes.restatement.
F-35 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
NOTE 3: RESTATEMENT
The Company concluded it should restate its previously issued financial statements by amending its Amendment No. 1 to its Annual Report on Form 10-K, filed with the SEC on May 23, 2022.
The restated financial statements are indicated as “Restated” in the financial statements and accompanying notes, as applicable.
The restatements of the prior filings are the result of the following summarized transactions:
During 2020 and 2021, certain holders of the Company’s convertible debt converted debt principal into shares of common stock, or the Company sold shares of its stock for cash. For certain of these transactions, the Company recorded a “loss on sale of stock" and increased additional paid-in capital representing the difference in the per share sale or conversion price of the stock and the per share market value of the stock at the date of the transactions. For these types of transactions, the Company should not have recorded any gain or loss for the difference in the per share issuance price and market value. The converted or sold value should be netted against the debt amount settled at original conversion terms, or cash received, with the offset recorded to additional paid-in capital. The restatement resulted in a reduction of net loss and additional paid-in capital. | ||
During Q2 2019, the Company granted a total of 23 million (57,500 post a 1-for-400 reverse stock split) warrant shares to three individuals which vest over a graded two-year period. The Company had been expensing, upon each graded vesting date, the fair value of the vested options as opposed to recognizing the expense straight-line over the entire vesting period for each vesting tranche. Further, the option was being expensed over a three-year vesting period, erroneously, as opposed to the contractual graded two-year vesting period. This resulted in significant differences in the timing of stock-based compensation recognition on an annual and quarterly basis. | ||
The Company had warrants outstanding at December 31, 2019 that were issued in conjunction with its AAA Preferred Stock (the "AAA warrants”). In early 2020, the warrant holders exercised 11,755,200 (29,388 post a 1-for-400 reverse stock split) warrant shares. The Company proceeded to record "warrant expense" for the fair value of the warrants on the date they were exercised. Per generally accepted accounting principles, the accounting for such warrants should be done as of their grant date, not their exercise date. When warrants are exercised for cash under the original terms of the warrant agreement, assuming they are classified as equity when issued, the Company should record common stock and additional paid-in capital only for the amount of proceeds received. In addition to the AAA warrants, certain warrants were exercised by two non-affiliated individuals. The Company subsequently issued additional common shares to the non-affiliated individuals under the warrant exercises based on a lower strike price, resulting in additional shares issued to the warrant holders. Any value associated with the modification of the warrant terms would be considered a deemed dividend and reflected within stockholders’ equity and not to other expense. | ||
During 2021, several debt holders received shares of common stock or an “equity kicker” in connection with the issuance of short-term promissory notes. The estimated value of the shares issued was reflected on the consolidated statements of operations as “loss on sale of stock". This should be presented as interest expense since the shares were issued with short-term promissory notes. | ||
F-36 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Impact of the Restatement – December 31, 2020
As of December 31, 2020 | ||||||||||||
Balance Sheet Data | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 184,586,420 | $ | (2,057,415 | ) | $ | 182,529,005 | |||||
Accumulated deficit | $ | (186,168,926 | ) | $ | 2,057,415 | $ | (184,111,511 | ) | ||||
Total Stockholders' Equity | $ | 2,886,685 | $ | – | $ | 2,886,685 |
Year Ended December 31, 2020 | ||||||||||||
Statement of Operations Data | As Previously Reported | Adjustment | As Restated | |||||||||
General and administrative | $ | 9,204,465 | $ | (353,536 | ) | $ | 8,850,929 | |||||
Total operating expenses | $ | 9,204,465 | $ | (353,536 | ) | $ | 8,850,929 | |||||
Loss from operations | $ | (7,381,100 | ) | $ | 353,536 | $ | (7,027,564 | ) | ||||
Proceeds from sale of warrants | $ | 662,758 | $ | (662,758 | ) | $ | – | |||||
Warrant income (expense) | $ | (598,894 | ) | $ | 598,894 | $ | – | |||||
Loss on sale of company stock | $ | (2,996,897 | ) | $ | 2,996,897 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | (3,009 | ) | $ | (3,009 | ) | ||||
Total other income (expense) - net | $ | (7,648,295 | ) | $ | 2,930,024 | $ | (4,718,271 | ) | ||||
Net loss | $ | (15,032,404 | ) | $ | 3,286,569 | $ | (11,745,835 | ) | ||||
Net loss per share - basic and diluted | $ | (5.92 | ) | $ | (4.63 | ) |
Year Ended December 31, 2020 | ||||||||||||
Cash Flow Data | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (15,032,404 | ) | $ | 3,286,569 | $ | (11,745,835 | ) | ||||
Stock-based compensation | $ | 1,347,048 | $ | (353,536 | ) | $ | 993,512 | |||||
Warrant expense | $ | 1,472,368 | $ | (1,472,368 | ) | $ | – | |||||
Loss on conversion of debt to common stock | $ | 30,694 | $ | (30,694 | ) | $ | – | |||||
Accounts payable and accrued expenses | $ | (778,375 | ) | $ | 4 | $ | (778,371 | ) | ||||
Net cash used in operating activities | $ | (4,716,739 | ) | $ | 1,429,975 | $ | (3,286,764 | ) | ||||
Proceeds from exercise of warrants | $ | – | $ | 662,754 | $ | 662,754 | ||||||
Repayments on notes payable | $ | (520,809 | ) | $ | 30,694 | $ | (490,115 | ) | ||||
Common stock issued for cash, net | $ | 3,600,423 | $ | (2,123,423 | ) | $ | 1,477,000 | |||||
Net cash provided by financing activities | $ | 4,085,456 | $ | (1,429,975 | ) | $ | 2,655,481 | |||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock issued for conversion of convertible notes | $ | – | $ | 30,694 | $ | 30,694 | ||||||
Conversion of Series E preferred stock to shares of common stock | $ | – | $ | 314,960 | $ | 314,960 |
F-37 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Impact of the Restatement – December 31, 2021
As of December 31, 2021 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 204,373,816 | $ | (3,089,809 | ) | $ | 201,284,007 | |||||
Accumulated deficit | $ | (205,534,703 | ) | $ | 3,089,809 | $ | (202,444,894 | ) | ||||
Total Stockholders' Equity (Deficit) | $ | 2,918,672 | $ | – | $ | 2,918,672 |
Year Ended December 31, 2021 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
General and administrative expenses | $ | 13,982,877 | $ | (375,118 | ) | $ | 13,607,759 | |||||
Loss from operations | $ | (13,264,645 | ) | $ | 375,118 | $ | (12,889,527 | ) | ||||
Loss on debt extinguishment | $ | (657,276 | ) | $ | 657,276 | $ | – | |||||
Total other income (expense) - net | $ | (6,101,132 | ) | $ | 657,276 | $ | (5,443,856 | ) | ||||
Net loss | $ | (19,365,777 | ) | $ | 1,032,394 | $ | (18,333,383 | ) | ||||
Net loss per share - basic and diluted | $ | (5.78 | ) | $ | (5.47 | ) |
Year Ended December 31, 2021 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (19,365,777 | ) | $ | 1,032,394 | $ | (18,333,383 | ) | ||||
Stock-based compensation | $ | 5,010,342 | $ | (375,118 | ) | $ | 4,635,224 | |||||
Loss on conversion of debt to common stock | $ | 655,832 | $ | (655,832 | ) | $ | – | |||||
Net cash used in operating activities | $ | (6,717,324 | ) | $ | – | $ | (6,717,324 | ) | ||||
Net cash provided by investing activities | $ | (6,472 | ) | $ | – | $ | (6,472 | ) | ||||
Net cash provided by financing activities | $ | 11,506,860 | $ | – | $ | 11,506,860 |
F-38 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Impact of the Restatement - Quarterly Interim Periods (Unaudited)
As of March 31, 2020 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 178,560,444 | $ | 1,604,482 | $ | 180,164,926 | ||||||
Accumulated deficit | $ | (173,572,315 | ) | $ | (1,604,482 | ) | $ | (175,176,797 | ) | |||
Total Stockholders' Equity | $ | 9,303,275 | $ | – | $ | 9,303,275 |
As of June 30, 2020 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 180,625,860 | $ | (68,575 | ) | $ | 180,557,285 | |||||
Accumulated deficit | $ | (178,155,775 | ) | $ | 68,575 | $ | (178,087,200 | ) | ||||
Total Stockholders' Equity | $ | 6,939,234 | $ | – | $ | 6,939,234 |
As of September 30, 2020 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 184,231,046 | $ | (2,101,143 | ) | $ | 182,129,903 | |||||
Accumulated deficit | $ | (182,116,945 | ) | $ | 2,101,143 | $ | (180,015,802 | ) | ||||
Total Stockholders' Equity | $ | 6,583,288 | $ | – | $ | 6,583,288 |
As of March 31, 2021 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 185,234,064 | $ | 1,932,033 | $ | 183,302,031 | ||||||
Accumulated deficit | $ | (188,398,702 | ) | $ | (1,932,033 | ) | $ | (186,466,669 | ) | |||
Total Stockholders' Equity | $ | 1,304,563 | $ | – | $ | 1,304,563 |
As of June 30, 2021 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 187,117,663 | $ | (2,652,133 | ) | $ | 184,465,530 | |||||
Accumulated deficit | $ | (190,992,325 | ) | $ | 2,652,133 | $ | (188,340,192 | ) | ||||
Total Stockholders' Equity | $ | 594,559 | $ | – | $ | 594,559 |
As of September 30, 2021 | ||||||||||||
Balance Sheet Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Additional paid in capital | $ | 189,498,056 | $ | (3,088,538 | ) | $ | 186,409,518 | |||||
Accumulated deficit | $ | (194,904,072 | ) | $ | 3,088,538 | $ | (191,815,534 | ) | ||||
Total Stockholders' Equity (Deficit) | $ | (951,735 | ) | $ | – | $ | (951,735 | ) |
F-39 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Three Months Ended March 31, 2020 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Selling, general and administrative | $ | 1,485,080 | $ | (80,750 | ) | $ | 1,404,330 | |||||
Stock-based compensation | $ | – | $ | 490,468 | $ | 490,468 | ||||||
Total operating expenses | $ | 2,381,928 | $ | 409,718 | $ | 2,791,646 | ||||||
Loss from operations | $ | (2,225,740 | ) | $ | (409,718 | ) | $ | (2,635,458 | ) | |||
Loss on sale of company stock | $ | (34,390 | ) | $ | 34,390 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | (3,038 | ) | $ | (3,038 | ) | ||||
Total other income (expense) - net | $ | (207,015 | ) | $ | 31,352 | $ | (175,663 | ) | ||||
Net loss | $ | (2,435,793 | ) | $ | (375,328 | ) | $ | (2,811,121 | ) | |||
Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) |
Three Months Ended June 30, 2020 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 1,276,870 | $ | (1,015,388 | ) | $ | 261,482 | |||||
Total operating expenses | $ | 3,553,285 | $ | (1,015,388 | ) | $ | 2,537,897 | |||||
Loss from operations | $ | (3,767,016 | ) | $ | 1,015,388 | $ | (2,751,628 | ) | ||||
Warrant expense | $ | (598,894 | ) | $ | 598,894 | $ | – | |||||
Loss on sale of company stock | $ | (58,775 | ) | $ | 58,775 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | 28 | $ | 28 | ||||||
Total other income (expense) - net | $ | (816,472 | ) | $ | 657,697 | $ | (158,775 | ) | ||||
Net loss | $ | (4,583,460 | ) | $ | 1,673,057 | $ | (2,910,403 | ) | ||||
Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) |
Six Months Ended June 30, 2020 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Selling, general and administrative | $ | 3,149,691 | $ | (80,750 | ) | $ | 3,068,941 | |||||
Stock-based compensation | $ | 1,276,870 | $ | (524,920 | ) | $ | 751,950 | |||||
Total operating expenses | $ | 5,935,213 | $ | (605,670 | ) | $ | 5,329,543 | |||||
Loss from operations | $ | (5,992,756 | ) | $ | 605,670 | $ | (5,387,086 | ) | ||||
Warrant expense | $ | (598,894 | ) | $ | 598,894 | $ | – | |||||
Loss on sale of company stock | $ | (93,165 | ) | $ | 93,165 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | (3,010 | ) | $ | (3,010 | ) | ||||
Total other income (expense) - net | $ | (1,023,487 | ) | $ | 689,049 | $ | (334,438 | ) | ||||
Net loss | $ | (7,019,253 | ) | $ | 1,297,729 | $ | (5,721,524 | ) | ||||
Net loss per share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) |
Three Months Ended September 30, 2020 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 54,589 | $ | 126,067 | $ | 180,656 | ||||||
Total operating expenses | $ | 2,078,382 | $ | 126,067 | $ | 2,204,449 | ||||||
Loss from operations | $ | (1,601,465 | ) | $ | (126,067 | ) | $ | (1,727,532 | ) | |||
Warrant income (expense) | $ | 662,758 | $ | (662,758 | ) | $ | – | |||||
Loss on sale of company stock | $ | (2,821,393 | ) | $ | 2,821,393 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | (23 | ) | $ | (23 | ) | ||||
Total other income (expense) - net | $ | (2,359,682 | ) | $ | 2,158,612 | $ | (201,070 | ) | ||||
Net loss | $ | (3,961,170 | ) | $ | 2,032,568 | $ | (1,928,602 | ) | ||||
Net loss per share - basic and diluted | $ | (1.43 | ) | $ | (0.70 | ) |
F-40 |
On September 13, 2019, Dr. Gene Salkind, is a related party who is a director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible promissory notes (the “Note”) and loaned to the Company an aggregate of $2,300,000 (the “Loans”) on a secured basis.MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
The Notes bear interest at a fixed rate of 15% per annum, computed based on a 360-day year of twelve 30-day months and will be payable monthly in arrears. Interest on the Notes is payable in cash, or, at the Lenders’ option, in shares of the Company’s common stock. The principal amount due under the Notes will be payable on September 30, 2029, unless earlier converted pursuant to the terms of the Notes.
Nine Months Ended September 30, 2020 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 1,331,459 | $ | (479,603 | ) | $ | 851,856 | |||||
Total operating expenses | $ | 8,013,595 | $ | (479,603 | ) | $ | 7,533,992 | |||||
Loss from operations | $ | (7,594,221 | ) | $ | 479,603 | $ | (7,114,618 | ) | ||||
Warrant income (expense) | $ | 63,864 | $ | (63,864 | ) | $ | – | |||||
Loss on sale of company stock | $ | (2,914,558 | ) | $ | 2,914,558 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | (3,033 | ) | $ | (3,033 | ) | ||||
Total other income (expense) - net | $ | (3,383,169 | ) | $ | 2,847,661 | $ | (535,508 | ) | ||||
Net loss | $ | (10,980,423 | ) | $ | 3,330,297 | $ | (7,650,126 | ) | ||||
Net loss per share - basic and diluted | $ | (3.99 | ) | $ | (2.78 | ) |
Subject to the Company obtaining prior approval from the Company’s shareholders for the issuance of shares of common stock upon conversion of the Notes, if and to the extent required by the New York Business Corporation Law, the Notes will be convertible into equity of the Company upon the following events on the following terms:
Three Months Ended March 31, 2021 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 16,839 | $ | 125,382 | $ | 142,221 | ||||||
Total operating expenses | $ | 1,626,394 | $ | 125,382 | $ | 1,751,776 | ||||||
Loss from operations | $ | (2,041,801 | ) | $ | (125,382 | ) | $ | (2,167,183 | ) | |||
Unrealized gain (loss) on investments | $ | – | $ | 40 | $ | 40 | ||||||
Total other income (expense) - net | $ | (188,015 | ) | $ | 40 | $ | (187,975 | ) | ||||
Net loss | $ | (2,229,776 | ) | $ | (125,382 | ) | $ | (2,355,158 | ) | |||
Net loss per share - basic and diluted | $ | (0.78 | ) | $ | (0.82 | ) |
Three Months Ended June 30, 2021 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 555,892 | $ | (500,500 | ) | $ | 55,392 | |||||
Total operating expenses | $ | 2,047,428 | $ | (500,500 | ) | $ | 1,546,928 | |||||
Loss from operations | $ | (2,156,513 | ) | $ | 500,500 | $ | (1,656,013 | ) | ||||
Interest expense | $ | (215,162 | ) | $ | (310,150 | ) | $ | (525,312 | ) | |||
Original issue discount | $ | (110,000 | ) | $ | 110,000 | $ | – | |||||
Loss on sale of company stock | $ | (419,750 | ) | $ | 419,750 | $ | – | |||||
Unrealized gain (loss) on investments | $ | – | $ | (40 | ) | $ | (40 | ) | ||||
Loan forgiveness - SBA | $ | – | $ | 265,842 | $ | 265,842 | ||||||
Total other income (expense) - net | $ | (744,912 | ) | $ | 485,402 | $ | (259,510 | ) | ||||
Net loss | $ | (2,593,623 | ) | $ | 720,100 | $ | (1,873,523 | ) | ||||
Net loss per share - basic and diluted | $ | (0.87 | ) | $ | (0.63 | ) |
The Notes contain customary events of default, which, if uncured, entitle the Lenders thereof to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, their Notes.
In connection with the subscription of the Notes, the Company issued to each Lender a warrant to purchase 400 post-split shares of the Company’s common stock for every two shares of common stock issuable upon conversion of the Notes, at an exercise price of $48.00 per post-split share (the “Lender Warrants”).
On September 13, 2019, Advangelists, LLC, a wholly-owned subsidiary of the Company (“AVNG”), entered into Amendment No. 1 to Employment Agreement (the “Katyal Amendment”) with Deepankar Katyal, who is a related party and the CEO of AVNG, which amends Mr. Katyal’s original employment agreement (the “Original Katyal Agreement”), dated as of December 7, 2018. Pursuant to the Katyal Amendment, among other things, (i) the Company agreed to indemnify Mr. Katyal to the extent provided in the Company’s Certificate of Incorporation (the “Certificate”) and By-laws and to include Mr. Katyal as an insured under the Company’s applicable directors’ and officers’ liability insurance policies; (ii) AVNG agreed to provide Mr. Katyal with an automobile allowance of $550.00 per month, and (iii) the non-compete restrictive covenants contained in the Original Katyal Agreement ceased. In addition, the Katyal Amendment provides for the Company to redeem the shares of the Company’s Class B Preferred Stock (the “Class B Stock”) owned by Mr. Katyal, and entitles Mr. Katyal to the following additional compensation:
Six Months Ended June 30, 2021 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 572,731 | $ | (375,118 | ) | $ | 197,613 | |||||
Total operating expenses | $ | 3,631,822 | $ | (375,118 | ) | $ | 3,256,704 | |||||
Loss from operations | $ | (4,156,314 | ) | $ | 375,118 | $ | (3,781,196 | ) | ||||
Interest expense | $ | (403,177 | ) | $ | (310,150 | ) | $ | (713,327 | ) | |||
Original issue discount | $ | (110,000 | ) | $ | 110,000 | $ | – | |||||
Loan forgiveness - SBA | $ | – | $ | 265,842 | $ | 265,842 | ||||||
Loss on sale of company stock | $ | (419,750 | ) | $ | 419,750 | $ | – | |||||
Total other income (expense) - net | $ | (932,927 | ) | $ | 485,442 | $ | (447,485 | ) | ||||
Net loss | $ | (4,823,399 | ) | $ | 594,718 | $ | (4,228,681 | ) | ||||
Net loss per share - basic and diluted | $ | (1.65 | ) | $ | (1.45 | ) |
F-41 |
MOBIQUITY TECHNOLOGIES, INC.
In connection with the Katyal Amendment, on September 13, 2019, the Company entered into a Class B Preferred stock Redemption Agreement (the “Katyal Redemption Agreement”), pursuant to which the Company redeemed the Company’s Class B Stock owned by Katyal.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 2019, the Company assumed a promissory note (the “AVNG Note”) payable to Deepankar Katyal (the “Payee”), as representative of the former owners of AVNG, which at the time of assumption had a remaining principal balance of $7,512,500. Simultaneously with the assumption of the AVNG Note, the AVNG Note was amended and restated as disclosed in the May 8-K (the “First Amended AVNG Note”). Effective as of September 13, 2019, the Company and Payee entered into a Second Amended and Restated Promissory Note (the “Second Amended AVNG Note”), in the principal amount of $6,750,000, pursuant to which the repayment terms under the First Amended AVNG Note were amended and restated as follows:
The Second Amended AVNG Note provides that upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class E Preferred Stock issuable pursuant to the terms of the Second Amended AVNG Note, and any shares of the Company’s common stock issued upon the conversion of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First Amended AVNG Note.
MergerYEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Mobiquity entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Glen Eagles Acquisition LP (“GEAL”) (which at the time owned 412,000 post-split shares of common stock of Mobiquity, equivalent to approximately 29.6% of the outstanding shares), AVNG Acquisition Sub, LLC (“Merger Sub”) and Advangelists, LLC (“Advangelists”) on November 20, 2018 which provided for Merger Sub to merge into Advangelists, with Advangelists as the surviving company following the merger.
Three Months Ended September 30, 2021 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Interest expense | $ | (203,436 | ) | $ | (605,880 | ) | $ | (809,316 | ) | |||
Original issue discount | $ | (605,880 | ) | $ | 605,880 | $ | – | |||||
Loss on sale of company stock | $ | (436,405 | ) | $ | 436,405 | $ | – | |||||
Total other income (expense) - net | $ | (1,245,703 | ) | $ | 436,405 | $ | (809,298 | ) | ||||
Net loss | $ | (3,911,747 | ) | $ | 436,405 | $ | (3,475,342 | ) | ||||
Net loss per share - basic and diluted | $ | (1.22 | ) | $ | (1.09 | ) |
On December 6, 2018, Mobiquity and the other parties to the Merger Agreement entered into the First Amendment to Agreement and Plan of Merger (the “Amendment”) which amended the Merger Agreement as follows:
Nine Months Ended September 30, 2021 | ||||||||||||
Statement of Operations Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Stock-based compensation | $ | 1,289,899 | $ | (375,118 | ) | $ | 914,781 | |||||
Total operating expenses | $ | 6,179,909 | $ | (375,118 | ) | $ | 5,804,791 | |||||
Loss from operations | $ | (6,822,358 | ) | $ | 375,118 | $ | (6,447,240 | ) | ||||
Interest expense | $ | (606,613 | ) | $ | (916,030 | ) | $ | (1,522,643 | ) | |||
Original issue discount | $ | (715,880 | ) | $ | 715,880 | $ | – | |||||
Loss on sale of company stock | $ | (856,155 | ) | $ | 856,155 | $ | – | |||||
Total other income (expense) - net | $ | (2,178,630 | ) | $ | 656,005 | $ | (1,522,625 | ) | ||||
Net loss | $ | (8,735,146 | ) | $ | 1,031,123 | $ | (7,704,023 | ) | ||||
Net loss per share - basic and diluted | $ | (2.89 | ) | $ | (2.54 | ) |
Three Months Ended March 31, 2020 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (2,435,793 | ) | $ | (375,328 | ) | $ | (2,811,121 | ) | |||
Stock-based compensation | $ | – | $ | 490,468 | $ | 490,468 | ||||||
Warrant expense | $ | 403,268 | $ | (403,268 | ) | $ | – | |||||
Accounts payable and accrued expenses | $ | (639,237 | ) | $ | (103,074 | ) | $ | (742,311 | ) | |||
Accrued expenses and other current liabilities | $ | (93,063 | ) | $ | 93,063 | $ | – | |||||
Accrued interest | $ | (10,011 | ) | $ | 10,011 | $ | – | |||||
Net cash used in operating activities | $ | (836,696 | ) | $ | (288,128 | ) | $ | (1,124,824 | ) | |||
Series E preferred stock exchange for common stock | $ | (314,960 | ) | $ | 314,960 | $ | – | |||||
Note conversion to common stock | $ | 30,695 | $ | (30,695 | ) | $ | – | |||||
Net cash used in investing activities | $ | (284,265 | ) | $ | 284,265 | $ | – | |||||
Preferred stock converted to common stock | $ | 314,960 | $ | (314,960 | ) | $ | – | |||||
Common stock issued under exercise of warrants | $ | – | $ | 288,128 | $ | 288,128 | ||||||
Cash paid on bank notes | $ | (263,173 | ) | $ | 30,695 | $ | (232,478 | ) | ||||
Net cash provided by financing activities | $ | 301,787 | $ | 3,863 | $ | 305,650 | ||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock issued for conversion of convertible notes | $ | – | $ | 30,695 | $ | 30,695 | ||||||
Conversion of Series E preferred stock to shares of common stock | $ | – | $ | 314,960 | $ | 314,960 |
F-42 |
Under the Merger Agreement and the Amendment, in consideration for the Merger:MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The transactions contemplated by the Merger Agreement were consummated on December 7, 2018 upon the filing of a Certificate of Merger by Advangelists. As a result of the merger, Mobiquity owned 48% and GEAL owned 52% of Advangelists; and Mobiquity is the sole manager of, and controls, Advangelists at that time.YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
As a result of Mobiquity having 100% control over Advangelists as of December 31, 2018, ASC 810-10-05-3 states “that for LLCs with managing and non-managing members, a managing member is the functional equivalent of a general partner and a non-managing member is the functional equivalent of a limited partner. In this case, a reporting entity with an interest in an LLC (which is not a VIE) would likely apply the consolidation model for limited partnerships if the managing member has the right to make the significant operating and financial decisions of the LLC.” In this case Mobiquity has the right to make the significant operating and financial decisions of Advangelists resulting in consolidation of Advangelists.
Six Months Ended June 30, 2020 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (7,019,253 | ) | $ | 1,297,729 | $ | (5,721,524 | ) | ||||
Stock-based compensation | $ | 1,276,870 | $ | (524,920 | ) | $ | 751,950 | |||||
Warrant expense | $ | 1,354,817 | $ | (1,354,817 | ) | $ | – | |||||
Accounts payable and accrued expenses | $ | (625,562 | ) | $ | (4,370 | ) | $ | (629,932 | ) | |||
Accrued expenses and other current liabilities | $ | (89,671 | ) | $ | 89,671 | $ | – | |||||
Accrued interest | $ | 85,301 | $ | (85,301 | ) | $ | – | |||||
Net cash used in operating activities | $ | (1,116,388 | ) | $ | (582,008 | ) | $ | (1,698,396 | ) | |||
Note conversion to common stock | $ | 30,695 | $ | (30,695 | ) | $ | – | |||||
Net cash provided by investing activities | $ | 30,695 | $ | (30,695 | ) | $ | – | |||||
Common stock issued under exercise of warrants | $ | – | $ | 582,008 | $ | 582,008 | ||||||
Cash paid on bank notes | $ | (462,694 | ) | $ | 30,695 | $ | (431,999 | ) | ||||
Net cash provided by financing activities | $ | 282,694 | $ | 612,703 | $ | 895,397 | ||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock issued for conversion of convertible notes | $ | – | $ | 30,695 | $ | 30,695 | ||||||
Conversion of Series E preferred stock to shares of common stock | $ | – | $ | 314,960 | $ | 314,960 |
On April 30, 2019, the Company entered into a Membership Interest Purchase Agreement with GEAL, pursuant to which the Company acquired from GEAL 3% of the membership interests of Advangelists, for cash in the amount of $600,000 (the “Purchase Price”). The Purchase Price was paid by the Company to GEAL on May 3, 2019. As a result of the Transaction, the Company then owned 51% of the membership interests of Advangelists, with GEAL owning 49% of the membership interests of Advangelists.
On May 10, 2019, the Company entered into a Membership Purchase Agreement effective as of May 8, 2019 with Gopher Protocol, Inc. to acquire the 49% interest of Advangelists, which it contemporaneously purchased from GEAL. As a result of this transaction, the Company owns 100% of Advangelists’s Membership Interests.
The acquisition of the 49% of Advangelists membership interests was accomplished in a transaction involving Mobiquity, Glen Eagles Acquisition LP, and Gopher Protocol, Inc.
Recognized amount of identifiable assets acquired, liabilities assumed, and consideration expensed:
Financial assets: | ||||
Cash and cash equivalents | $ | 216,799 | ||
Accounts receivable, net | 2,679,698 | |||
Property and equipment, net | 20,335 | |||
Intangible assets (a) | 10,000,000 | |||
Accounts payable and accrued liabilities | (2,871,673 | ) | ||
Purchase price expensed | 9,954,841 | |||
$ | 20,000,000 |
Nine Months Ended September 30, 2020 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (10,980,423 | ) | $ | 3,330,297 | $ | (7,650,126 | ) | ||||
Stock-based compensation | $ | 1,331,459 | $ | (479,603 | ) | $ | 851,856 | |||||
Warrant expense | $ | 1,472,368 | $ | (1,472,368 | ) | $ | – | |||||
Accounts payable and accrued expenses | $ | (629,419 | ) | $ | 86,203 | $ | (543,216 | ) | ||||
Accrued expenses and other current liabilities | $ | (95,310 | ) | $ | 95,310 | $ | – | |||||
Accrued interest | $ | 181,513 | $ | (181,513 | ) | $ | – | |||||
Net cash used in operating activities | $ | (4,490,623 | ) | $ | 1,378,326 | $ | (3,112,297 | ) | ||||
Common stock issued for cash, net | $ | 3,338,084 | $ | (3,338,084 | ) | $ | – | |||||
Note conversion to common stock | $ | 30,695 | $ | (30,695 | ) | $ | – | |||||
Net cash provided by (used in) investing activities | $ | 3,362,180 | $ | (3,368,779 | ) | $ | (6,599 | ) | ||||
Common stock issued under exercise of warrants | $ | – | $ | 662,758 | $ | 662,758 | ||||||
Common stock issued for cash, net | $ | – | $ | 1,297,000 | $ | 1,297,000 | ||||||
Cash paid on bank notes | $ | (490,739 | ) | $ | 30,695 | $ | (460,044 | ) | ||||
Net cash provided by financing activities | $ | 425,103 | $ | 1,990,453 | $ | 2,415,556 | ||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock issued for conversion of convertible notes | $ | – | $ | 30,695 | $ | 30,695 | ||||||
Conversion of Series E preferred stock to shares of common stock | $ | – | $ | 314,960 | $ | 314,960 |
F-43 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Three Months Ended March 31, 2021 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (2,229,776 | ) | $ | (125,382 | ) | $ | (2,355,158 | ) | |||
Stock-based compensation | $ | 16,839 | $ | 125,382 | $ | 142,221 | ||||||
Accounts payable and accrued expenses | $ | (275,686 | ) | $ | 99,552 | $ | (176,134 | ) | ||||
Accrued expenses and other current liabilities | $ | 4,715 | $ | (4,715 | ) | $ | – | |||||
Accrued interest | $ | 94,837 | $ | (94,837 | ) | $ | – | |||||
Net cash used in operating activities | $ | (1,079,181 | ) | $ | – | $ | (1,079,181 | ) | ||||
Common stock issued for cash, net | $ | 548,990 | $ | (548,990 | ) | $ | – | |||||
Net cash provided by investing activities | $ | 548,990 | $ | (548,990 | ) | $ | – | |||||
Common stock issued for cash, net | $ | – | $ | 548,990 | $ | 548,990 | ||||||
Net cash provided by financing activities | $ | 140,016 | $ | 548,990 | $ | 689,006 |
Six Months Ended June 30, 2021 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (4,823,399 | ) | $ | 594,718 | $ | (4,228,681 | ) | ||||
Stock-based compensation | $ | 572,731 | $ | (375,118 | ) | $ | 197,613 | |||||
Stock issued with short-term convertible notes | $ | – | $ | 310,150 | ||||||||
Gain on forgiveness of debt | $ | – | $ | (265,842 | ) | $ | (265,842 | ) | ||||
Accounts payable and accrued expenses | $ | (519,474 | ) | $ | 176,339 | $ | (343,135 | ) | ||||
Accrued expenses and other current liabilities | $ | (19,473 | ) | $ | 19,473 | $ | – | |||||
Accrued interest | $ | 195,810 | $ | (195,810 | ) | $ | – | |||||
Net cash used in operating activities | $ | (2,712,694 | ) | $ | 263,910 | $ | (2,448,784 | ) | ||||
Common stock issued for cash, net | $ | 898,990 | $ | (898,990 | ) | $ | – | |||||
Original issue discount shares | $ | 268,150 | $ | (268,150 | ) | $ | – | |||||
Note conversion to common stock | $ | 671,602 | $ | (671,602 | ) | $ | – | |||||
Net cash provided by investing activities | $ | 1,838,742 | $ | (1,838,742 | ) | $ | – | |||||
Common stock issued for cash, net | $ | – | $ | 898,990 | $ | 898,990 | ||||||
Proceeds from issuance of notes payable, net | $ | 1,310,000 | $ | 510,000 | $ | 1,820,000 | ||||||
Gain on forgiveness of debt | $ | (265,842 | ) | $ | 265,842 | $ | – | |||||
Repayment of notes payable | $ | (598,816 | ) | $ | (100,000 | ) | $ | (698,816 | ) | |||
Net cash provided by financing activities | $ | 445,342 | $ | 1,574,832 | $ | 2,020,174 | ||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock issued for conversion of convertible notes | $ | 419,750 | $ | (419,750 | ) | $ | – | |||||
Common stock issued for services | $ | 110,000 | $ | (110,000 | ) | $ | – |
F-44 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Nine Months Ended September 30, 2021 | ||||||||||||
Cash Flow Data (Unaudited) | As Previously Reported | Adjustment | As Restated | |||||||||
Net loss | $ | (8,735,146 | ) | $ | 1,031,123 | $ | (7,704,023 | ) | ||||
Stock-based compensation | $ | 1,289,899 | $ | (375,118 | ) | $ | 914,781 | |||||
Stock issued with short-term convertible notes | $ | – | $ | 1,753,032 | $ | 1,753,032 | ||||||
Gain on forgiveness of debt | $ | – | $ | (265,842 | ) | $ | (265,842 | ) | ||||
Accounts payable and accrued expenses | $ | (474,650 | ) | $ | 273,037 | $ | (201,613 | ) | ||||
Accrued expenses and other current liabilities | $ | (28,882 | ) | $ | 28,882 | $ | – | |||||
Accrued interest | $ | 301,919 | $ | (301,919 | ) | $ | – | |||||
Net cash used in operating activities | $ | (5,060,535 | ) | $ | 2,143,195 | $ | (2,917,340 | ) | ||||
Common stock issued for cash, net | $ | 898,990 | $ | (898,990 | ) | $ | – | |||||
Original issue discount shares | $ | 724,031 | $ | (724,031 | ) | $ | – | |||||
Note conversion to common stock | $ | 1,810,506 | $ | (1,810,506 | ) | $ | – | |||||
Net cash provided by investing activities | $ | 3,433,527 | $ | (3,433,527 | ) | $ | – | |||||
Common stock issued for cash, net | $ | – | $ | 898,990 | $ | 898,990 | ||||||
Proceeds from issuance of notes payable, net | $ | 2,643,000 | $ | 225,500 | $ | 2,868,500 | ||||||
Gain on forgiveness of debt | $ | (265,842 | ) | $ | 265,842 | $ | – | |||||
Repayment of notes payable | $ | (616,918 | ) | $ | (100,000 | ) | $ | (716,918 | ) | |||
Net cash provided by financing activities | $ | 1,760,240 | $ | 1,290,332 | $ | 3,050,572 | ||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock issued for conversion of convertible notes | $ | 419,750 | $ | (419,750 | ) | $ | – |
NOTE 4: INTANGIBLE ASSETS
The ATOS platform:
· | creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of ad time slots (known as digital real estate) targeted at users while engaged on their connected TV, computer, or mobile device, and |
· | gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by the using ads in both image and video formats (known as rich media) to increase their customer base and foot traffic to their physical locations. |
The Company tests goodwill for impairment at least annually on December 31st and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgement is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.
F-45 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Our goodwill balance is not amortized to expense, instead it is tested for impairment at least annually. We perform our annual goodwill impairment analysis at the end of the fourth quarter. If events or indicators of impairment occur between annual impairment analyses, we perform an impairment analysis of goodwill at that date. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant asset. In testing for a potential impairment of goodwill, we: (1) verify there are no changes to our reporting units with goodwill balances; (2) allocate goodwill to our various reporting units to which the acquired goodwill relates; (3) determine the carrying value, or book value, of our reporting units, as some of the assets and liabilities related to each reporting unit are held by a corporate function; (4) estimate the fair value of each reporting unit using a discounted cash flow model; (5) reconcile the fair value of our reporting units in total to our market capitalization adjusted for a subjectively estimated control premium and other identifiable factors; (6) compare the fair value of each reporting unit to its carrying value; and (7) if the estimated fair value of a reporting unit is less than the carrying value, we must estimate the fair value of all identifiable assets and liabilities of that reporting unit, in a manner similar to a purchase price allocation for an acquired business to calculate the implied fair value of the reporting unit’s goodwill and recognize an impairment charge if the implied fair value of the reporting unit’s goodwill is less than the carrying value. There were noThe Company recognized an impairment charges duringcharge of $3,600,000 and $4,000,000 for the yearperiods ended December 31, 20192021, and inDecember 31, 2020 the impairment cost was $4,000,000.
Intangible Assetsrespectively.
At each balance sheet date herein, definite-lived intangible assets primarily consist of customer relationships which are being amortized over their estimated useful lives of five years.
The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they will be removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.
Useful Lives | December 31, 2020 | December 31, 2019 | Useful Lives | December 30, 2021 | December 31, 2020 | |||||||||||||||
Customer relationships | 5 years | $ | 3,003,676 | $ | 3,003,676 | 5 years | $ | 3,003,676 | $ | 3,003,676 | ||||||||||
ATOS Platform | 5 years | 6,000,000 | 10,000,000 | 5 years | 2,400,000 | 6,000,000 | ||||||||||||||
9,003,676 | 13,003,676 | 5,403,676 | 9,003,676 | |||||||||||||||||
Less accumulated amortization | (3,355,922 | ) | (1,555,186 | ) | (4,156,657 | ) | (3,355,922 | ) | ||||||||||||
Net carrying value | $ | 5,647,754 | $ | 11,448,490 | $ | 1,247,019 | $ | 5,647,754 |
Future amortization, for the years ending December 31, is as follows:
2021 | $ | 1,800,736 | ||
2022 | $ | 1,800,736 | ||
2023 | $ | 1,800,736 | ||
2024 | $ | 245,546 | ||
Thereafter | $ | – |
NOTE 4: NOTES PAYABLE AND DERIVATIVE LIABILITIES
Summary of Notes payable:
December 31, 2020 | December 31, 2019 | |||||||
Berg Notes (a) | $ | – | $ | 50,000 | ||||
Mob-Fox US LLC (c) | 30,000 | – | ||||||
Dr. Salkind, et al | 2,550,000 | 2,550,000 | ||||||
Small Business Administration (b) | 415,842 | – | ||||||
Business Capital Providers (d) | 355,441 | 266,250 | ||||||
Total Debt | 3,351,283 | 2,866,250 | ||||||
Current portion of debt | 901,283 | 566,250 | ||||||
Long-term portion of debt | $ | 2,450,000 | $ | 2,300,000 |
2022 | $ | 603,976 | ||
2023 | 572,584 | |||
2024 | 70,459 | |||
Total | $ | 1,247,019 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
NOTE 5: NOTES PAYABLE
Summary of Notes payable: | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
Mob-Fox US LLC (b) | $ | – | $ | 30,000 | ||||
Dr. Salkind, et al (f) | 2,562,500 | 2,550,000 | ||||||
Small Business Administration (a) | 150,000 | 415,842 | ||||||
Subscription Agreements (d) | 250,000 | – | ||||||
Blue Lake Partners LLC Talos Victory Fund LLC (e) | – | – | ||||||
Business Capital Providers (c) | 156,504 | 355,441 | ||||||
Total Debt | 3,119,004 | 3,351,283 | ||||||
Current portion of debt | 656,504 | 901,283 | ||||||
Long-term portion of debt | $ | 2,462,500 | $ | 2,450,000 |
__________________
(a) | ||
In May of 2020, the Companies applied and received Small Business Administration Cares Act loans due to the COVID-19 Pandemic. Each loan carries a five-year term, carrying a one percent interest rate. The loans turn into grants if the funds are use the for the SBA accepted purposes. The window to use the funds for the SBA specific purposes is a twenty-four-week period. If the funds are used for the allotted expenses the loans turn into grants with each loan being forgiven. The Company also received an Economic Injury Disaster Loan from the SBA which carries a thirty-year term, carrying a | ||
In October of 2020, the Company entered into an agreement with a vendor to accept $65,000 in full settlement of our payable due. A down payment of $15,000 at the signing of the agreement and five payments of $10,000 |
(c) | Business Capital Providers, Inc. purchased certain future receivables from the Company at a 26% discount under the following agreements on the following terms: | |
| ||
Pursuant to a Merchant Agreement dated April 29, 2021, purchased $405,000 of future receivables for a purchase price of $300,000 on terms which are substantially the same as the July 28, 2021, Merchant Agreement, except that the daily
| ||
The Company previously entered into |
F-47 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
On November 6, 2019, the Company entered into a third merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan paid in full.
On February 20, 2020, the Company entered into a fourth merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan paid in full.
On June 12, 2020, the Company entered into a fifth merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business
On August 11, 2020, the Company entered into a sixth merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for a term of 132 business
On November 25, 2020, the Company entered into a seventh merchant agreement with Business Capital Providers, Inc. in the amount of $310,000 payable daily at $2,700.00, per payment for the term of 155 business days. On February 19, 2021, the Company entered into an eight-merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan is paid in full. On April 29, 2021, the Company entered into a ninth-merchant agreement with Business Capital Providers, Inc. in the amount of $300,000 payable daily at $2,700.00, per payment for the term of 150 business days. On July 28, 2021, the Company entered into a tenth-merchant agreement with Business Capital Providers, Inc. in the amount of $300,000 payable daily at $2,531.25, per payment for the term of 160 business days. |
(d) | Nineteen private investors, who were unaffiliated shareholders of the Company and accredited investors as provided under Regulation D Rule 501 promulgated under the Securities Act of 1933, provided us convertible debt financing during the period May 2021 through September 2021 pursuant to subscription agreements as described below. (Certain of these investors provided us multiple investments in one or more of these convertible debt structures.): |
Nine of the lender-investors provided us an aggregate of $668,000 in convertible debt financing on the following terms:
The lender-investors were issued shares of Company common stock valued at $6 per share equal to 5% of their investments as original issue discount.
The debt maturity date is October 31, 2021. If the Company receives debt of equity financing of $200,000 or more, the debt is payable within two business days after the Company receives those funds. The maturity dates of six of these investors’ convertible debt was extended to December 31, 2021.
The debt is convertible into shares of Company common stock at a conversion price of $6 per share at any time at the investor’ option until the maturity date.
Three of the lender-investors provided us an aggregate of $200,000 in convertible debt financing on the following terms:
The lender-investors were issued shares of Company common stock valued at $6 per share equal to 6,000 per $100,000 of principal loan, or on a pro-rata basis is less than $100,000 is loaned (effectively 6% of the amount loaned) as original issue discount.
The debt is convertible into shares of Company common stock at a conversion price of $6 per share at any time at the investor’s option until the maturity date.
These investors converted all of this convertible debt into a total of 40,000 shares of common stock generating a non-cash charge to the financials of $154,500.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Eleven of the lender-investors provided us an aggregate of $819,500 in convertible debt financing on the following terms:
The investment amounts included 10% original issue discount. Accordingly, the total net principal proceeds of this debt that we received was $745,000. The maturity date is June 30, 2022.
The investor may convert the debt at any time through the maturity date at a 30% discount to the volume weighted average price per share over the 60-day period prior to conversion, with a floor conversion price of $4 per share. The debt will automatically convert on July 1, 2022, at $4 per share if it is not repaid, or converted by the investor, prior to then. All of these investors converted a total of $819,500 of this convertible debt into a total of 156,761 shares of common stock.
Four of the lender-investors provided us $130,000 in convertible debt financing on the following terms:
Interest at the annual rate of 10%, debt maturity date is June 30, 2022. The investor may convert the debt at any time through the maturity date at a 30% discount to the volume weighted average price per share over the 60-day period prior to conversion, with a floor conversion price of $4 per share. The debt will automatically convert on July 1, 2022, at $4 per share if it is not repaid, or converted by the investor, prior to then. One of these investors converted a total of $30,000 of this convertible debt into a total of 5,904 shares of common stock with a non-cash charge of $17,771.
On May 10, 2019,April 14, 2021, through September 7, 2021, the Company entered into a $7,512,500 Promissorytwenty-nine subscription convertible note with Deepankar Katyal, et al, foragreements totaling $1,943,000, twelve of the acquisitionnotes included original issue discounts totaling $74,500. During 2021, sixteen of the notes totaling $1,149,500 were converted to common stock, one note of $100,000 was paid in full.
(e) | In September 2021, the Company entered into securities purchase agreements 2021, with two accredited investors, Talos Victory Fund, LLC, and Blue Lake Partners LLC, pursuant to which the Company issued 10% promissory notes with a maturity date of September 20, 2022, in the aggregate principal amount of $1,125,000. In addition, the Company issued warrants to purchase an aggregate of 56,250 shares of its common stock to these holders. Spartan Capital Securities LLC and Revere Securities LLC acted as placement agents on this transaction. The promissory notes include the following terms: |
Interest at the annual rate of 10%.
The notes carry original issue discount of $112,500 in the aggregate. Accordingly, the total net principal of this debt was $1,012,500.
The Company is required to make interim payments to the holders in the aggregate amount of $225,000, on or before March 18, 2022, towards the repayment of the balance of Advangelists, LLC, requiring six monthly paymentsthe notes. The Company may prepay the principal sum under the notes then outstanding plus accrued and unpaid interest in full at any time without any prepayment premium; however, the Company is required to pay a minimum amount of $250,000 starting May 15, 2019 through October 6, 2019, a paymentthe first 12 months of $1,500,000 on December 6, 2019, and beginning in January of 2020, ten monthly payments of $500,000 each until October of 2020, with a stated interest rate of 1.5%.under the notes.
On September 13, 2019, Dr. Gene Salkind, who is a director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible promissory notes (the “Notes”) and loaned to the Company an aggregate of $2,300,000 (the “Loans”) on a secured basis payable in three installments in September 13 received net $720.000, balance received October and November 2019.
F-49 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
The holders may convert the notes and exercise the warrants into the Company’s common stock (subject to contractual beneficial ownership limitations of 4.99%). The holders have the right to convert the notes at any time into shares of common stock at a conversion price of $5.00 per share; provided, however, if the Company consummates a so-called up-listing offering to a national exchange within 180 days after the closing date, then the Note conversion price shall adjust to equal 70% of the price per share of common stock in that offering. The warrants may also be exercised at any time from date of issuance over a period of five years at the exercise price then in effect. The initial warrant exercise price shall equal $10.00 per share; provided however, if the Company consummates the up-listing offering within the 180-day period noted above, then the exercise price shall adjust to equal 130% of the price per share in that offering. The warrants contain cashless exercise provisions. Both the notes and the warrants contain customary anti-dilution provisions which could cause an adjustment to the conversion price of the notes and the exercise price of the warrants.
The note holders were repaid in full in December of 2021. In December of 2021, each note holder exercised their warrants into a total of 104,262 shares of the Company’s common stock.
The notes provide that so long as the Company has any obligations under the Notes, the Company will not, among other things:
· | Incur or guarantee any indebtedness which is senior or equal to the notes. |
· | Redeem or repurchase any shares of stock, warrants, rights or options without the holders’ consent. |
· | Sell, lease or otherwise dispose of a significant portion of its assets without the holders’ consent. |
· | The notes contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the notes or securities purchase agreements. |
· | In an event of default under the notes, which has not been cured within any applicable cure period, if any, the notes shall become immediately due and payable and the Company shall pay to the holders an amount equal to the principal sum then outstanding plus accrued interest, multiplied by 125%. Additionally, upon the occurrence of an event of default, additional interest will accrue from the date of the event of default at the rate equal to the lower of 16% per annum or the highest rate permitted by law. |
On the closing date of this financing, the holders delivered the net amount of $910,000 of the purchase price to the Company in exchange for the notes (which was net of the original issue discount and other fees, and expenses relate to this financing). On October 19, 2021, the Company filed a Form S-1 Registration Statement (File no. 333-260364) with the Securities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NASDAQ Capital Market under the symbol “MOBQ.” This offering was completed on December 13, 2021, and the Company retired the loans of, Talos Victory Fund, LLC and Blue Lake Partners LLC out of the gross proceeds it received of approximately $10.3 million. Also, all warrants issued to Talos and Blue Lake were converted on a cashless exercise basis into 24,692 common shares and 24,692 common shares, respectively.
In the fourth quarter of 2021, Business Capital Providers assigned one of its Merchant Agreements and related debt described above to non-affiliated third parties, which subsequently converted $89,100 in outstanding indebtedness into 13,103 common shares pursuant to their terms. In the fourth quarter of 2021, the Company borrowed from a non-affiliated person $312,500 on a non-convertible three-month loan with 20% original issue discount less fees of $30,000.
F-50 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
(f) | On September 13, 2019, Dr. Gene Salkind, who is a director of the Company, and an affiliate of Dr. Salkind subscribed for 15% Senior Secured Convertible Promissory Notes and loaned the Company an aggregate of $2,300,000. These notes were amended and restated on December 31, 2019, by Amended and Restated 15% Senior Secured Convertible Promissory Notes which deferred interest payments from the date of the original notes to December 31, 2020 and added an aggregate interim payment of $250,000 payable on December 31, 2020 that covered the deferred interest payments. These notes were again amended and restated on April 1, 2021, by the Second Amended and Restated 15% Senior Secured Convertible Promissory Notes which reflected an additional principal amount of $150,000 loaned by Dr. Salkind, and also amended the interim payment date to December 31, 2021, and the conversion price from $32 to $4 per share. The notes are secured by the assets of the Company and its subsidiaries. The total amount loaned under the notes, as amended and restated, including the principal amount and the interim payment amount is $2,700,000, which was paid down to $2,562,500 in December 2021. |
The notes, as amended and restated, bear annual interest at a fixed rate of 15% per annum, computed based on a 360-day year of twelve 30-day months and will bewhich is payable monthly in arrears. Interest on the Notes is payable in cash or, at the Lenders’Salkind lenders’ option, in shares of the Company’s common stock. The principal amount due under the Notes will be payableis due on September 30, 2029, and the interim payment is payable on December 31, 2021, unless, in either case, earlier converted pursuant tointo shares of our common stock under the terms of the Notes.
notes, as described below.
Subject toThe outstanding principal plus any accrued and unpaid interest, and the Company obtaining prior approval frominterim payment under the Company’s shareholders for the issuance ofnotes, are convertible into shares of Company common stock uponat a conversion price of $4 per share at any time, until the Notes, if and to the extent required by the New York Business Corporation Law, the Notes will be convertible into equity of the Company upon the following eventsnotes are fully converted, on the following terms:
· |
· | The Company may convert the notes at any time that the trailing thirty (30) day volume weighted average price per share (as more particularly described in the Notes) of the Company’s common stock is above |
The Notesnotes contain customary events of default, which, if uncured, entitle the Lenders thereofholders to accelerate the due datepayment of the unpaid principal amount of, and all accrued and unpaid interest on,under their Notes.notes.
In connection with the subscription of the Notes,notes and upon conversion thereof (if at all), the Company issuedwill issue to each LenderSalkind lender a warrant to purchase one share of the Company’s common stock for every two shares of common stock issuable upon conversion of the Notes, at an exercise price of $48 per share. The warrant exercise price was amended to $4 per share.
In the second quarter of 2020, we halted required interest payments under the September 2019 and June 30, 2021, Notes to Dr. Salkind and his affiliate due to economic hardships stemming from a downturn in our business and the related decline of our revenue resulting from the COVID 19 pandemic. In December 2021, we paid $400,000 of accrued interest owed to Dr. Salkind and an affiliated entity.
F-51 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
NOTE 6: INCOME TAXES
The provision for income taxes for the years ended December 31, 2021, and 2020 is summarized as follows:
2021 | 2020 | |||||||
Current: | ||||||||
Federal | $ | – | $ | – | ||||
State | – | – | ||||||
Total Current | – | – | ||||||
Deferred: | ||||||||
Federal | – | – | ||||||
State | – | – | ||||||
Total Deferred | $ | – | $ | – |
The Company has federal net operating loss carryforwards (“NOL’s) of $197,813,237 and $178,447,460, respectively, which will be available to reduce future taxable income.
The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:
YEAR ENDED DECEMBER 31, | ||||||||
2021 | 2020 | |||||||
Deferred Tax Assets | $ | (14,691,000 | ) | $ | (12,528,000 | ) | ||
Less: Valuation Allowance | 14,691,000 | 12,528,000 | ||||||
Net Deferred Tax Asset | $ | – | $ | – |
A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:
YEARS ENDED DECEMBER 31, | ||||||||
2021 | 2020 | |||||||
Federal Statutory Tax Rate | 21.00% | 21.00% | ||||||
State Taxes, net of Federal benefit | 5.00% | 5.00% | ||||||
Change in Valuation Allowance | (26.00% | ) | (26.00% | ) | ||||
Total Tax Expense | 0.00% | 0.00% |
F-52 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
NOTE 7: STOCKHOLDERS’ EQUITY (DEFICIT)
Shares Issued for Services
During 2020, the Company issued 38,125 post-split shares of common stock, at $7.20 to $40.00 per share for $547,451 in exchange for services rendered. During 2021, the Company issued 265,000 shares of common stock, at $3.21 to $9.73 per share for $1,158,026 in exchange for services rendered.
Shares issued for interest:
During the years ended December 31, 2021 and 2020, the Company did not issue any shares for interest.
Shares issued for upon conversion of warrants, notes and/or preferred stock:
During 2020, one holder of our Series E Preferred Stock converted 3,937 shares to 9,843 post-split shares of our common stock and 4,921 warrants at an exercise price of $48.00 per share with an expiration date of January 8, 2025. During 2021, the single holder of our Series C Preferred Stock converted 1,500 shares to 375,000 shares of our common stock and 375,000 warrants at an exercise price of $48.00 with an expiration date of September 2023. During 2021, a shareholder of our Series AAA Preferred Stock converted 25,000 shares to 6,250 shares of our common stock.
During 2020, 77,220, post-split, warrants were converted to common stock, at $8.00 to $28.00 per share. During 2021 two Warrant holders converted in a cashless exercise their warrants into 49,384 common shares.
During 2020, one note holder converted $30,694 of their note into 1,919 post-split common shares at a conversion rate of $16 per post-split share (the “Lender Warrants”).and cash payment of $5,000. During 2021, seventeen of the lender-investors provided us an aggregate of $1,243,600 in convertible debt financing converted their debt into a total of 236,768 shares of common stock at a conversion price at $4.81 to $7.25 per share.
Stock and Loan Transactions for Cash
On April 8, 2021, the Company sold 16,667 shares of its restricted common stock at $6.00 per share to one investor.
On April 14, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $100,000 note and 2,500 restricted shares of common stock as a loan origination fee.
On April 16, 2021, the Company sold 41,667 shares of restricted common stock at $6.00 per share to one investor.
On April 21, 2021, the $100,000 loan from April 14, 2021, was retired out of the proceeds and sale by the Company of 41,667 shares of its common stock at $6.00 per share.
F-53 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
On April 30, 2021, the Company issued a two-month loan to an investor in exchange for $100,000. The principal of the note together with an origination fee and accrued interest thereon totaling $105,000 and 10,000 shares of restricted common stock is due on June 30, 2021.
On May 16, 2019,10, 2021, the Company assumedreceived a promissoryshort-term $100,000 loan from one investor. The Company issued a $105,000 note (the “AVNG Note”) payable to Deepankar Katyal (the “Payee”),which includes a $5,000 loan origination fee. On September 13, 2021, this Note was exchanged for a short term $110,000 note which includes $10,000 loan origination fee. On September 30, 2021, this loan was converted into 19,744 shares of common stock.
On May 17, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $100,000 note and 6,000 restricted common stock as representativea loan origination fee.
On May 18, 2021, the Company received a short-term $100,000 loan from one investor. The Company issued a $100,000 note and 5,000 restricted common stock as a loan origination fee.
On May 19, 2021, the Company received a short-term $50,000 loan from one investor. The Company issued a $50,000 note and 3,000 restricted common stock as a loan origination fee.
On May 24, 2021, the Company received a short-term $50,000 loan from one investor. The Company issued a $50,000 note and 3,000 restricted common stock as a loan origination fee.
On June 9, 2021, the Company received short-term $400,000 loans from three investors. The Company issued $420,000 notes including $20,000 loan origination fee and 10,000 restricted common stock as a loan origination fees.
On June 18, 2021, the Company received short-term $120,000 loans from two investors. The Company issued $132,000 notes including $12,000 loan origination fees.
On July 8, 2021, the Company received short-term $80,000 loans from two investors. The Company issued $85,000 notes including $5,000 loan origination fee and a 10% rate on one of the former ownersnotes.
On July 14, 2021, the Company received short-term $75,000 loans from two investors. The Company issued $82,500 notes including $7,500 loan origination fees.
On July 15, 2021, the Company received short-term $150,000 loans from two investors. The Company issued $155,000 notes including $5,000 loan origination fee and 5,000 restricted common stock as a loan origination fee.
On July 29, 2021, the Company received a short term note of AVNG,$300,000 payable at $2,531.25 for 160 payments.
On August 11, 2021, the Company received short-term $25,000 loan from one investor. The Company issued 1,250 restricted common stock as a loan origination fee.
F-54 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
On August 12, 2021, the Company received short-term $200,000 loans from two investors. The Company issued 10,000 restricted common stock as loan origination fees.
On August 16, 2021, the Company received short-term $50,000 loan form one investor. The note carries a 10% interest rate.
On August 25, 2021, the Company received short-term $43,000 loans from two investors. The Company issued 2,150 restricted common stock as loan origination fees.
On September 2, 2021, the Company received short-term $25,000 loan from one investor. The note carries a 10% interest rate.
On September 7, 2021, the Company received short-term $50,000 loan from one investor. The Company issued $55,000 note including $5,000 loan origination fee.
On September 10, 2021, the Company received short-term $25,000 loan from one investor. The note carries a 10% interest rate.
On September 15, 2021, the Company received short-term $50,000 loan from one investor. The Company issued $55,000 note including $5,000 loan origination fee.
On September 16, 2021, the Company received short-term $50,000 loan from one investor. The Company issued $55,000 note including $5,000 loan origination fee.
On September 30, 2021, Dr. Salkind, Chairman of the Board and principal stockholder, converted his 1500 shares of Series C Preferred Stock into 375,000 common shares and warrants to purchase 375,000 common shares exercisable at $48.00 per share through September 2023.
In the fourth quarter of 2021, Business Capital Providers assigned one of its Merchant Agreements and related debt described above to non-affiliated third parties, which atsubsequently converted $89,100 in outstanding indebtedness into 13,103 common shares pursuant to their terms.
On October 19, 2021, the time of assumption hadCompany filed a remaining principal balance of $7,512,500. SimultaneouslyForm S-1 Registration Statement (File no. 333-260364) with the assumptionSecurities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NASDAQ Capital Market under the symbol “MOBQ.” This offering was completed on December 13, 2021 and the Company retired the loans of, Talos Victory Fund, LLC and Blue Lake Partners LLC out of the AVNG Note,gross proceeds it received of approximately $10.3 million. All warrants issued to Talos and Blue Lake were converted on a cashless exercise basis into 24,692 common shares and 24,692 common shares, respectively. The Company issued 2,481,928 common shares and 2,807,937 warrants in connection with the AVNG Note was amended and restated (the “First Amended AVNG Note”). Effectivepublic offering with the warrants exercisable at $4.98 per share. The Company also issued 5-year warrants to purchase 74,458 common shares to the Underwriters exercisable at $5.1875 per share.
F-55 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
The following are outstanding commitments as of September 13, 2019, the Company and Payee entered into a Second Amended and Restated Promissory Note (the “Second Amended AVNG Note”), in the principal amount of $6,750,000, pursuant to which the repayment terms under the First Amended AVNG Note were amended and restated as follows:December 31, 2021:
· | $5,250,000 of the principal balance remaining due under the Second Amended AVNG Note is payable by the delivery of (i) 65,625 shares of the Company’s newly designated Class E Preferred Stock, which is convertible into 164,063 post-split shares the Company’s common stock, and (ii) common stock purchase warrants to purchase |
Consulting Agreements
On May 28, 2021, the Company entered into a consulting agreement with Sterling Asset Management to provide business advisory services. The company will provide assistance and recommendations to help build strategic partnerships, to provide the Company with advice regarding revenue opportunities, mergers and acquisitions. The six- month engagement commenced on May 28, 2021. The consultant receives 2,500 restricted common shares each month of the agreement and $75,000 cash payments.
On December 13, 2021, the Company entered into a consulting agreement with 622 Capital LLC to provide business advisory services over a term of six months. The Second Amended AVNG Note provides that upon an Eventconsultant received 100,000 shares of Default (as defined inrestricted shares after the Second Amended AVNG Note), and upon the electionexecution of the Payee, (i)agreement. Also in December 2021, the Company entered into a consulting agreement with Alchemy Advisory LLC to provide business advisory services over a term of six months. The consultant received 100,000 shares of Class E Preferred Stock issuable pursuant torestricted shares after the termsexecution of the Second Amended AVNG Note, and any sharesagreement. On December 29, 2021, the Company entered into a consulting agreement with Pastel Holdings Inc. to provide business advisory services over a term of 18 months commencing January 1, 2022. The Company is required to pay a $5,000 per month consulting fee during the term of the Company’sagreement and it issued five-year warrants to purchase 15,000 common stock issued upon the conversion of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First Amended AVNG Note.
NOTE 5: INCOME TAXES
The provision for income taxes for the years ended December 31, 2020 and 2019 is summarized as follows:
2020 | 2019 | |||||||
Current: | ||||||||
Federal | $ | – | $ | – | ||||
State | – | – | ||||||
– | – | |||||||
Deferred: | ||||||||
Federal | – | – | ||||||
State | – | – | ||||||
$ | – | $ | – |
The Company has federal net operating loss carryforwards (“NOL’s) of $178,447,460 and $163,415,056, respectively, which will be available to reduce future taxable income.
The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:
YEAR ENDED DECEMBER 31, | ||||||||
2020 | 2019 | |||||||
Net operating loss carryforwards | $ | (46,396,000 | ) | $ | (42,488,000 | ) | ||
Stock based compensation – options/warrants | 4,607,000 | 4,257,000 | ||||||
Stock issued for services | 879,000 | 971,000 | ||||||
Gain loss on derivative instrument | 781,000 | 781,000 | ||||||
Disallowed entertainment expense | 51,000 | 50,000 | ||||||
Charitable contribution limitation | 7,000 | 7,000 | ||||||
Preferred Stock | 25,000 | 25,000 | ||||||
Bad debt expense & reserves | 228,000 | 33,000 | ||||||
Penalties | 3,000 | 3,000 | ||||||
Loss on extinguishment of debt | 1,133,000 | 1,133,000 | ||||||
Beneficial conversion features | 77,000 | 77,000 | ||||||
Mobiquity-Spain – net loss | 540,000 | 540,000 | ||||||
Impairment of long-lived assets | 58,000 | 58,000 | ||||||
Stock issued for interest | 245,000 | 245,000 | ||||||
Nondeductible insurance | 14,000 | 13,000 | ||||||
Stock incentives | 15,000 | 15,000 | ||||||
Derivative expense | 480,000 | 480,000 | ||||||
Professional Fees | 944,000 | 774,000 | ||||||
Gain / Loss on stock held for investment | 646,000 | 646,000 | ||||||
Gain / Loss on company stock | 5,235,000 | 4,456,000 | ||||||
Gain / Loss on settlement of company debt | 2,757,000 | 2,757,000 | ||||||
Gain / Loss on sale of warrants | 7,259,000 | 6,931,000 | ||||||
Unrealized loss on securities | 1,944,000 | 1,943,000 | ||||||
Acquisition expense | 3,904,000 | 3,904,000 | ||||||
Depreciation - tax | 3,000 | – | ||||||
Depreciation - book | (4,000 | ) | – | |||||
Amortization - book | (72,000 | ) | – | |||||
Federal income tax | 105,000 | – | ||||||
State tax - tax | (3,000 | ) | – | |||||
State tax - book | 30,000 | – | ||||||
Interest expense - tax | (263,000 | ) | – | |||||
Interest expense - book | 276,000 | – | ||||||
Accrued salaries – current year | 344,000 | – | ||||||
Accrues salaries – prior year | (438,000 | ) | – | |||||
Amortization of debt discount | 2,058,000 | 2,058,000 | ||||||
Deferred Tax Assets | (12,528,000 | ) | (10,331,000 | ) | ||||
Less Valuation Allowance | 12,528,000 | 10,331,000 | ||||||
Net Deferred Tax Asset | $ | – | $ | – |
A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:
YEARS ENDED DECEMBER 31, | ||||||||
2020 | 2019 | |||||||
Federal Statutory Tax Rate | 21.00% | 21.00% | ||||||
State Taxes, net of Federal benefit | 5.00% | 5.00% | ||||||
Change in Valuation Allowance | (26.00% | ) | (26.00% | ) | ||||
Total Tax Expense | 0.00% | 0.00% |
NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIT)
In 2019, the Company received equity subscription agreements totaling $960,000, which include 50% warrant coverage,shares at an exercise price of $0.12 with an expiration date of September 30, 2023. The Company issued 16,000,001 shares of common stock and 8,000,000 warrants in connection with these transactions. Of the $960,000, $200,000 was invested by Thomas Arnost, Chairman of the Board. No subscription agreements were received in 2020.
In 2019, the Company sold 123,038 shares of post-split common stock with warrants to purchase 60,925 post-split shares of common stock, exercisable between $48.00 to $72.00 expiring on September 30, 2023 in exchange for cash consideration of $3,434,500, net. In 2019, the Company issued 17,088 shares of common stock in exchange for services rendered. In 2019, the Company issued 65,625 shares of preferred stock series E for the exchange of a $5,250,000 senior secured note. The Company received cash consideration of $1,132,210 in exchange for the conversion of warrants issued previously. The company issued 200,000 post-split shares of common stock with 150% matching warrants for the conversion of series AAAA preferred stock.
In 2019, holders of Series AAA preferred stock converted their preferred stock into 261,044 shares of common stock and warrants to purchase 261,044 post-split shares, with each warrant exercisable at $20.00$4.565 per share through December 31, 2020.
As approved by the Company’s Board of Directors on September 10, 2019, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of New York to designate the rights, preferences and limitations of 70,000 shares of the Company’s authorized 5,000,000 shares of Preferred Stock, $.0001 par value, as Class E Preferred Stock, $0.0001 per share (“Class E Preferred Stock”). Of the 70,000 shares of Class E Preferred Stock, 65,625 shares were issued to nine persons, including 25,675 were issued to Mr. Katyal and 25,020 shares were issued to Mr. Mehta.
In 2019, holders of warrants expiring December 31, 2019 exercised warrants to purchase 29,388 post-split shares of common stock and the Company received cash consideration of $146,940 in January 2020 and notes receivable totaling $440,820, which have maturity dates in 2020.
Shares issued for services:
In 2020, the Company issued 38,125 post-split shares of common stock, at $7.20 to $40.00 per share for $547,451 in exchange for services rendered.
Shares issued for interest:
In 2020, no shares were issued for interest.
In 2020, one holder of our Series E Preferred Stock converted 3,937 shares to 9,843 post-split shares of our common stock and 4,921 warrants at an exercise price of $48.00 per share with an expiration date of January 8, 2025.
In 2020, 77,220 warrants were converted to common stock, at $8.00 to $28.00 per share. During 2020, 3,650 warrants were converted in a cashless exercise transaction submitted to the Company for 2,303 shares of common stock, post-split shares.
In, 2020 one note holder converted $30,695 of their note into 1,919 post-split common shares at a conversion rate of $16 per post-split share and cash payment of $5,000.
Consulting Agreements
Upon consummation of the Merger, Mobiquity entered into consulting agreements (the “Consulting Agreements”) with certain employees and contractors of Advangelists (the “Consultants”), pursuant to which Mobiquity (i) issued to the Consultants warrants to purchase an aggregate of 55,616 post-split shares of its common stock and (ii) agreed to transfer to the Consultants an aggregate of 4,783 post-split shares of common stock of Gopher Protocol Inc. The terms of the Consultant’s warrants are substantially similar to the terms of the warrants issued in the merger.
NOTE 7:8: OPTIONS AND WARRANTS (restated)
The Company’s results for the years ended December 31, 20202021, and 20192020 include employee share-based compensation expense totaling $1,945,942$4,635,224 and $29,812,197,$993,512, respectively. Such amounts have been included in the Statementsconsolidated statements of Operationsoperations within selling, general and administrative expenses and other expenses. No income tax benefit has been recognized in the statement of operations for share-based compensation arrangements due to a history of operating losses.
The following table summarizes stock-based compensation expense for the years ended December 31, 20202021, and 2019:2020:
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
Employee stock-based compensation – option grants | $ | 4,635,224 | $ | 993,512 |
Years Ended December 31, | ||||||||
2020 | 2019 | |||||||
Employee stock-based compensation – option grants | $ | 1,347,048 | $ | 6,599,000 | ||||
Employee stock-based compensation – stock grants | – | – | ||||||
Non-Employee stock-based compensation – option grants | – | – | ||||||
Non-Employee stock-based compensation – stock grants | – | – | ||||||
Non-Employee stock-based compensation – warrants for retirement of debt | 598,894 | 23,213,197 | ||||||
$ | 1,945,942 | $ | 29,812,197 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
NOTE 8:9: STOCK OPTION PLANS
During Fiscal 2005, the Company established, and the stockholders approved, an Employee Benefit and Consulting Services Compensation Plan (the “2005 Plan”) for the granting of up to 5,000 post-split non-statutory and incentive stock options and stock awards to directors, officers, consultants and key employees of the Company. On June 9, 2005, the Board of Directors amended the Plan to increase the number of stock options and awards to be granted under the Plan to 10,000 post-split shares. During Fiscal 2009, the Company established a plan of long-term stock-based compensation incentives for selected Eligible Participants of the Company covering 10,0000 post-split shares. This plan was adopted by the Board of Directors and approved by stockholders in October 2009 and shall be known as the 2009 Employee Benefit and Consulting Services Compensation Plan (the “2009 Plan”). In September 2013, the Company’s stockholders approved an increase in the number of shares covered by the 2009 Plan to 25,000 post-split shares. In February 2015, the Board approved, subject to stockholder approval within one year, an increase in the number of shares under the 2009 Plan to 50,000 post-split shares; however, stockholder approval was not obtained within the requisite one year and the anticipated increase in the 2009 Plan was canceled. In the first quarter of 2016, the Board approved, and stockholders ratified a 2016 Employee Benefit and Consulting Services Compensation Plan covering 25,000 post-split shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits to the 2016 Plan. In December 2018, the Board of Directors adopted and in February 2019. the stockholders ratified the 2018 Employee Benefit and Consulting Services Compensation Plan covering 75,000 post-split shares (the “2018 Plan”). On April 2, 2019, the Board approved the “2019 Plan” identical to the 2018 Plan, except that the 2019 Plan covers 150,000 post-split shares. The 2019 Plan required stockholder approval by April 2, 2020, in order to be able to grant incentive stock options under the 2019 Plan. On October 13, 2021, the Board approved the “2021 Plan” identical to the 2018 Plan, except that the 2019 Plan covers 1,100,000 post-split shares. The 2005, 2009, 2016, 2018, 2019 and 20192021 plans are collectively referred to as the “Plans.”
All stock options under the Plans are granted at or above the fair market value of the common stock at the grant date. Employee and non-employee stock options vest over varying periods and generally expire either 5 or 10 years from the grant date. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. For option grants, the Company will take into consideration payments subject to the provisions of ASC 718 “Stock Compensation”, previously Revised SFAS No. 123 “Share-Based Payment” (“SFAS 123 (R)”). The fair values of these restricted stock awards are equal to the market value of the Company’s stock on the date of grant, after taking into account certain discounts. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. Previously, such assumptions were determined based on historical data. The weighted average assumptions made in calculating the fair values of options granted during the years ended December 31, 20202021, and 20192020 are as follows:
Years Ended December 31 | ||||||||
2020 | 2019 | |||||||
Expected volatility | 592.89% | 242.39% | ||||||
Expected dividend yield | – | – | ||||||
Risk-free interest rate | 0.74% | 2.32% | ||||||
Expected term (in years) | 5.00 | 6.00 |
Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding, January 1, 2020 | 281,000 | $ | 48.00 | 6.15 | $ | 769,500 | ||||||||||
Granted | 25,313 | 35.75 | – | – | ||||||||||||
Exercised | – | – | – | – | ||||||||||||
Cancelled & Expired | (3,468 | ) | – | – | – | |||||||||||
Outstanding, December 31, 2020 | 302,845 | $ | 45.85 | 4.65 | $ | – | ||||||||||
Options exercisable, December 31, 2020 | 281,869 | $ | 45.78 | 5.10 | $ | – |
Years Ended December 31 | ||||||||
2021 | 2020 | |||||||
Expected volatility | 116.39% | 592.89% | ||||||
Expected dividend yield | – | – | ||||||
Risk-free interest rate | 1.28% | 0.74% | ||||||
Expected term (in years) | 10.00 | 5.00 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic | |||||||||||||
Outstanding, January 1, 2021 | 302,849 | $ | 45.85 | 4.65 | $ | – | ||||||||||
Granted | 835,000 | 19.85 | 2.90 | – | ||||||||||||
Exercised | – | – | – | – | ||||||||||||
Cancelled & Expired | (1,940 | ) | – | – | – | |||||||||||
Outstanding, December 31, 2021 | 1,135,909 | $ | 16.69 | 8.39 | $ | – | ||||||||||
Options exercisable, December 31, 2021 | 1,124,619 | $ | 16.59 | 8.39 | $ | – |
The weighted-average grant-date fair value of options granted during the years ended December 31, 2021, and 2020 was $19.85 and 2019 was $35.75, and $52.00, respectively.
The aggregate intrinsic value of options outstanding and options exercisable aton December 31, 20202021, is calculated as the difference between the exercise price of the underlying options and the market price of the Company's common stock for the shares that had exercise prices, that were lower than the $6.75$2.13 closing price of the Company's common stock on December 31, 2020.2021.
As of December 31, 2020,2021, the fair value of unamortized compensation cost related to unvested stock option awards is $1,093,630.$545,458.
The weighted average assumptions made in calculating the fair value of warrants granted during the years ended December 31, 20202021, and 20192020 are as follows:
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
Expected volatility | 175.52% | 449.47% | ||||||
Expected dividend yield | – | – | ||||||
Risk-free interest rate | 1.14% | 0.91% | ||||||
Expected term (in years) | 5.83 | 5.83 |
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic | |||||||||||||
Outstanding, January 1, 2021 | 471,557 | $ | 52.52 | 6.31 | $ | – | ||||||||||
Granted | 3,439,157 | 9.46 | 4.30 | – | ||||||||||||
Exercised | (104,262 | ) | – | – | – | |||||||||||
Expired | (6,250 | ) | – | – | – | |||||||||||
Outstanding, December 31, 2021 | 3,800,202 | $ | 15.19 | �� | 4.68 | $ | – | |||||||||
Warrants exercisable, December 31, 2021 | 3,800,202 | $ | 15.19 | 4.68 | $ | – |
Years Ended December 31, | ||||||||
2020 | 2019 | |||||||
Expected volatility | 449.47%. | 164.85% | ||||||
Expected dividend yield | – | – | ||||||
Risk-free interest rate | 0.91% | 7.48% | ||||||
Expected term (in years) | 5.83 | 3.20 |
Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding, January 1, 2020 | 642,620 | $ | 44.00 | 5.81 | $ | 2,500,502 | ||||||||||
Granted | 30,638 | – | – | – | ||||||||||||
Exercised | (33,138 | ) | – | – | – | |||||||||||
Expired | (173,484 | ) | – | – | – | |||||||||||
Outstanding, December 31, 2020 | 466,636 | $ | 52.52 | 6.31 | $ | – | ||||||||||
Warrants exercisable, December 31, 2020 | 466,636 | $ | 52.52 | 6.31 | $ | – |
F-58 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Note 10: EXECUTIVE COMPENSATION
Effect of Pandemic
As a result of our declining revenue, during the COVID-19 pandemic, our management team decided it was necessary to reduce overhead In April of 2020, due to the COVID-19 pandemic all employees’ salaries were reduced by 40% and we terminated one employee. In October of 2020, the employees pay reduction was reduced to a 20% reduction through the completion of our December 2021 public offering. Several employees were laid-off or resigned, all travel and advertising were suspended, and office space rent was suspended, allowing the entire staff to work remotely. As of December 17, 2021, all employees’ salaries were restored to pre-pandemic levels.
Employment Agreements of Executives
Dean Julia
Dean Julia is employed as the Company’s Chief Executive Officer under an employment agreement with an initial term of three years which commenced on April 2, 2019. The agreement automatically renewed for an additional two years in January 2020 since the Company failed to terminate the agreement at least 90 days before termination of the initial term. Mr. Julia’s annual base salary is $360,000. In addition to his base salary, Mr. Julia is entitled to a quarterly bonus of at least 1% of gross revenue for each completed fiscal quarter, so long as the Company’s gross revenue meets or exceeds 75% of management’s stated goal. The quarterly bonus may be paid either in cash, common stock or stock options, at Mr. Julia’s election. Should his employment agreement be terminated prior to the end of any fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly bonus shall be paid within 30 days of termination. The Company's board of directors will determine a revenue target each year for the purpose of calculating the quarterly bonus in that year. Mr. Julia also received a signing bonus of vested 10-year options to purchase 62,500 shares, exercisable at $60 per share. Additionally, he is also entitled to 10-year options to purchase an additional 12,500 shares of common stock, exercisable at $60 per share, annually on April 1st of each year which commenced on April 1, 2020. Additionally, if the Company is acquired through a board of directors-approved change in control of at least 50% of the Company’s outstanding voting stock, or the sale of all or substantially all of the Company’s assets, Mr. Julia shall be entitled to receive a payment in-kind equal to 3% of the consideration paid in connection with that transaction. He is also entitled to paid disability insurance and term life insurance at an annual cost of not more than $15,000. Additionally, he is also entitled to receive health, dental and 401(k) benefits as is made available by the Company for its other senior officers, as well as indemnification by the Company to the fullest extent permitted by law, and the Company’s certificate of incorporation and bylaws. Mr. Julia also has the use of a Company-leased or -owned automobile. Mr. Julia’s employment agreement contains customary non-competition and non-solicitation of Company customers or employees’ provisions during the term of the agreement. The Company may terminate Mr. Julia’s employment for cause, and Mr. Julia may terminate his employment at any time on three-months’ notice. Also, the Company may terminate Mr. Julia’s employment agreement on Mr. Julia’s death or disability – disability being unable to perform his essential functions for four consecutive months due to physical, mental or emotional incapacity resulting from sickness, disease, or injury. In each of these termination cases, the Company is obligated only to pay Mr. Julia amounts that were due or accrued prior to termination, plus, other than in a for-cause-termination, any pro-rata quarterly bonus described above.
F-59 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Paul Bauersfeld
Paul Bauersfeld is employed as the Company’s Chief Technology Officer under an at-will employment agreement which commenced on April 2, 2019. Mr. Bauersfeld’s monthly salary is $25,000. Mr. Bauersfeld is entitled to a quarterly bonus of at least 1% of gross revenue for each completed fiscal quarter, so long as the Company’s gross revenue meets or exceeds management’s stated goal. The quarterly bonus may be paid either in cash, common stock or stock options, at Mr. Bauersfeld’s election. Should his employment agreement be terminated prior to the end of any fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly bonus shall be paid within 30 days of termination. The Company's board of directors will determine a revenue target each year for the purpose of calculating the quarterly bonus in that year. Mr. Bauersfeld also received a signing bonus of 10-year options to purchase 25,000 shares, exercisable at $60 per share; 35% of which vested immediately, 35% of which vested on April 2, 2020, and 30% of which vested on April 2, 2021. Mr. Bauersfeld is entitled to participate in the Company’s health plans as well as indemnification by the Company to the fullest extent permitted by law, and the Company’s certificate of incorporation and bylaws. Mr. Bauersfeld’s employment agreement contains customary non-competition and non-solicitation of Company customers or employees’ provisions during the term of the agreement. Although Mr. Bauersfeld’s employment agreement is at-will, the Company may terminate Mr. Bauersfeld’s employment for cause. In the event Mr. Bauersfeld’s employment agreement is terminated other than for cause by the Company, the Company will pay Mr. Bauersfeld severance pay equal to three months of his salary.
Sean Trepeta
Sean Trepeta is employed as President of our wholly owned subsidiary, Mobiquity Networks, Inc. under an at-will employment agreement which commenced on April 2, 2019. Mr. Trepeta’s monthly salary is $20,000. Mr. Trepeta is entitled to a quarterly bonus of at least 1% of gross revenue for each completed fiscal quarter, so long as the Company’s gross revenue meets or exceeds management’s stated goal. The quarterly bonus may be paid either in cash, common stock, or stock options, at Mr. Trepeta’s election. Should his employment agreement be terminated prior to the end of any fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly bonus shall be paid within 30 days of termination. The Company's board of directors will determine a revenue target each year for the purpose of calculating the quarterly bonus in that year. Mr. Trepeta also received a signing bonus of 10-year options to purchase 25,000 shares, exercisable at $60 per share; 35% of which vested immediately, 35% of which vested on April 2, 2020, and 30% of which vested on April 2, 2021. Mr. Trepeta is entitled to participate in the Company’s health plans as well as indemnification by the Company to the fullest extent permitted by law, and the Company’s certificate of incorporation and bylaws. Mr. Trepeta’s employment agreement contains customary non-competition and non-solicitation of Company customers or employees’ provisions during the term of the agreement. Although Mr. Trepeta’s employment agreement is at-will, the Company may terminate Mr. Trepeta’s employment for cause. In the event Mr. Trepeta’s employment agreement is terminated other than for cause by the Company, the Company will pay Mr. Trepeta severance pay equal to three months of his salary.
F-60 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Deepankar Katyal
Deepankar Katyal is employed as Chief Executive Officer of our wholly owned subsidiary, Advangelists, LLC under employment agreement with Advangelists with a term of three years which commenced on December 7, 2018. The agreement was amended on September 13, 2019. (See Note 12 below.) Mr. Katyal’s annual base salary is $400,000. Mr. Katyal’s employment agreement, as amended, also provides the following compensation:
· | a bonus, payable in cash or common stock of the Company, equal to 1% of the Company’s gross revenue for each month during the 2019 fiscal year, subject to certain revenue thresholds as set forth in the agreement. Those revenue thresholds were not attained, and this bonus was not earned; |
· | commissions equal to 10% of the net revenues derived from all New Katyal Managed Accounts (as defined in the agreement – being accounts directly introduced by Mr. Katyal or assigned to Employee in writing by the Manager of the Company); | |
· | options to purchase 37,500 shares of the Company’s common stock at an exercise price of $36.00 per share, of which 25,000 vested on September 13, 2019, the date Mr. Katyal’s employment agreement was amended, and 12,500 vested on September 13, 2020: and | |
· | one share of Company Series B Preferred Stock which was issued to Mr. Katyal. The Series B Preferred Stock, as a class, provided cash dividend rights, payable in cash, to the holders thereof in an aggregate amount equivalent to 10% of the annual gross revenue of Advangelists or the Company, whichever is higher, up to a maximum aggregate annual amount of $1,200,000, for each of its 2019 and 2020 fiscal years. As a holder of 50% of the Series B Preferred Stock, the maximum amount of annual dividends that Mr. Katyal would be entitled to $600,000. The Series B Preferred Stock rights, privileges, preferences, and restrictions was to terminate by its terms as of December 31, 2020; and, immediately upon declaration and payment of the dividend in respect of Mobiquity's 2020 fiscal year, Mobiquity was to withdraw such class from its authorized capital. The Series B Preferred Stock was subject to cancellation if Mr. Katyal terminated his employment without good reason or the Company terminated his employment for cause. Mr. Katyal did not receive any Series B Preferred Stock dividends and the Series B Preferred Stock was redeemed by the Company from Mr. Katyal in consideration for entering into the amendment of his employment agreement on September 13, 2019, and for no other consideration. |
During the term of the employment agreement, Mr. Katyal is entitled to a monthly allowance of up to $550 per month to cover lease or purchase finance costs of an automobile. Mr. Katyal’s employment agreement provides for indemnification by the Company to the fullest extent permitted by the Company’s certificate of incorporation and bylaws, as well as participation in all benefit plans, programs and perquisites as are generally provided by Advangelists to its employees, including medical, dental, life insurance, disability and 401(k) participation. Mr. Katyal’s employment agreement contains customary non-solicitation of Company customers or employees’ provisions during the term of the agreement and for one year after termination. The agreement provides for termination by Advangelists for cause upon 30 days’ prior written notice: and without cause after 60 days’ prior written notice. The employment agreement terminates automatically upon Mr. Katyal’s death, and it may also be terminated by Advangelists if Mr. Katyal is disabled for more than six consecutive months in any 12-month period—disability being the inability to substantially perform Mr. Katyal's duties and responsibilities by reason of mental or physical illness or injury. Mr. Katyal is entitled to terminate the agreement for “good reason”. If Mr. Katyal is terminated by Advangelists for cause, Advangelists is obligated only to pay Mr. Katyal amounts of base salary and expense reimbursements that were due or accrued prior to the termination date. If Mr. Katyal is terminated by Advangelists without cause, and provided Mr. Katyal is not in breach under the agreement, Advangelists is obligated to pay Mr. Katyal his compensation and expense reimbursements that would be payable to Mr. Katyal for the remainder of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal’s employment is terminated as a result of his death, Advangelists is obligated to pay Mr. Katyal his salary though the date of termination, and his other compensation for the remainder of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal’s employment is terminated as a result of his disability, provided Mr. Katyal provides a general release, Advangelists is obligated to pay Mr. Katyal his salary though the date of termination, and his other compensation for the remainder of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal terminates his employment for good reason, and provided Mr. Katyal provides a general release, Advangelists is obligated to pay Mr. Katyal his compensation and expense reimbursements that would be payable to Mr. Katyal for the remainder of the contractual employment term had Mr. Katyal remained an employee. Mr. Kaytal’s employment agreement provides for assignment of ownership rights regarding intellectual property created by Mr. Katyal relating to the Company’s business.
F-61 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 (AS RESTATED)
Sean McDonnell
Sean McDonnell is employed as the Company’s Chief Executive Officer on a non-full-time basis as an employee at-will with no employment agreement. He has a monthly base salary of $11,000 and he is eligible to receive options and other bonuses at the discretion of the board.
NOTE 9:11: LITIGATION
We are not a party to any pending material legal proceedings, except as follow:proceedings. The following matters were settled in the past two fiscal years.
Washington Prime Group, Inc.(“WPG”), a successor in interest to Simon Property Group, L.P., commenced an action in the Marion Superior Court, County of Marion, State of Indiana against the Company in February 2020 alleging default on 36 commercial leases which the Company had entered into in 36 separate shopping mall locations across the United States. Plaintiff allegesStates for the placement of Mobiquity’s Bluetooth messaging system equipment in the shopping malls to send advertisements through to shoppers’ phones as they walked through mall common areas. WPG alleged damages from unpaid rent of $892,332. Plaintiff is seekingWPG sought a judgment from the Courtcourt to collect saidthe claimed unpaid rent plus attorneys’ fees and other costs of collection. The Company disputed the claim. On September 18,2020,18, 2020, the Partiesparties entered into a settlement agreement with respect to this lawsuit. Subject to the terms, conditions, and provisions ofUnder the settlement Agreement,agreement, Mobiquity paid WPG One Hundred Thousand Dollars$100,000.00 in five $20,000 monthly installments ending in January 2021 and No/100 Cents ($100,000.00).mutual general releases were exchanged.
In the Supreme Court of New York, county of Nassau,December 2019, Carter, Deluca & Farrell LP, a law firm, filed a summons and Complaintcommenced an action in the Supreme Court of New York, County of Nassau, against the Company seeking $113,654 in past due legal fees allegedly owed. The Company disputed the amount owed to saidthat firm. On March 13, 2020,2021 the Company entered into a settlement agreement and paidwith the law firm and paid them $60,000 to settle the lawsuit.
The Company’s wholly-owned subsidiary, Advangelists LLC is a defendant in a lawsuit filed in Tel Aviv brought by the PlaintiffIn July 2020, Fyber Monetization, a privatean Israeli company in the business of digital advertising.advertising, commenced an action against the Company’s wholly owned subsidiary Advangelists LLC in the Magistrate’s Court in Tel Aviv, Israel. In its statement of claim, Fyber allegesalleged that Advangelists owes Fyber license fees of $584,945 invoiced in June through November 3of3, of 2019 unpaid invoices totaling $584,945 US Dollars. Advangelists has disputed any monies being owedunder a February 1, 2017, license agreement for the use of Fyber’s RTB technology and it intendse-commerce platform with connects digital advertising media buyers and media sellers. In March 2022, this lawsuit was settled with the Company paying $120,000 to vigorously defend this lawsuit.Plaintiff.
In October 2020, FunCorp Limited, has filed a lawsuitCypriot company which owns and operates social networking websites and mobile applications, commenced an action against the Company’s wholly owned subsidiary Advangelists LLC in Superior Court, State of Washington, County of King alleging Advangelists owesowed FunCorp for services rendered unpaid invoicesamounts due under an insertion order for placement of Advangelists’ advertisements on FunCorp’s iFunny website totaling $42,464.$42,464 plus legal fees. Advangelists has disputed the claim. In September 2021 the action was settled in payment of $44,000 and the exchange of general releases, without Advangelists admitting any monies being owed and it intends to vigorously defend this lawsuit.
NOTE 10: COMMITMENTS:
liability. The Second Amended AVNG Notesettlement agreement provides that upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class E Preferred Stock issuable pursuant to the terms of the Second Amended AVNG Note,settlement agreement and any shares of the Company’s common stock issued upon the conversion of the Class E Preferred Stock, shallFunCorp’s allegations are confidential and may not be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordancedisclosed except as required by law, court order or subpoena with the terms of the First Amended AVNG Note.certain limitations.
NOTE 11: OTHER MATERIAL EVENTS
In May of 2020, Deepankar Katyal resigned from the board to spend more time necessary to run the day to day operations of Advangelists, LLC focusing on technology and revenue growth.
F-62 |
Interest payments due on Dr. Salkind notes have been halted in the second quarter ofMOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020 due to COVID-19 issues affecting our collections on our accounts receivable.(AS RESTATED)
NOTE 12: SUBSEQUENT EVENTS
AsOn January 4, 2022, Don Walker (“Trey”) Barrett III accepted the position of Chief Operations and Strategy Officer of Mobiquity Technologies, Inc. The Company entered into an Employment Agreement with Mr. Barrett, effective as of January 1, 2022, for an initial term of two years, which may be renewed for successive one-year terms, with an annual salary of $275,000. Mr. Barrett will be entitled to an annual bonus of up to 100% of his annual salary each year based on the attainment of performance standards, targets or goals which will be mutually agreed upon by the Company and Mr. Barrett. Mr. Barrett was granted non-statutory options to purchase up to 150,000 shares of common stock, at a resultprice of our declining revenue, during$4.565 per share out of the COVID-19 pandemic, our management team decidedCompany’s 2021 Employee Benefit and Consulting Services Compensation Plan. The options will vest in three substantially equal annual installments of 50,000 shares each on the first, second and third anniversaries of the date of the Employment Agreement provided Mr. Barrett is employed by the Company on those dates, subject to acceleration if Mr. Barrett is terminated without cause, he resigns for good reason, or certain change of control events occur. Additionally, Mr. Barrett was granted 25,000 shares of restricted stock as a signing bonus pursuant to his Employment Agreement, and not out of any other plan, which will vest in full on the six-month anniversary of the date of his Employment Agreement provided he is employed by the Corporation on that date. Mr. Barrett’s employment Agreement contains customary provisions permitting the Company to terminate Mr. Barrett’s employment for cause or Mr. Barrett’s disability and entitling Mr. Barrett to terminate his employment for good reason, before the end of the contractual employment period. Under the Employment Agreement, Mr. Barrett would be entitled to payment of an amount equivalent to his annual salary for a period of 12 months after termination if his employment is terminated by the Company without cause or due to his disability, or Mr. Barrett terminates his employment for good reason. Additionally, if Mr. Barrett’s employment is not renewed at the end of the initial employment period or any renewal period, Mr. Barrett would be entitled to payment of an amount equivalent to his annual salary for a period of nine months after termination.
On January 4, 2022, the Company entered into a new one-year employment agreement with Deepankar Katyal. His compensation and benefits under the new contract have not changed from the Agreement summarized in Note 10 above.
On March 18, 2022, the Company terminated the Employment Agreement of Don (Trey) W. Barrett III for cause, and it will not incur any material early termination penalties (due to the fact the termination was necessaryfor cause). His employment Agreement is summarized above.
On March 17, 2022, Anthony Iacovone resigned from the Company’s board of directors for personal reasons.
On March 18, 2022, Anne S. Provost was elected to reduce overhead. The following steps were takenthe board of directors to lower expenses, while still keepingserve as an independent director and as a financial expert. Ms. Provost was also nominated to replace Mr. Iacovone on all three board committees, which consist of an Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.
On March 18, 2022, the business operationalboard of directors approved the payment of $1,000 per month to be paid to each member of the board of directors for serving on the board and ready to expand when needed; salaries were cut by approximately forty (40%) percent, several employees were laid-off, all travel was suspended and office space rent was suspended, allowing the entire staff to work remotely.any committees thereof.
1,833,334 SHARES________ Shares of Common Stock
and accompanying Series 2023 Warrants to Purchase _______ Shares of Common Stock
and Class C Warrants to Purchase _______ Shares of Common Stock
_______ Pre-funded Warrants to Purchase ________ Shares of Common Stock
and accompanying Series 2023 Warrants to Purchase _______ Shares of Common Stock
and Class C Warrants to Purchase _______Shares of Common Stock
Representative Warrants to
Purchase ____________Shares of Common Stock
COMMON STOCK
PROSPECTUS
__________, 2021
Through and including , 2021________________, 2023 (the 25th day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
SPARTAN CAPITAL SECURITIES LLC.
_____________________, 2023
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY RESALE PROSPECTUS
SUBJECT TO COMPLETION DATED OCTOBER 19, 2021
MOBIQUITY TECHNOLOGIES, INC.
281,250 Shares of Common Stock of Mobiquity Technologies, Inc.
This prospectus relates to the offer and resale of up to 281,250 shares of our common stock, par value $0.0001 per share, comprised of: (i) 225,000 shares of common stock, issuable to Talos Victory Fund, LLC (“Talos”) and Blue Lake Partners LLC (“Blue Lake”) upon their conversion of convertible promissory notes, expiring on the maturity date of September 20, 2022 pursuant to their respective Securities Purchase Agreements (“SPAs”) dated September 20, 2021; and (ii) 56,250 shares of common stock issuable to Talos and Blue Lake upon their exercise of warrants expiring on September 20, 2026 granted to them pursuant to the SPAs. Talos and Blue Lake are also sometimes collectively referred to in this prospectus as the Selling Shareholders.
Our common stock is currently quoted on the OTCQB market, operated by OTC Markets Group, under the symbol “MOBQ.” On October 18, 2021, the last quoted price of our common stock as reported on the OTCQB was $7.99 per share. We have applied to list our common stock on the NASDAQ Capital Market under the symbol “MOBQ.”
The shares of common stock may be offered by the Selling Shareholders in negotiated transactions, at either prevailing market prices or negotiated prices. The Selling Shareholders in their discretion may also offer the shares of common stock from time to time in ordinary brokerage transactions in the OTCQB market, or if we are successful in our application to NASDAQ, in the NASDAQ marketplace or otherwise. The Selling Shareholders can offer all, some or none of their shares of common stock, thus we have no way of determining the number of shares of common stock they will hold after this offering. See our discussion in the “Selling Shareholders Plan of Distribution” section of this prospectus.
The Selling Shareholders and any brokers executing selling orders on behalf of the Selling Shareholders may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, and commissions received by a broker executing selling orders may be deemed to be underwriting commissions under the Securities Act.
These are speculative securities. See “Risk Factors” beginning on page 7 for the factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus October 19, 2021.
THE OFFERING
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USE OF PROCEEDS
The shares of common stock to be offered and sold pursuant to this prospectus will be offered and sold by the Selling Shareholders or their transferees. We will not receive any proceeds from the sale of the shares of common stock by the Selling Shareholders, except for the exercise price which may be received by the Company from the potential exercise of Warrants to purchase 56,250 shares of common stock issuable to Talos and Blue Lake granted to them pursuant to the SPAs. Any proceeds from the exercise of the Warrants would be allocated for general working capital.
SELLING SHAREHOLDERS
This prospectus relates to the offer and resale of up to 281,250 shares of our common stock, par value $0.0001 per share, comprised of: (i) 225,000 shares of common stock, that may be sold by the Selling Shareholders upon the conversion of their convertible promissory notes, expiring on the maturity date of September 20, 2022 pursuant to their respective SPAs; and (ii) 56,250 shares of common stock that may be sold by the Selling Shareholders upon their respective exercise of warrants expiring on September 20, 2026 granted to them pursuant to the SPAs. We are registering the shares in order to permit the Selling Shareholders to offer the shares for resale from time to time.
The table below lists the Selling Shareholders and other information regarding the “beneficial ownership” of the shares of common stock by the Selling Shareholders. In accordance with Rule 13d-3 of the Exchange Act, “beneficial ownership” includes any shares of our common stock as to which the Selling Shareholders have sole or shared voting power or investment power and any shares of our common stock the Selling Shareholders have the right to acquire within 60 days.
The Selling Shareholders is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.
The second column indicates the number of shares of common stock beneficially owned by the Selling Shareholders, based on its ownership as of October 15, 2021. The second column also assumes the purchase of all shares of stock to be acquired under the maximum number of securities to be sold by the Company to the Selling Shareholders, without regard to any limitations on purchase described in this prospectus or in the SPAs.
The third column lists the shares of common stock being offered by this prospectus by the Selling Shareholders.
The Selling Shareholders can offer all, some or none of their shares of common stock, thus the number of shares of common stock they will hold after this offering is indeterminate. However, the fourth and fifth columns assume that the Selling Shareholders will sell all shares of common stock covered by this prospectus. See “Selling Shareholders Plan of Distribution.”
Selling Shareholder | Number of Shares Beneficially Owned Before Offering | Number of Shares Being Offered (1) | Maximum Number of Shares Beneficially Owned After Offering (2) | Percentage of Shares Beneficially Owned After Offering (%) | ||||||||||||
Talos Victory Fund, LLC (3)(4) | 140,625 | 140,625 | 0 | 0 | ||||||||||||
Blue Lake Partners LLC (5)(6) | 140,625 | 140,625 | 0 | 0 |
________________________
SELLING SHAREHOLDERS PLAN OF DISTRIBUTION
Each Selling Shareholder may sell all or a portion of the shares of common stock held by it and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the Selling Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:
Each Selling Shareholder may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus. In addition, each Selling Shareholder may transfer the shares of common stock by other means not described in this prospectus. If a Selling Shareholder effects such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Shareholder or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, a Selling Shareholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. Each Selling Shareholder may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. Each Selling Shareholder may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.
Each Selling Shareholder may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of Selling Shareholders to include the pledgee, transferee or other successors in interest as Selling Shareholders under this prospectus. Each Selling Shareholder also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
To the extent required by the Securities Act and the rules and regulations thereunder, each Selling Shareholder and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Shareholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that the Selling Shareholders will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.
The Selling Shareholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the Selling Shareholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.
LEGAL MATTERS
The validity of the shares covered by the registration statement of which this prospectus is a part has been passed upon for us by Ruskin Moscou Faltischek P.C.
281,250 SHARES
COMMON STOCK
PROSPECTUS
__________, 2021
Through and including , 2021 (the___ day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses expected to be incurred by us in connection with the issuance and distribution of the securities being registered.
SEC Registration Fee | $ | 1,432 | ||
Initial NASDAQ Capital Market Filing Fee | $ | 50,000 | ||
Underwriter Expenses | $ | 200,000 | ||
Legal Fees and Expenses | $ | 100,000 | * | |
Accounting Fees and Expenses | $ | 30,000 | ||
Transfer Agent and Registrar Expenses | $ | 5,000 | ||
Miscellaneous Fees and Expenses, including FINRA filing fee | $ | 43,568 | ||
Total | $ | 430,000 |
SEC Filing Fee | $ | 5,000.00 | * | |
Underwriter Expenses and non-accountable expense allowance | $ | 300,000.00 | * | |
Legal Fees and Expenses | $ | 125,000.00 | * | |
Accounting Fees and Expenses | $ | 30,000.00 | * | |
Transfer Agent and Registrar Expenses | $ | 5,000.00 | * | |
Miscellaneous Fees and Expenses, including FINRA filing fee | $ | 35,000.00 | * | |
*Total | $ | 500,000.00 | * |
*Estimated expenses.
Item 14. Indemnification of Directors and Officers.
The New York Business Corporation Law contains provisions permitting and, in some situations, requiring New York corporations to provide indemnification to their officers and directors for losses and litigation expense incurred in connection with their service to the corporation. Our certificate of incorporation and bylaws contain provisions requiring our indemnification of our directors and officers and other persons acting in their corporate capacities. In addition, we may enter into agreements with our directors providing contractually for indemnification consistent with the certificate of incorporation and bylaws. Currently, we have no such agreements, other than employment agreements with our executive officers, which provide for indemnification to the fullest extent as permitted by law. The New York Business Corporation Law also authorizes us to purchase insurance for our directors and officers insuring them against risks as to which we may be unable lawfully to indemnify them. We have obtained limited insurance coverage for our officers and directors as well as insurance coverage to reimburse us for potential costs of our corporate indemnification of officers and directors. As far as exculpation or indemnification for liabilities arising under the Securities Act of 1933 may be permitted for directors and officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission such exculpation or indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.
II-1 |
Item 15. Recent salesSales of unregistered securities.Unregistered Securities.
(a) In fiscal 2019 and 2020,2021, we made sales or issuances of unregistered securities listed in the table below:
Date of Sale | Title of Security | Number Sold | Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers | Exemption from Registration Claimed | If Option, Warrant or Convertible Security, terms of exercise or conversion | |||||
2021 | Common stock | 265,000 shares | Services rendered | Rule 506; Section 4(2) | Not applicable | |||||
2021 | Common Stock | 236,768 shares | Note conversion | Section 3(a)(9) | Not applicable | |||||
2021 | Common Stock | 49,384 shares | Warrant conversions cashless exercise | Section 3(a)(9) | Each warrant exercise Price$5.395, expiration Date 9/17/2026 | |||||
2021 | Common Stock | 375,000 shares | Series C Preferred Stock conversion | Section 3(a)(9) | (1) | |||||
2021 | Common Stock | 2,631,764 shares | Shares sold for cash | Rule 506; Section 4(2) | Not applicable | |||||
2021 | Common Stock | 92,900 shares | Original issue discount | Rule 506;Section 4(2) | Not applicable | |||||
2021 | Common Stock | 6,250 shares | Series AAA Preferred Stock conversion | Rule 506;Section 4(2) | Not applicable |
Registration Claimed | ||||||||||
(1) |
| 1,500 Series C Warrants | ||||||||
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II-2 |
Registration Claimed | ||||||||||
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(b) From January 1, 2020 through September 30, 2020 and January 1, 2021 through September 30, 2021,For fiscal 2022, we had no sales or issuances of unregistered capital stock, except as referenced above and in the table below:
Date of Sale | Title of Security | Number Sold | Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers | Exemption from Registration Claimed | If Option, Warrant or Convertible Security, terms of exercise or conversion | |||||
Jan. – September | Common Stock | Services rendered | Rule 506, Section 4(2) | Not applicable | ||||||
Jan. – | Common Stock | 1,443,333 shares 684,166 warrants | Note conversion of$2,502,500 of Secured debt and $150,000 of unsecured debt | Section 3(a)(9) | ||||||
Common Stock |
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| Common Stock | 882,448 shares | $1,137,500 raised, no commissions paid | Rule506, Section | Not applicable | |||||
| Common Stock | Rule 506, Section 4(2) | Not applicable |
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(1) | The secured investor converted $2,502,500 of principal into 1,368,333 common shares and warrants to purchase 684,166 shares of common stock at an exercise price of $4.00 per share through September 2029. | |||||||||
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Issuer Purchases of Equity Securities
On September 10, 2019 Mobiquity exchanged 37,500 (post split) common sharesDecember 30, 2022, we and Walleye Opportunities Master Fund Ltd, a Cayman Islands company (the “Investor”), entered into a Securities Purchase Agreement (the “Agreement”) for 110,000 commonthe Investor to purchase from the Company (i) a senior secured 20% OID nine-month promissory note in an aggregate original principal amount of $1,437,500 (the “Investor Note”), and (ii) a five year warrant to purchase 2,613,636 shares of Gopher Protocol (GBT)the Company’s common stock at an exercise price of $.44 per share which is not exercisable until July 1, 2023 (the “Investor Warrant”). A total of 522,727 shares of Common Stock, or approximately 5.3% of the Company’s outstanding shares of Common Stock, were issued to the Investor as an incentive on the transaction, excluding the above referenced Investor Warrant, the shares of Common Stock exercisable pursuant to such Investor Warrant not being considered beneficially owned by the Investor until the Investor Warrant is exercisable within 60 days. A fee of $103,500 plus warrants to purchase 26,136 shares of Common Stock exercisable at $0.484 per share were issued to Spartan Capital Securities LLC. These warrants were subsequently cancelled on February 7, 2023. Approximately $163,000 of the loan proceeds were utilized to retire a small business loan originally in the principal amount of $150,000. The Investor Note will only become convertible into Common Stock upon the occurrence of an Event of Default under and as defined in the Investor Note on terms set forth in the Investor Note. This Investor Note matures and is payable on or before September 30, 2023, and it provides that were heldit is accelerated and becomes immediately payable if we complete a trigger financing of $3,000,000 or more, which closes subsequent to the earlier of the closing the offering in this prospectus or March 31, 2023. If we are unable to raise additional funding in a trigger financing after this offering or do not generate sufficient cashflow to repay the Note when due, or we will be default under the Note if we do not pay it. The Company granted a security interest in all of its assets to the Investor as collateral for investment purposes.
its obligations under the Investor Note pursuant to a Security Agreement. In addition, the Company’s subsidiaries guaranteed the obligations of the Company under the Investor Note pursuant to a Subsidiary Guarantee and granted a first lien security interest in all of their assets to the Investor as additional collateral pursuant to the Security Agreement. All securities sold in the above described transaction contain certain piggy-back registration rights after the completion of the offering contemplated by this prospectus. Exemption from registration is claimed under Section 4(2) of the Securities Act of 1933, as amended.
Item 16. Exhibits
II-4 |
10.4 | Employment Agreement dated December 7, 2018 – Deepanker Katyal |
II-5 |
10.5 | Amendment No. 1 to Employment Agreement, dated as of September 13, 2019, by and between Advangelists, LLC and Deepankar Katyal | |
10.6 | Class B Preferred Stock Redemption Agreement, dated as of September 13, 2019, by and between Mobiquity Technologies, Inc. and Deepankar Katyal | |
10.7 | Merchant Agreement dated April 29, 2021, 2021 by and between Mobiquity Technologies, Inc. and Business Capital Providers, Inc.** | |
10.8 | Merchant Agreement dated July 28, 2021 by and between Mobiquity Technologies, Inc. and Business Capital Providers, Inc.** | |
10.9 | Employment Agreement dated January 4, 2022 – Deepanker Katyal (Incorporated by reference to Form | |
10.10 | Employment Agreement dated January 4, 2022 – Don Walker (“Trey”) Barrett, III (Incorporated by reference to Form | |
10.11 | Security Agreement and Subsidiary Guarantee with Walleye (Incorporated by reference to Form | |
21.1 | Subsidiaries of the Issuer | |
23.1 | Consent of Ben Borgers CPA PC * | |
23.2 | Consent of Ruskin Moscou Faltischek P.C | |
2005 Employee Benefit and Consulting Services Compensation Plan | ||
99.2 | Amendment to 2005 Plan | |
99.3 | 2009 Employee Benefit and Consulting Services Compensation Plan (Incorporated by reference to Form 10-K filed for the fiscal year ended December 31, 2009.) | |
99.4 | 2018 Employee Benefit and Consulting Services Compensation Plan. (Incorporated by reference to Definitive Proxy Statement filed with the SEC on January 11, 2019.) | |
99.5 | 2021 Employee Benefit and Consulting Compensation Plan** | |
107 | Filing Fee Table*** | |
101.INS | Inline XBRL Instance Document * | |
101.SCH | Inline Document, XBRL Taxonomy Extension * | |
101.CAL | Inline Calculation Linkbase, XBRL Taxonomy Extension Definition * | |
101.DEF | Inline Linkbase, XBRL Taxonomy Extension Labels * | |
101.LAB | Inline Linkbase, XBRL Taxonomy Extension * | |
101.PRE | Inline Presentation Linkbase * |
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* | Filed herewith |
** | Previously filed under Form S-1 Registration Statement, File No. 333-260364. |
*** | Previously filed |
* To be filed by amendment.
** Filed herewith.
II-6 |
Item 17. Undertakings.
The undersigned hereby undertakes:
(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2)That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4)That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5)That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
(ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
(iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
(iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Pre-Effective Amendment No. 2 to Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized in the Shoreham, State of New York, on October 19, 2021.February 8, 2023.
MOBIQUITY TECHNOLOGIES INC.
By:/s/ /s/ Dean L. Julia
Dean L. Julia
Chief Executive Officer and Principal Executive Officer
POWER OF ATTORNEY AND SIGNATURES
The undersigned, a majority of the officers and directors of the company hereby constitute and appoint Dean L. Julia and Sean McDonnell, and each of them singly, with full power of substitution, our true and lawful attorneys-in-fact and agents will full power of substitution, to sign any and all amendments to this Registration Statement on Form S-1 (including pre- and post-effective amendments), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, proxy and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxy and agent, or their substitute, may lawfully do or cause to be done by virtue hereof, including the power and authority to sign for us in our names in the capacities indicated below any and all amendments to this Registration Statement and any other registration statement filed pursuant to the provisions of Rule 462 under the Securities Act.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dean Julia | Chief Executive Officer, Secretary, Director | |||
Dean Julia | (Principal Executive Officer) | |||
/s/ Sean McDonnell | Chief Financial Officer | |||
Sean McDonnell | ||||
/s/ Gene Salkind | Director and Chairman | February 8, 2023 | ||
Dr. Gene Salkind | ||||
/s/ Anne S. Provost | Director | February 8, 2023 | ||
Anne S. Provost | ||||
/s/ Peter L. Zurkow | Director | February 8, 2023 | ||
Peter L. Zurkow | ||||
/s/ Michael A. Wright | Director | February 8, 2023 | ||
Michael A. Wright | ||||