NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Mobiquity Technologies,
Inc. (“Mobiquity,” “we,” “our” or “the Company”), and its operating subsidiaries, is a
next generation location data intelligence company. The Company provides precise unique, at-scale location data and insights on consumer’s
real-world behavior and trends for use in marketing and research. We provide one of the most accurate and scaled solutions for mobile
data collection and analysis, utilizing multiple geo-location technologies. The Company is seeking to implement several new revenue streams
from its data collection and analysis, including, but not limited to, Advertising, Data Licensing, Footfall Reporting, Attribution Reporting,
Real Estate Planning, Financial Forecasting and Custom Research. We also are a developer of advertising and marketing technology focused
on the creation, automation, and maintenance of an advertising technology operating system (or ATOS). The 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. was incorporated
in the State of New York and has the following subsidiaries:
Schedule Of Subsidiaries |
|
|
Company Name |
|
State of Incorporation |
Mobiquity Networks, Inc. |
|
New York |
Advangelists, LLC |
|
Delaware |
Mobiquity Networks, Inc.
Mobiquity Networks, Inc. is a wholly owned subsidiary
of Mobiquity Technologies, Inc., commencing operations in 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, Inc. operates our data intelligence platform business.
Advangelists, LLC
Advangelists LLC is a wholly owned subsidiary
of Mobiquity Technologies, Inc., acquired through a merger transaction in December 2018, and operates our ATOS platform business.
Liquidity, Going Concern and Management’s
Plans
These 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 consolidated
financial statements, for the year ended December 31, 2022, the Company had:
· |
Net loss of $8,062,328 and |
· |
Net cash used in operations was $6,187,383 |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Additionally, at December 31, 2022, the Company
had:
· |
Accumulated deficit of $210,507,222 |
· |
Stockholders’ deficit of $10,830, and |
· |
Working capital deficit of $1,875,416 |
We manage liquidity risk by reviewing, on an ongoing
basis, our sources of liquidity and capital requirements. The Company has cash on hand of $220,854 at December 31, 2022.
The Company has incurred significant losses since
its inception in 1998 and has not demonstrated an ability to generate sufficient revenues from the sales of its products and services
to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be
sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including:
our financial position, our cash flows and cash usage forecasts for the year ended December 31, 2022, and our current capital structure
including equity-based instruments and our obligations and debts.
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. In addition to the gross proceeds of $1,437,500 received in conjunction with the Securities Purchase Agreement with
Walleye Opportunities master Fund Ltd. in January 2023, and the $2,950,000 in total net proceeds expected to be received in conjunction
with the February 2023 Offering (see Note 10), 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 one year after the date that these consolidated financial statements are
issued, as the Company will need additional capital to meet its financial obligations. These 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 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:
· |
Execution of business plan focused on technology development and improvement, |
· |
Seek out equity and/or debt financing to obtain the capital required to
meet the Company’s financial obligations, in addition to the gross proceeds of $1,437,500 received in January 2023 noted above.
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. |
· |
Continuing to explore and execute prospective partnering, distribution and acquisition opportunities, |
· |
Identifying unique market opportunities that represent potential positive short-term cash flow. |
Coronavirus (“COVID-19”) Pandemic
During the year ended December 31, 2022, the Company’s
financial results and operations were adversely impacted by the COVID-19 pandemic. The Company is a data location company with a specialty
to drive traffic to retail stores. In the prior two (2) years, the Company suffered from the effects of the pandemic due to lack of traffic
to retail stores related to mandated stay-at-home restrictions and the Company 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 pandemic also had an effect on the Company’s ability attain new customers or
retain existing customers, and to collect on its outstanding accounts receivable, resulting in an increase of its allowance for doubtful
accounts in fiscal 2022 of approximately $324,000. 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.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation
These consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts
of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
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, including
stock-based compensation and deferred tax asset valuation allowance, 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.
Risks and Uncertainties
The Company operates in an industry that is subject
to intense competition and changes in consumer demand. The Company’s operations are subject to significant risk and uncertainties
including financial and operational risks and the potential of overall business failure.
The Company has experienced, and in the future
expects to continue to experience, variability in sales and net 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 the Company
competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company’s
service offerings. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Fair Value of Financial Instruments
The Company accounts for financial instruments
at fair value, which as is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (exit
price) in an orderly transaction between market participants at the measurement date. The valuation techniques are based on observable
and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect
certain market assumptions. There are three levels of inputs that may be used to measure fair value:
|
· |
Level 1—Valuation based on quoted market prices in active markets for identical assets or liabilities in active markets; |
|
|
|
|
· |
Level 2—Valuation based on quoted prices in active markets for similar assets and liabilities; and |
|
|
|
|
· |
Level 3—Valuation based on unobservable inputs that are supported by little or no market activity, which require management’s best estimate of what market participants would use as fair value. |
Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management.
The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair value. These financial instruments include accounts receivable, accounts payable and accrued
expenses, and contract liabilities. At December 31, 2022 and December 31, 2021, the carrying amounts of these financial instruments approximated
their fair values due to the short-term nature of these instruments. The fair value of the Company’s long-term debt approximates
its carrying value based on current financing rates available to the Company.
The Company does not have any other financial
or non-financial assets or liabilities that would be characterized as Level 1, Level 2, or Level 3 instruments.
Cash and Cash Equivalents and Concentrations
of Risk
For purposes of presentation in the 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 be cash equivalents.
At December 31, 2022 and December 31, 2021, the
Company did not have any cash equivalents.
The Company is exposed to credit risk on its cash
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 December 31, 2022 and December 31, 2021, the Company did not experience any losses on cash balances in excess of FDIC insured limits.
Any loss incurred or a lack of access to funds could have a significant impact on the Company’s consolidated financial condition,
results of operations, and cash flows.
For fiscal 2022 and 2021, sales of our products
to one and two customers generated approximately 39% and 31% 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. The loss of one of these customers could have a material adverse effect on our results of operations and financial condition.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Accounts Receivable
Accounts receivable represent customer
obligations under normal trade terms and 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. Three and six of our customers combined accounted for
approximately 82%
and 55%
of outstanding accounts receivable at December 31, 2022 and 2021, respectively.
The Company had net accounts receivable of $340,935,
$388,112, and $1,698,719 at December 31, 2022, 2021 and 2020, respectively.
Management periodically assesses the Company’s
accounts receivable and, if necessary, establishes an allowance for doubtful accounts. The Company provides its 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.
The allowance for doubtful accounts was approximately
$1,091,000 and $821,000 at December 31, 2022 and 2021, respectively. This allowance relates to receivables generated in previous years
for which collection is uncertain, based in part, as a result of many customers being adversely impacted by COVID-19.
Bad debt expense (recovery) is recorded as a component
of general and administrative expenses in the accompanying consolidated statements of operations.
Impairment of Long-lived Assets
Management evaluates the recoverability of the
Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment
exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events
and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived
assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results;
significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business
strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate
disposition of these assets and compares this to the carrying amounts of the assets.
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.
During the year ended December 31, 2021, the Company
identified potential impairment triggering events related 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 capital markets. The Company performed an impairment
assessment of its ATOS Platform intangible asset in December 2021 and determined that the carrying value of the asset exceeded its fair
value by an estimate of $3,600,000. The charge was recognized in the fourth quarter of 2021, which resulted in the asset being written
down to a net book value of zero.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Property and Equipment
Property and equipment are 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 materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise
disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected
in current results of operations.
Goodwill
The Company’s goodwill represents the excess
of the consideration transferred for the acquisition of Advangelists, LLC in December 2018 over the fair value of the underlying identifiable
net assets acquired. Goodwill is not amortized but instead, it is tested for impairment at least annually. In the event that management
determines that the value of goodwill has become impaired, the Company will record a charge in an amount equal to the excess of the reporting
unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit during the
fiscal quarter in which the determination is made.
The Company performs its annual impairment tests
of goodwill as of December 31st of each year, or more frequently, if certain indicators are present. Goodwill is required to be tested
for impairment at the reporting unit level. A reporting unit is an operating segment or one level below the operating segment level, which
is referred to as a component. Management identifies its reporting units by assessing whether components (i) have discrete financial information
available, (ii) engage in business activities, and (iii) whether a segment manager regularly reviews the component’s operating results.
Net assets and goodwill of acquired businesses are allocated to the reporting unit associated with the acquired business based on the
anticipated organizational structure of the combined entities. If two or more components are deemed economically similar, those components
are aggregated into one reporting unit when performing the annual goodwill impairment review. The Company has one reporting unit as of
December 31, 2022, and 2021. No impairment of goodwill was recognized by the Company for fiscal 2022 or 2021.
Intangible Assets
In December 2018, the Company acquired the majority
of its intangible assets through its acquisition of Advangelists LLC, which included customer relationships and the ATOS platform technology.
The Company amortizes its identifiable definite-lived intangible assets over an estimated period of 5 years. See Note 3 for further details.
Derivative Financial Instruments
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.
Terms of financial instruments are reviewed to
determine whether or not they contain embedded derivative instruments that are required to be accounted for separately from the host contract
under ASC 815 and recorded on the balance sheet at fair value. Derivative liabilities are remeasured to reflect fair value at each period
end, with any increase or decrease in the fair value being recorded in results of operations. The Company generally incorporates a binomial
model to determine fair value. Upon conversion of a debt instrument where an embedded conversion option has been bifurcated and accounted
for separately as a derivative liability, the Company records the resulting shares issued at fair value, derecognizes all related debt
principal, derivative liability, and debt discount, 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 815 are reclassified to liabilities at the fair value
of the instrument on the reclassification date. The Company does not use derivative instruments to hedge exposures to cash flow, market
or foreign currency risk. As of December 31, 2022 and 2021, the Company had no derivative liabilities.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Debt Issuance Costs
Debt issuance costs paid to lenders, or third
parties are amortized to interest expense in the consolidated statements of operations, over the term of the underlying debt instrument,
using the effective interest method, with the unamortized portion reported net with related principal outstanding on the consolidated
balance sheet. There were no unamortized debt issuance costs remaining at December 31, 2022 and 2021.
Revenue Recognition
The Company’s revenues are generated from
internet advertising, the Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606).
In accordance with ASC 606, revenue is recognized when promised services are transferred to a customer. 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 (performance obligations), 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. Currently, the Company does not have any contracts
that contain multiple performance obligations.
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 December 31, 2022 and 2021
contained a significant financing component.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
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. 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.
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 the promised service
to a customer. Under both managed services arrangements or self-service arrangements, the Company’s promised services under the
contracts include identification, bidding and purchasing of advertisement opportunities. The Company also generally has discretion in
establishing the pricing of the ads. Since the Company is controlling the promise to deliver the contracted services, the Company is considered
the principal in all arrangements for revenue recognition purposes.
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. As of December 31, 2022, there were $193,598 in contract liabilities outstanding that we expect to recognize as revenue
in our next fiscal year. There were no upfront payments received as of December 31, 2021.
Revenues
All revenues recognized were derived from internet
advertising for the years ended December 31, 2022, and 2021.
Advertising
Advertising costs are expensed as incurred. Advertising
costs are included as a component of general and administrative expenses in the consolidated statements of operations.
The Company did not incur advertising costs during
the year ended December 31, 2022, and recognized $1,454 in such costs during the year ended December 31, 2021.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Stock-Based Compensation
The Company accounts for our stock-based compensation,
including stock options and common stock warrants, 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
requisite service period for employee awards, which is usually the vesting period, and when the goods are obtained or services are received,
for nonemployee awards. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also applies to 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.
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 are not puttable or mandatorily redeemable by the holder and are classified as equity awards.
The fair value of stock-based compensation is
generally determined using the Black-Scholes valuation model as of the date of the grant or the date at which the performance of the services
is completed (measurement date).
When determining fair value of stock-based compensation,
the Company considers the following assumptions in the Black-Scholes model:
· |
Exercise price, |
· |
Expected dividends, |
· |
Expected volatility, |
· |
Risk-free interest rate; and |
· |
Expected life of option |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Income Taxes
The Company accounts for income tax using the
asset and liability method prescribed by ASC 740, Income Taxes (ASC 740). Under this method, deferred tax assets and liabilities
are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax
rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to
offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that all or some portion of the deferred
tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as gain or loss in the period that
includes the enactment date.
The Company follows the accounting guidance for
uncertainty in income taxes using the provisions of ASC 740. Using that guidance, tax positions initially need to be recognized in the
consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
As of December 31, 2022 and 2021, the Company did not identify any uncertain tax positions that qualify for either recognition or disclosure
in the consolidated financial statements.
The Company recognizes interest and penalties,
if any, related to recognized uncertain income tax positions, in other expense. No interest and penalties related to uncertain income
tax positions were recorded for the years ended December 31, 2022 and 2021. Open tax years subject to examination by the Internal Revenue
Service generally remain open for three years from the filing date. Tax years subject to examination by the state jurisdictions generally
remain open for up to four years from the filing date.
Related Parties
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, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests.
Reclassification
For financial statement presentation purposes,
the Company reclassified amounts among certain stockholders’ equity accounts to reflect shares of outstanding Series AAA,
Series C, and Series E preferred stock at their par value, with the offsetting amounts presented as additional paid-in capital. Previously,
the preferred stock accounts included par value of the preferred stock shares outstanding plus additional paid-in capital associated with
the outstanding stock. Amounts reclassified were $493,869, $15,000, and $4,935,040 for the Series AAA, Series C, and Series E preferred
stock, respectively, and the effects of such reclassifications are reflected as of December 31, 2020 on the accompanying consolidated
financial statements, where applicable. There was no net effect on total stockholders’ equity or net loss for any period as a result
of these reclassifications.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Recent Issued Accounting Pronouncements
We consider the applicability and impact of all
new accounting pronouncements 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 Financial Accounting Standards
Board (FASB) through the date these consolidated financial statements were available to be issued and found no recent accounting pronouncements
issued, but not yet effective, that when adopted, will have a material impact on the consolidated financial statements of the Company.
Financial
Instrument – 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 is currently evaluating the expected impact of adopting ASU 2016-13
on its consolidated financial statements and disclosures.
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 business combination must apply ASC 606 principles when recognizing and measuring acquired contract assets and contract liabilities.
The provisions of ASU 2021-08 are applicable for the Company for fiscal years and interim periods beginning after December 15, 2022. The
Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements and related disclosures.
Fair Value Measurement of Equity Securities
Subject to Contractual Sale Restrictions: On September 30, 2022, the FASB issued ASU 2022-03 (ASU 2022-03), which clarifies the
guidance in Topic 820 on the fair value measurement of an equity security that is subject to contractual restrictions that prohibit the
sale of an equity security. The ASU also requires specific disclosures related to such an equity security, including (1) the fair value
of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and
(3) any circumstances that could cause a lapse in the restrictions. ASU 2022-03 clarifies that a “contractual restriction prohibiting
the sale of an equity security is a characteristic of the reporting entity holding the equity security” and is not included in the
equity security’s unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the
equity security’s fair value (i.e., the entity should not apply a discount related to the contractual sale restriction, as stated
in ASC 820-10-35-36B as amended by the ASU). The ASU also prohibits an entity from recognizing a contractual sale restriction as a separate
unit of account. For public business entities, ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim
periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2022-03 on its
consolidated financial statements and related disclosures.
Recently Adopted Accounting Pronouncement
Accounting for Convertible Instruments:
In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s 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 U.S. 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.
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.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 3: INTANGIBLE ASSETS
Definite-Lived Intangible Assets
The ATOS platform technology was acquired through the Company’s
acquisition of Advangelists, LLC in 2018 and 2019 and is described as follows:
· |
The 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 other definite-lived intangible asset is
a customer relationship asset also acquired through the Advangelists, LLC acquisition. Customer relationship intangible assets are being
amortized over their estimated useful lives of five years. The Company periodically evaluates the reasonableness of the useful lives
of these assets. These assets are also reviewed for impairment or obsolescence when events or circumstances indicate that the carrying
amount may not be recoverable. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized
in the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Schedule of intangible assets | |
| |
| | |
| |
| |
Useful Lives | |
December 31, 2022 | | |
December 31, 2021 | |
| |
| |
| | |
| |
Customer relationships | |
5 years | |
$ | 3,003,676 | | |
$ | 3,003,676 | |
Less accumulated amortization | |
| |
| (2,357,392 | ) | |
| (1,756,657 | ) |
Net carrying value | |
| |
$ | 646,284 | | |
$ | 1,247,019 | |
The ATOS platform was determined to be fully
impaired as of December 31, 2021. During the years ended December 31, 2022 and 2021, the Company recognized $600,735
and $800,735 of amortization
expense, respectively, related to intangible assets, which is included in general and administrative expenses on the consolidated statements
of operations.
Future amortization of definite-lived intangible
assets, for years ending December 31, is as follows:
Schedule of future accumulated amortization | |
| |
2023 | |
$ | 569,796 | |
2024 | |
| 76,488 | |
Total | |
$ | 646,284 | |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 4 – DEBT
Following is a summary of debt outstanding
at December 31:
Summary of long term debt | |
| | |
| |
| |
December 31, 2022 | | |
December 31, 2021 | |
Convertible Notes Payable - Related Party (a) | |
$ | – | | |
$ | 2,562,500 | |
Convertible Notes Payable (b) | |
| – | | |
| 250,000 | |
Small Business Administration (c) | |
| 150,000 | | |
| 150,000 | |
Notes Payable – Accounts Receivable Factoring (d) | |
| – | | |
| 156,504 | |
Total Debt | |
| 150,000 | | |
| 3,119,004 | |
Current portion of debt | |
| – | | |
| 656,504 | |
Long-term portion of debt | |
$ | 150,000 | | |
$ | 2,462,500 | |
|
(a) |
From September through
March 2021, the Company issued to Dr. Gene Salkind, a director of the Company, along with an affiliate of Dr.
Salkind, a total of $2,562,500
in 15% Senior Secured Convertible Promissory Notes (the Salkind Notes). The Salkind Notes had the following terms, as
amended: |
|
· |
The Salkind Notes
were convertible at any time at a conversion rate of $32.00 (subsequently amended in April 2021 to
$4.00). |
|
|
|
|
· |
The Company could require
the Salkind Notes to be converted at any time that the trailing thirty (30) day volume weighted average price per share (as more
particularly described in the Salkind Notes) of the Company’s common stock is above $4.00 per share (as amended). |
|
|
|
| · | Upon conversion of the Salkind Notes,
the Company was to issue warrants for the purchase of common stock of the Company. The number of common shares granted
under the warrants was equivalent to 50% of the total shares issued under the principal converted. The warrants are immediately exercisable
at a price of $4.00 (as amended) per share through September 2029. |
| | |
| · | The Salkind Notes were secured by assets of the
Company and its subsidiaries. |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The Salkind Notes contained customary
events of default, which, if uncured, entitle the holders to accelerate payment of the principal and all accrued and unpaid interest
under the promissory notes.
During 2021, the Company made $137,500
in cash payments on the total principal outstanding at the time of $2,700,000.
During fiscal 2022, the holders converted
the remaining $2,562,500 of outstanding debt through two separate conversion transactions at mutually and Board approved reduced conversion
prices of $1.50 and $1.25 per share, respectively, which also resulted in additional warrants being issued related to the 50% warrant
coverage and based on the total shares issued. In connection with these conversions, a total of 1,776,333 restricted common shares were
issued and warrants to purchase 888,166 restricted common shares at an exercise price of $4.00 per share exercisable through September
2029 were granted. The Company determined that these conversions resulted in debt extinguishment accounting under Accounting Standards
Codification 470-50, Debt Modifications and Extinguishments. As a result, the Company recorded a total loss on debt extinguishment
for fiscal 2022 of $855,296, which represented the excess of the debt reacquisition price over its carrying value at the time of the conversions.
Accrued and unpaid interest on the Salkind Notes of $235,563 remains outstanding at December 31, 2022 and is included in accounts payable
and accrued expenses on the accompanying consolidated balance sheet which can be converted at the amended conversion rate of $4.00.
|
(b) |
During 2021, the Company issued multiple unsecured
Convertible Promissory Notes for total debt proceeds of $250,000 to several private investors who are otherwise unaffiliated shareholders
of the Company (Convertible Notes).
A total of $150,000 of non-interest bearing Convertible
Notes were issued to a single debt holder with an initial conversion price of $6.00 per share, along with a total origination fee consisting
of 7,500 shares of restricted common stock. During the year ended December 31, 2022, the debt holder converted the $150,000 of debt principal
at a reduced conversion rate of $2.00 per share under an induced conversion arrangement that included an explicit time limit for conversion.
The conversion resulted in the issuance of 75,000 shares of common stock and recognition of $101,000 in inducement expense on the accompanying
consolidated statement of operations for the year ended December 31, 2022.
A total of $100,000 in 10% Convertible Notes were issued to three individuals
with a maturity date of July 1, 2022. The 10% Convertible Notes contained an automatic conversion feature, effectively converting all
outstanding and unpaid principal on the maturity date at a conversion rate of $4.00 per share. On July 1, 2022, $100,000 of convertible
note principal, and accrued interest of $8,425, were converted into 27,107 common shares at the $4.00 conversion rate. Upon conversion,
the $108,425 of principal and accrued interest was reclassified to stockholders’ equity. |
|
|
|
|
(c) |
In June 2020, the Company received an Economic Injury Disaster Loan of $150,000 from the Small Business Administration
(SBA) which carries a thirty-year term, and interest at 3.7% per annum, with a maturity date in July of 2050. The loan is to be repaid
in monthly installments, including principal and interest, of $731, beginning twelve months from the date of the loan. Total accrued and
unpaid interest on the debt was $13,594 at December 31, 2022 and is included in accounts payable and accrued expenses on the accompanying
consolidated balance sheet. The total principal outstanding has been presented as long-term liabilities as payments required to be made
in 2023 will be applied to accrued interest. |
|
|
|
|
(d) |
In July 2021, Business Capital Providers, Inc. purchased certain future receivables from the Company at a discount under agreements dated July of 2021. All loans have been repaid in full as of December 31, 2022. |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Gain on Forgiveness
of Debt – PPP Loan
In
May of 2020, the Company applied and received Small Business Administration (SBA) Cares Act loans due to the COVID-19 Pandemic. Each loan
carried a five-year term and bore interest at 1.00% per annum (PPP Loan). The window to use the funds for the SBA specific purposes was
a twenty-four-week period. If the funds were used for the allotted expenses the PPP Loans are to be forgiven in full. During the second
quarter of 2021, the Company applied for and received forgiveness on the PPP Loan of $265,842, which was recognized as gain on forgiveness
of debt on the accompanying consolidated statement of operations for the year ended December 31, 2021.
NOTE 5: INCOME TAXES
The Company has federal net operating loss carryforwards
(“NOL’s) of $58,838,282 and $45,775,954 at December 31, 2022 and 2021, respectively, which may be available to reduce future
taxable income indefinitely.
The tax effects of temporary differences which
give rise to deferred tax assets are summarized as follows:
Schedule of deferred tax assets | |
| | |
| |
| |
December 31, | |
| |
2022 | | |
2021 | |
Deferred tax assets | |
| | | |
| | |
Net operating losses | |
$ | 13,433,000 | | |
$ | 11,421,000 | |
Accounts receivable | |
| 286,000 | | |
| 205,000 | |
Valuation allowance | |
| (13,585,000 | ) | |
| (10,540,000 | ) |
Net deferred tax assets | |
| 134,000 | | |
| 1,086,000 | |
| |
| | | |
| | |
Deferred tax liabilities | |
| | | |
| | |
Property and equipment | |
| (134,000 | ) | |
| (1,086,000 | ) |
Net deferred tax assets | |
$ | – | | |
$ | – | |
The change in the Company’s valuation
allowance was an increase of $3,045,000
and a decrease of $881,000
for the years ended December 31, 2022 and 2021, respectively, primarily related to the increase in net operating losses.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
A reconciliation of the federal statutory rate
to the Company’s effective tax rate is as follows:
Reconciliation of federal statutory rate |
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
Federal income tax at statutory rates |
|
|
(21.00% |
) |
|
|
(21.00% |
) |
Change in deferred tax asset valuation allowance |
|
|
25.00% |
|
|
|
4.00% |
|
Other |
|
|
(4.00% |
) |
|
|
17.00% |
|
Income taxes at effective rates |
|
|
0.00% |
|
|
|
0.00% |
|
NOTE
6: STOCKHOLDERS’ EQUITY
The Company’s authorized capital stock consists
of 105,000,000 shares, comprised of 100,000,000 shares of common stock, par value $0.0001, and 5,000,000 shares of preferred stock, $0.0001
par value.
Of the 5,000,000 shares of preferred stock authorized,
the Board of Directors has designated the following:
| · | 1,500,000 shares as Series AA Preferred Stock, none outstanding |
| · | 1,250,000 shares as Series AAA Preferred Stock, 31,413 shares outstanding |
| · | 1,250 shares as Series AAAA Preferred Stock, all previously outstanding shares of which have been redeemed
or converted |
| · | 1,500 shares as Series C Preferred Stock, none outstanding |
| · | 2 shares as Series B Preferred Stock, all previously outstanding shares of which have been redeemed or
converted |
| · | 70,000 shares as Series E Preferred Stock, 61,688 shares outstanding |
Rights Under Preferred Stock
The Company’s classes of preferred stock
include the following provisions:
Optional Conversion Rights
| · | Series AA preferred stock – one share convertible into 50 shares of common stock |
| · | Series AAA preferred stock – one share convertible into 100 shares of common stock |
| · | Series C preferred stock – one share convertible into 100,000 shares of commons stock |
| · | Series E preferred stock – one share at a rate of Stated Value, as defined, divided by $0.08, convertible
commencing January 31, 2020 |
Redemption Rights
Series E preferred stock is redeemable at any
time upon 30 days written notice by the Company and the holders, at a rate of 100% of the Stated Value, as defined.
Warrant Coverage
Series C preferred stock carries 100% warrant
coverage upon preferred stock conversion, warrants exercisable through September 20, 2023 at an exercise price of $0.12.
No further voting, dividend or liquidation preference
rights exist as of December 31, 2022 on any class of preferred stock.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Shares Issued for Services
Prior to 2021, the Company entered into a consulting
agreement with Sterling Asset Management (Sterling) to provide business advisory services. Compensation paid to Sterling under the agreement
was in the form of common stock. For the year ended December 31, 2021, the Company issued 7,500 shares of common stock to Sterling under
this agreement. On May 28, 2021, the Company entered into a new contract with Sterling to provide assistance and recommendations to help
build strategic partnerships and to provide the Company with advice regarding revenue opportunities, mergers and acquisitions. Under the
new six-month contract, Sterling received 2,500 restricted common shares each month of the agreement (a total of 15,000 shares) and $75,000
in cash payments. The total fair value of the 22,500 shares of common stock compensation issued to Sterling for the year ended December
31, 2021 was $177,675.
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 consultant received 100,000
shares of restricted common stock upon execution of the agreement, which were fair valued at $321,000.
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 restricted common stock upon execution of the agreement, which were fair valued at $321,000.
On December 29, 2021, the Company entered into
a consulting agreement with Pastel Holdings Inc. to provide business advisory services over a term of eighteen months commencing January
1, 2022. The Company is required to pay a $5,000 per month consulting fee during the term of the agreement and to issue five-year warrants
for the purchase of 15,000 common shares at an exercise price of $4.565 per share. The total fair value of the warrants issued during
the year ended December 31, 2022 was approximately $16,000.
In March 2022, the Company entered into a consulting
agreement with John Columbia, Inc. to provide business advisory services. As compensation under the agreement, the Company issued 50,000
shares of common stock, fair valued at $1.69 per share, for a total of $84,500 in exchange for services rendered, as well as monthly payments
of $20,000 over the term of the agreement, recognized as general and administrative services on the accompanying consolidated statement of operations for
the year ended December 31, 2022.
Common Stock Issued for Cash
During 2021, the Company issued a total of 149,836
shares of its common stock under various subscription agreements with individual private accredited investors for a per share purchase
price of $6.00 and cash proceeds totaling $898,990. The agreements had similar terms and were for the purchase of shares of common stock
for cash.
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. 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 a total
of 2,481,928 common shares for total gross proceeds of $6,968,168, and 2,807,937 warrants (2021 Warrants) in connection with the public
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.
During the year ended December 31, 2022, the Company
issued 922,448 shares of common stock at $1.25 per share for total cash proceeds of $1,187,500 under thirteen individual stock subscription
agreements.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Common Stock Issued Upon Conversion of Debt
During 2021, sixteen of the holders of the Convertible
Notes converted $1,810,507 of outstanding principal and accrued interest into a total of 223,665 shares of common stock at conversion
prices ranging from $4.81 to $7.25 per share.
During 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.
During 2022, as discussed in Note
4, a total of $2,562,500 of related party Convertible Notes principal outstanding was converted into a total of 1,776,333 shares
of common stock at conversion prices of $1.25 and $1.50 per share under two individual conversions. The conversions resulted in the Company
recognizing $855,296 in loss on debt extinguishment and additional paid-in capital as a result of 567,854 additional common stock warrants
issued by the Company upon conversion of the debt and the reduction of the conversion price.
During 2022, as discussed in Note 4, the remaining
$250,000
in outstanding principal under the Convertible Notes was converted into 102,107
shares of common stock at conversion prices of $2.00 and $4.00 per share under four individual conversions. Conversion of $150,000
in such principal was considered an inducement transaction under U.S. GAAP resulting in the recording of additional $101,000 in inducement
expense and additional paid-in capital. The balance of $100,000 in debt principal, plus $8,425 in accrued interest, was converted during
2022 into 27,107 shares of common stock at the conversion rate of $4.00 per share. Therefore, the $108,425 of principal and accrued interest
was reclassified to stockholders’ equity upon conversion.
Common Stock Issued in Conjunction with Debt Issuance
During 2021, the Company issued several convertible
debt promissory notes under subscription agreements with accredited investors. The agreements called for the issuance of shares of restricted
common stock to the debt holders upon issuance of the debt in exchange for a reduced debt financing rate. The total shares issued under
the convertible debt promissory notes was 92,900.
The fair value of the shares ranged from $6.00 to $9.38 per share for a total of $700,581.
Common Stock Issued Upon Exercise of Warrants
During 2021, two warrant holders exercised warrants
under a cashless exercise provision, resulting in the issuance 49,384 shares of common stock. No warrants were exercised during 2022.
Conversion of Preferred Stock
During 2021, a shareholder of our Series AAA Preferred Stock converted
25,000 shares, valued at $375,000, to 6,250 shares of our common stock.
During 2021, the single holder of our Series C
Preferred Stock converted 1,500 shares, valued at $15,000, to 375,000 shares of our common stock. Pursuant to the Series C Preferred Stock
conversion terms, the shareholder was granted 375,000 warrants upon conversion at an exercise price of $48.00 with an expiration date
of September 2023.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 7 – STOCK OPTION PLANS AND WARRANTS
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 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 shares. During Fiscal 2009, the Company established a plan of long-term stock-based compensation incentives for
selected Eligible Participants of the Company covering 10,000 shares. This plan was adopted by the Board of Directors and approved by
stockholders in October 2009 (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 shares. In the first quarter of 2016, the Board approved, and stockholders
ratified a 2016 Employee Benefit and Consulting Services Compensation Plan covering 25,000 shares (the “2016 Plan”) and approved
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 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 shares. The 2019 Plan required stockholder approval by April 2, 2020, 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 2021 Plan required stockholder approval by October 13, 2022, to be able to grant incentive stock
options under the 2021 Plan. The 2005 Plan, 2009 Plan, 2016 Plan, 2018 Plan, 2019 Plan and 2021 Plan are collectively referred to as
the “Plans.”
In December of 2021, the Company granted a total
of 810,000 option awards to employees or directors of the Company from the 2021 Plan. The options are immediately exercisable at an exercise
price of $4.57 per share for a period of ten years expiring in December 2031.
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 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 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, such assumptions were determined based on
historical data. The weighted average assumptions incorporated into calculating the fair values of options granted during fiscal
2022 and 2021 are as follows:
Schedule of assumptions used | |
| | |
| |
| |
Years Ended December 31 | |
| |
2022 | | |
2021 | |
Expected volatility | |
| 194% | | |
| 116% | |
Expected dividend yield | |
| – | | |
| – | |
Risk-free interest rate | |
| 2.14%-2.55% | | |
| 1.28% | |
Expected life (in years) | |
| 6.75 | | |
| 10 | |
Schedule of options outstanding | |
| | |
| | |
| | |
| |
| |
Option Shares | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | | |
Aggregate Intrinsic Value | |
| |
| | |
| | |
| | |
| |
Outstanding, January 1, 2021 | |
| 302,849 | | |
$ | 45.85 | | |
| 4.65 | | |
$ | – | |
Granted | |
| 835,000 | | |
| 19.85 | | |
| 2.90 | | |
| – | |
Cancelled and expired | |
| (1,940 | ) | |
| – | | |
| – | | |
| – | |
Outstanding, December 31, 2021 | |
| 1,135,909 | | |
| 16.69 | | |
| 8.39 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| 37,500 | | |
| 3.56 | | |
| 8.72 | | |
| – | |
Cancelled and expired | |
| (10,688 | ) | |
| 21.77 | | |
| – | | |
| – | |
Outstanding, December 31, 2022 | |
| 1,162,721 | | |
$ | 16.22 | | |
| 7.44 | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | |
Options exercisable, December 31, 2022 | |
| 1,154,483 | | |
$ | 16.16 | | |
| 7.43 | | |
$ | – | |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The weighted-average grant-date fair value of
options granted during fiscal 2022, was $1.09.
The aggregate intrinsic value of options outstanding
and options exercisable at December 31, 2022 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 $0.54 closing price of
the Company's common stock on December 31, 2022, of which there were none.
The Company’s results for fiscal 2022 and
2021 include employee share-based compensation expense totaling $67,541 and $4,635,224 respectively. Such amounts have been included in
the consolidated statements of operations within general and administrative expenses.
As of December 31, 2022, the unamortized compensation
cost related to unvested stock option awards is $13,542, expected to be recognized in fiscal year 2023.
Warrants
On December 29, 2021 the Company entered into
a 12 month consulting agreement starting in January 2022 with Pastel Holdings Inc (“Pastel”) to provide business advisory services.
Pastel will provide assistance and recommendations to help build strategic partnerships and provide the Company with advice regarding
revenue opportunities, mergers and acquisitions. Pastel receives 15,000 warrants of the Company’s common stock over the first
twelve months of this agreement, all of which were issued during 2022. The warrants shall have a term of five years and shall be exercisable
at $4.565 per share. A $5,000 per month consulting fee will be paid, in addition to the warrants, commencing on January 1, 2022. The total
fair value of the warrants issued to Pastel totaled $16,064 and was recognized as general and administrative expense on the accompanying
consolidated statement of operations.
During fiscal 2022, the Company issued 888,166
warrants in connection with the conversion of secured convertible notes to a related party (see Note 4), with an exercise price of $4.00
per share, immediately exercisable through September 2029.
The weighted average assumptions made in calculating
the fair value of warrants granted during the years ended December 31, 2022, and 2021 are as follows:
Schedule of warrant assumptions | |
| | |
| |
| |
Years Ended December 31, | |
| |
2022 | | |
2021 | |
Expected volatility | |
| 163%-198% | | |
| 176% | |
Expected dividend yield | |
| – | | |
| – | |
Risk-free interest rate | |
| 1.62%-4.25% | | |
| 1.14% | |
Expected term (in years) | |
| 3.00-5.00 | | |
| 5.83 | |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Schedule of warrants outstanding | |
| | |
| | |
| | |
| |
| |
Shares | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | | |
Aggregate Intrinsic Value | |
Outstanding, January 1, 2021, | |
| 471,557 | | |
$ | 52.529 | | |
| 6.31 | | |
$ | – | |
Granted | |
| 3,439,157 | | |
| 9.46 | | |
| 4.30 | | |
| – | |
Exercised | |
| (102,262 | ) | |
| – | | |
| – | | |
| – | |
Expired | |
| (6,250 | ) | |
| – | | |
| – | | |
| – | |
Outstanding, December 31, 2021 | |
| 3,800,202 | | |
| 15.19 | | |
| 4.68 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| 903,166 | | |
| 4.01 | | |
| 8.61 | | |
| – | |
Expired | |
| (19,568 | ) | |
| 22.73 | | |
| – | | |
| – | |
Outstanding, December 31, 2022 | |
| 4,683,800 | | |
$ | 13.01 | | |
| 4.73 | | |
$ | – | |
NOTE 8: EARNINGS (LOSS) PER SHARE
Pursuant to ASC 260, Earnings Per Share, basic
earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding
for the periods presented.
Diluted earnings (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and
warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive
in the future. In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential
common stock equivalents upon conversion would be anti-dilutive.
The following potentially dilutive equity securities
outstanding as of December 31, 2022 and 2021 are as follows:
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | |
| | |
| |
| |
December 31, 2022 | | |
December 31, 2021 | |
Convertible notes payable and accrued interest | |
| 58,891 | | |
| 768,204 | |
Stock options | |
| 1,162,721 | | |
| 1,135,909 | |
Warrants | |
| 4,683,800 | | |
| 3,800,202 | |
Total common stock equivalents | |
| 5,905,412 | | |
| 5,704,315 | |
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 9: COMMITMENTS AND CONTINGENCIES
Litigation
We are not a party to any pending material legal
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 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’ fees 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 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 which connects digital advertising media buyers and media sellers. In March
2022, this lawsuit was settled with the Company paying $120,000
to Plaintiff and recognizing a gain on settlement of liability of $389,495 on the accompanying consolidated statement of operations.
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 plus
legal fees. 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 terms of the settlement agreement and
FunCorp’s allegations are confidential and may not be disclosed except as required by law, court order or subpoena with certain
limitations.
On January 4, 2022, Don Walker (“Trey”)
Barrett III accepted the position of Chief Operations and Strategy Officer of Mobiquity Technologies, Inc. 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 consolidated statement of operations.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Nasdaq Listing Requirements
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 hearing 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. 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
the recently completed offering. (see Note 10). As the net proceeds of the recently completed offering was approximately $2,950,000, which
is lower than the amount anticipated, the Company will likely need to raise additional capital and to amend its plan of compliance.
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 2021 Warrants cease to be listed for trading on the NasdaqCM, we would expect that our Common
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.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
NOTE 10: SUBSEQUENT EVENTS
Securities Purchase Agreement
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”). Proceeds from the Agreement were received by the Company in
January 2023. 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 the investor may demand prepayment after March 31, 2023 and before the maturity
date, provided that the purchasers of securities in the offering covered by this prospectus who hold the purchased Company
securities at the time the prepayment demand is made unanimously consent to the prepayment. We expect we will rely on proceeds from
future fundings or cashflow from operations to repay the Note on the maturity date or earlier at our option, or if the investor
demands prepayment which is consented to. If we are unable to raise additional funding after the recently completed offering or do
not generate sufficient cashflow to repay the Note when due, we will be in 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 our February 2023 offering. We have completed various other financings as
described under the Notes to Consolidated Financial Statements. Exemption from registration is claimed under Section 4(2) of the
Securities Act of 1933, as amended.
On January 5, 2023, the
Company paid $163,885 to the Small Business Administration to pay off the Company’s SBA loan.
February 2023 Public Offering
On February 13, 2023, the Company entered into
an underwriting agreement (the Underwriting Agreement) with the Spartan Capital Securities, LLC (the Underwriter) relating to the public
offering of 3,777,634 shares of common stock and pre-funded warrants to purchase 4,286,883 shares of common stock (the Shares), accompanied
by Series 2023 Warrants to purchase 12,096,776 shares of common stock (the February 2023 Offering). The offered securities are priced
at a public offering price of $0.465 per combination of one share of common stock or pre-funded warrant, accompanied by one Series 2023
Warrant.
Each pre-funded warrant is exercisable at any
time to purchase one share of common stock at an exercise price of $0.0001 per share. Each Series 2023 Warrant is exercisable for five
years to purchase 1.5 shares of common stock at an exercise price of $0.465 per 1.5 shares. The Series 2023 Warrants also have an alternative
cashless exercise permitting the holder to acquire 0.75 shares for each 1.5 shares any time after the earlier of (i) 30 days following
the initial exercise date of February 14, 2023 and (ii) the date on which the aggregate trading volume of the Company’s common stock
beginning on the initial exercise date of the Series 2023 Warrants exceeds 36,290,322 shares. Additionally, the exercise price of both
warrants are subject to customary adjustments for stock splits, stock dividends, reclassifications and the like.
The Company also granted the Underwriter
a 45-day option to purchase up to an additional 1,209,678 shares and/or pre-funded warrants in lieu of shares, and accompanying Series
2023 Warrants to purchase 1,814,517 shares at the public offering price less the underwriting discounts and commissions, to cover over-allotments,
if any.
The net proceeds to the Company from the sale
of the Shares and Warrants, after deducting the Underwriters’ discounts and commissions and estimated offering expenses payable
by the Company, are expected to be approximately $2,950,000. The February 2023 Offering closed on February 16, 2023. The over-allotment
has not been exercised and the Company cannot assure as to whether the Underwriters will exercise all or any part of the over-allotment
option.
Between the closing of the February 2023 Offering
and March 28, 2023, one or more investors holding pre-funded warrants converted their pre-funded warrants into 3,036,667 shares of common
stock and converted 806,451 of the Series 2023 Warrants into 403,226 shares of common stock.