ITEM 1. FINANCIAL STATEMENTS.
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed Consolidated
Balance Sheets
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March 31,
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December 31,
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2018
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2017
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(Unaudited)
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Assets
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Current Assets:
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Cash and cash equivalents
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$
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155,100
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$
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56,470
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Accounts receivable, net
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30,431
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18,576
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Prepaid expenses and other
current assets
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–
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17,638
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Total Current Assets
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185,531
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92,684
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Intangible assets, net
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5,060
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9,960
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Other assets
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11,275
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11,275
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Total Assets
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$
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201,866
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$
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113,919
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Liabilities and Stockholders' Deficit
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Current Liabilities:
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Accounts payable
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$
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253,440
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$
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458,280
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Accrued expenses
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948,070
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735,431
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Derivative liability
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10,541,670
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666,123
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Note payable
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100
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54,644
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Convertible promissory
notes, net
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3,737,410
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3,149,498
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Total Current Liabilities
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15,480,690
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5,063,976
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AAA Preferred Stock,
$.0001 par value; 5,000,000 shares authorized 850,588 and 850,588 shares issued and outstanding at March 31, 2018 and December
31, 2017, respectively
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11,552,513
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11,552,513
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Stockholders' Deficit:
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Preferred Stock, $.0001
par value; 5,000,000 shares authorized, 240,000 and 240,000 shares issued and outstanding at March 31, 2018 and December 31,
2017, respectively
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25
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25
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Common stock, $.0001 par
value; 900,000,000 and 900,000,000 shares authorized; 199,375,600 and 198,375,600 shares issued and outstanding at March 31,
2018, and December 31, 2017, respectively
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19,950
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19,850
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Additional paid-in capital
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45,134,709
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44,776,029
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Accumulated deficit
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(71,986,021
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)
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(61,298,474
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)
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Total Stockholders' Deficit
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(26,831,337
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)
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(16,502,570
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)
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Total Liabilities and Stockholders' Deficit
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$
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201,866
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$
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113,919
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See notes to condensed consolidated financial statements.
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed
Consolidated Statements of Operations
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Three Months Ended March 31, (Unaudited)
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2018
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2017
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Revenues
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38,703
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81,787
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Cost of Revenues
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61,117
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96,292
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Gross Profit (Loss)
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(22,414
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)
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(14,505
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)
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Operating Expenses:
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Selling, general and administrative
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891,004
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1,679,335
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Total Operating Expenses
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891,004
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1,679,335
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Loss from Operations
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(913,418
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)
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(1,693,840
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)
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Other Income (Expense):
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Interest expense
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(546,012
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)
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(1,133,548
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)
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Change in derivative liability
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(8,983,210
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)
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462,193
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Initial derivative expense
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(244,906)
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(1,038,439
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)
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Loss on extinguishment of debt
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–
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(2,706,197
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)
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Total Other Income (Expense)
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(9,774,128
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)
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(4,415,991
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)
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Loss from continuing operations
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(10,687,546
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)
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$
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(6,109,831
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)
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Other Comprehensive Income
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–
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13,047
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Discontinued operations
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Loss from operations of discontinued entity
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–
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(175,316
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)
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Net Comprehensive Loss
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$
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(10,687,546
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)
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$
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(6,272,100
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)
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Net Loss Per Common Share:
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For continued operations
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$
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(0.05
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)
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$
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(0.05
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)
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Basic and Diluted
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$
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(0.05
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)
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$
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(0.06
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)
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Weighted Average Common Shares Outstanding:
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Basic and Diluted
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198,883,933
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111,234,302
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See notes to condensed consolidated financial
statements.
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed Consolidated Statements of Cash
Flows
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Three Months Ended March 31, (Unaudited)
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2018
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2017
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Cash Flows from Operating Activities:
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Net loss
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$
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(10,687,546
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)
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$
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(6,109,831
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation Expense
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–
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78
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Amortization - Intangible Assets
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4,900
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7,150
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Amortization - Debt discount
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336,843
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641,363
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Common stock issued for services
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–
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314,310
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Common stock issued for incentives
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31,375
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–
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Change in derivative liability
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8,983,210
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(462,193
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)
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Stock-based compensation
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327,405
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273,092
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Initial derivative expense
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244,906
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1,038,439
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Loss on extinguishment of debt
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–
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2,706,197
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Loss on disposal of assets
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–
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12,241
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Expenses paid from note
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–
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567,737
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Changes in operating assets and liabilities:
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Accounts receivable
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(11,855
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)
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80,927
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Inventory
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–
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(5,945
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)
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Prepaid expenses and other assets
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17,638
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20,033
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Accounts payable
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(204,841
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)
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(167,543
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)
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Accrued expenses and other current liabilities
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35,002
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(81,554
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)
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Accrued interest
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177,637
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345,515
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Total adjustments
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9,942,220
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5,289,847
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Net Cash Used in Operating Activities
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(745,326
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)
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(819,984
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)
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Net Cash Used in Operating Activities-discontinued operations
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–
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(175,316
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)
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Cash Flows from Investing Activities:
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Net Cash Used in Investing Activities
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–
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–
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Cash Flows from Financing Activities:
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|
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Proceeds from the issuance of notes, net
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898,500
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1,300,000
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Proceeds from issuance of common stock
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–
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311,250
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Proceeds received from exercising warrants
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–
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95,834
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Cash paid for accrued interest
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–
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|
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(3,140
|
)
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Cash received from bank loans
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|
66,500
|
|
|
|
–
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Cash paid on bank loans
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|
(121,044
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)
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|
|
–
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Net Cash Provided by Financing Activities
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843,956
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|
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1,703,944
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Net change in Cash and Cash Equivalents
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|
98,630
|
|
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|
708,644
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Cash and Cash Equivalents, beginning of period
|
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|
56,470
|
|
|
|
213,184
|
|
Cash and Cash Equivalents, end of period
|
|
$
|
155,100
|
|
|
$
|
921,828
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure Information:
|
|
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|
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Cash paid for interest
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$
|
–
|
|
|
$
|
–
|
|
Cash paid for taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
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|
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Non-cash Financing and Investing Activities:
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|
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Stock issued for interest
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$
|
31,375
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|
|
$
|
670,631
|
|
Conversion of note and interest into AAA Preferred and Common Stock
|
|
$
|
–
|
|
|
$
|
12,749,771
|
|
Recognition of debt discount
|
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$
|
748,931
|
|
|
$
|
–
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|
See notes to condensed
consolidated financial statements.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
NATURE OF OPERATIONS – On September
10, 2013, Mobiquity Technologies, Inc. changed its name from Ace Marketing & Promotions, Inc. “the Company” or
“Mobiquity”). We operate through a wholly-owned U.S. subsidiary, named, Mobiquity Networks, Inc. Mobiquity Networks
owns 100% of Mobiquity Wireless S.L.U, a company incorporated in Spain. This corporation had an office in Spain to support our
U.S. operations, which office was closed in the fourth quarter of 2016. Ace Marketing, its legacy marketing and promotions business
was successfully sold on October 1, 2017, allowing us to focus our full attention to Mobiquity Networks.
Mobiquity Technologies, Inc., a New York
corporation (the “Company”), is the parent company of its operating subsidiary; Mobiquity Networks, Inc. (“Mobiquity
Networks”). The Company’s wholly-owned subsidiary, 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. With its combined first party location data via its advanced SDK and its various
exclusive data sets; 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; Advertising,
Data Licensing,
Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research.
GOING CONCERN - The accompanying
condensed financial statements have been prepared assuming the Company will continue as a going concern. The Company's continued
existence is dependent upon the Company's ability to obtain additional debt and/or equity financing to advance its new technology
revenue stream. The Company has incurred losses from continued operations for the quarter ended March 31, 2018 of $10,687,546.
As of March 31, 2018, the Company has an accumulated deficit of $71,986,021. The Company has had negative cash flows from operating
activities of $745,326, for the quarter ended March 31, 2018. These factors raise substantial doubt about the ability of the Company
to continue as a going concern.
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. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability
raises doubts about the Company’s ability to continue as a going concern.
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.
PRINCIPLES OF CONSOLIDATION - The accompanying
consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing & Promotions,
Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc.
The Condensed Balance
Sheets as of March 31, 2018, the Condensed Statements of Operations for the three months ended March 31, 2018 and 2017 and the
Condensed Statements of Cash Flows for the three months ended March 31, 2018 and 2017 have been prepared by us without audit, and
in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for
a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally
accepted in the United States of America. In our opinion, the accompanying unaudited condensed financial statements contain all
adjustments necessary to present fairly in all material respects our financial position as of March 31, 2018, results of operations
for the three months ended March 31, 2018 and 2017 and cash flows for the three months ended March 31, 2018 and 2017. All such
adjustments are of a normal recurring nature. The results of operations and cash flows for the three months ended March 31, 2018
are not necessarily indicative of the results to be expected for the full year. We have evaluated subsequent events through the
filing of this Form 10-Q with the SEC, and determined there have not been any events that have occurred that would require adjustments
to our unaudited Condensed Financial Statements.
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS-
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques,
are assigned a hierarchical level.
The following are the hierarchical levels
of inputs to measure fair value:
|
·
|
Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
|
·
|
Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
·
|
Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The carrying amounts of the Company's financial
assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain
notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative
liabilities, at fair value, on a recurring basis under level 3.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Fair value of derivatives
|
|
$
|
–
|
|
|
$
|
-
|
|
|
$
|
10,541,670
|
|
|
$
|
10,541,670
|
|
Embedded Conversion Features
The Company evaluates embedded conversion
features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value
recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated
under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature.
Derivative Financial Instruments
The
Company has financial instruments that are considered derivatives or contain embedded features subject to derivative
accounting
related to 19 convertible notes issued totaling $4,234,000 which have a variable conversion price equal to
50% of the lowest volume weighted average price in the 30 days prior to conversion
.
The notes have maturity dates ranging from February 2, 2018 – October 21, 2018. The Company also has financial
instruments that are considered derivatives or contain embedded features subject to derivative accounting
related to
2,200,000 warrants which included a ratchet provision in the conversion price of $.05 as part of a conversion of preferred
AAA shares, and 1,000,000 warrants which included a ratchet provision in the conversion price of $.055 as part of a placement
fee related to a note.
Embedded derivatives are valued separately from the host
instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these
instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations
during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible
debentures and associated warrants using a multinomial lattice model as of March 31, 2018. The fair values of the derivative
instruments are measured each quarter, which resulted in a loss of $8,983,210 and derivative expense of $244,906 during the
three months ended March 31, 2018. As of March 31, 2018, the fair market value of the derivatives aggregated
$
10,541,670
using the following assumptions: estimated 0.1 to 4.1-year term,
estimated volatility of 196.98% to 394.26%, and a discount rate of 0.00% to 2.09%.
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, to be cash equivalents. As of March 31, 2018 and December 31, 2017, the balances were $155,100 and
$56,470, 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, as a consequence, believes that its receivable credit risk exposure is limited. Our current receivables
at March 31, 2018 are with five customers. Two customers constitute 77.79% of our sales. Customer A percentage of sales was 53.12%
and customer B was 24.67%
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 March 31, 2018 and December 31, 2017, the Company did not exceeded FDIC limits.
REVENUE RECOGNITION –
Revenue
represents amounts earned for data licensing arrangements consisting of flat fee, per use basis or revenue share. Licensee is
sent data on a daily basis, has use of the data for a period of time based on the contract life between one month to one year.
We recognize revenues in the period in which the data transmission
is provided to the licensee.
Under these policies, the Company evaluates each of these criteria
as follows:
|
·
|
Evidence
of an arrangement. We consider a signed insertion order or contract by the licensee or
its agency to be evidence of an arrangement.
|
|
·
|
Delivery.
Delivery is considered to occur daily with the transmission of the data from our network
servers to the licensee.
|
|
·
|
Fixed
or determinable fee. The Company recognizes revenue for data license arrangements ratably
over the term of the insertion order or contract. Our arrangements with the licensee
is noted in the signed contracts which specifies the price to be paid and due date of
remittance. Contracts that include fixed-fee data transmission are invoiced upon acceptance
of the insertion order or contract and billed at time of delivery. The Company’s
terms as stated in the contracts. Final billing is based on usage of delivered data. At the end of the period (usually
monthly) an acknowledgment of data amount delivered is sent to licensee, who then verifies usage and at the point a final
invoice is generated.
|
|
·
|
Collection
is deemed reasonably assured. We deem collection reasonably assured if we expect that
the licensee will be able to pay the amounts under the arrangement as payments become
due. Collection is deemed not reasonably assured when a licensee is perceived to be in
financial distress, which may be evidenced by weak industry conditions, a bankruptcy
filing, or previously billed amounts that are past due. If we determine that collection
is not reasonably assured, then we would defer the revenue and recognize the revenue
upon cash collection.
|
|
·
|
No
other warranties and or obligations are implied or due once the data transmission has
been completed with the licensee.
|
MOBIQUITY NETWORKS – Revenue
is recognized with the billing of an advertising contract or data sale. The customer signs a contract directly with us for an
advertising campaign with mutually agreed upon term and is billed on the start date of the advertising campaign, which are normally
in short duration periods. The second type of revenue is through the licensing of our data. Revenue from data can occur in two
ways; the first is a direct feed, which is billed at the end of each month. The second way is through the purchasing of audience
segments. When an audience segment is purchased, we bill the buyer upon delivery, which is usually 1-2 days for the order date.
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 credit-worthiness, current economic trends and changes in customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts. As of March 31, 2018 and December 31, 2017, allowance
for doubtful accounts were $0 and $0, respectively.
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 - Long-lived assets such
as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that
the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on
the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets,
if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its
undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the
asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at
a rate commensurate with the risk associated with the recovery of the assets. The Company recognized no impairment losses for the
period ended March 31, 2018.
PATENTS and TRADEMARKS - Patents and trademarks
developed during the prior years were capitalized for the period of development and testing. Expenditures during the planning stage
and after implementation have been expensed in accordance with ASC 985.
ADVERTISING COSTS - Advertising costs are
expensed as incurred. For the quarter ended March 31, 2018 and for the year ended December 31, 2017, there were no advertising
costs.
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. Refer to Note 8 “Stock Option Plans” in the Notes to Consolidated
Financial Statements in this report for a more detailed discussion.
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.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS -
Revenue from Contracts with Customers (Topic 606)
. The company adopted Revenue Recognition
Standard, ASC 606 on January 1, 2018 and after for the recognition for our revenue policy.
We have completed our assessment of the impact under the new
revenue standard on our condensed financial statements. Based on our assessment, we have concluded that our financial statements
will not be materially impacted upon adoption.
NOTE 2: LOSS PER SHARE
Basic
loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Dilutive loss per share gives effect to stock options and warrants, which are considered to be dilutive common stock
equivalents. Basic loss per common share was computed by dividing net loss by the weighted average number of shares of common
stock outstanding. 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 325,811,673 because they are anti-dilutive as a
result of a net loss for the three months ended March 31, 2018.
NOTE 3: CONVERTIBLE DEBT AND DERIVATIVE
LIABILITIES
Summary of Convertible Promissory Notes:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Arnost Note
|
|
$
|
–
|
|
|
$
|
–
|
|
CAVU Notes, net
|
|
|
100,000
|
|
|
|
100,000
|
|
Berg Note (a)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Secured Notes (b) net of discounts of $646,590 for March 31, 2018 and $234,502 for December 31, 2017
|
|
|
3,587,410
|
|
|
|
2,999,498
|
|
Total Debt
|
|
|
3,737,410
|
|
|
|
3,149,498
|
|
Current portion of debt
|
|
|
3,737,410
|
|
|
|
3,149,498
|
|
Long-term portion of debt
|
|
$
|
–
|
|
|
$
|
–
|
|
In the first quarter of 2018, the Company entered into agreements with non-affiliated
persons to provide $1,000,000 of short term secured debt financing in four monthly tranches. The Company will issue in connection
with each tranche, a six-month secured convertible promissory note. In connection with this transaction, the Company agreed to
issue an origination fee of 1,000,000 shares of restricted common stock. Alexander Capital L.P. acted as Placement Agent and Advisor
for this transaction. Each of these new notes are on the terms of the Company's 10% Senior Secured debt.
The Company's 10% Senior
Secured Debt consists of 19 convertible notes issued totaling $4,234,000. These notes mature 6 months from the date of issuance,
accrue interest at 10%, and had a base conversion price of $.05. As of March 31, 2018, the 10% Senior Secured Debt notes are in
default for breach of covenants due to notes which have matured during the period not being settled. The default on these notes
triggered an increase in the interest rate from 10% to 24% on the principal balance, a 9% late fee being charged on interest accrued,
and a variable conversion price equal to 50% of the lowest volume weighted average price in the 30 days prior to conversion. On
February 27, 2018 the Company reduced the base conversion price from $.05 to $.02. The Company accounted for this modification
per ASC 470-50 "Modifications and Extinguishments". Due to the variable rate in effect from the default provisions of the 10%
Senior Secured Debt notes this reduction in base conversion price had no material change on the value of the notes.
A recap of the derivative liability is as follows:
Derivative Liability 2018
|
Beginning balance
|
|
$
|
(666,123
|
)
|
New Issuances
|
|
|
(244,906
|
)
|
Discount on new issuances
|
|
|
(647,431
|
)
|
Gain (Loss) on revaluation of derivative liability
|
|
|
(8,983,210
|
)
|
Ending balance
|
|
$
|
(10,541,670
|
)
|
NOTE 4: STOCKHOLDERS’ (DEFICIT)
Shares issued for Original Interest Discount
During the quarter ended March 31,
2018, the Company issued 1,000,000 shares of common stock at a price per share between $0.03 and $0.04 for original issue
discount on receipt of $1,000,000 in 10% secured convertible promissory notes.
NOTE 5: STOCK-BASED COMPENSATION
Compensation
costs related to share-based payment transactions, including employee stock options, are recognized in the financial
statements utilizing the straight line method for the cost of these awards.
The Company's results
for the three month period ended March 31, 2018 and 2017 include employee share-based compensation expense totaling $327,405 and
$273,092, respectively. Such amounts have been included in the Condensed Consolidated Statements of Operations within selling,
general and administrative 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 three months ended March 31, 2018 and 2017:
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Employee stock-based compensation - option grants
|
|
$
|
273,945
|
|
|
$
|
150,592
|
|
Employee stock-based compensation - stock grants
|
|
|
–
|
|
|
|
–
|
|
Non-Employee stock-based compensation - option grants
|
|
|
53,460
|
|
|
|
11,500
|
|
Non-Employee stock-based compensation - stock grants
|
|
|
–
|
|
|
|
–
|
|
Non-Employee stock-based compensation-stock warrant
|
|
|
–
|
|
|
|
111,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
327,405
|
|
|
$
|
273,092
|
|
NOTE 6: STOCK OPTION PLAN
In the first quarter
of 2016, the Board approved and stockholders ratified a 2016 Employee Benefit and Consulting Services Compensation Plan covering
10,000,000 shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits to the 2016
Plan. The Company also had approved 2005 and 2009 Plans covering 4,000,000 shares and 10,000,000 shares, respectively.
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 under the Plans during the three months ended March 31,
2018 and 2017 are as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Expected volatility
|
|
|
173.00%
|
|
|
|
146.77%
|
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
Risk-free interest rate
|
|
|
2.43%
|
|
|
|
1.89%
|
|
Expected term (in years)
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Share
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2018
|
|
|
|
17,515,001
|
|
|
|
0.39
|
|
|
|
4.43
|
|
|
$
|
–
|
|
|
Granted
|
|
|
|
19,250,000
|
|
|
|
.05
|
|
|
|
5.00
|
|
|
|
–
|
|
|
Exercised
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
(11,015,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2018
|
|
|
|
25,750,000
|
|
|
|
0.12
|
|
|
|
3.91
|
|
|
|
4,000
|
|
|
Options exercisable, March 31, 2018
|
|
|
|
25,750,000
|
|
|
|
0.12
|
|
|
|
3.91
|
|
|
$
|
4,000
|
|
The weighted-average
grant-date fair value of options granted during the three months ended March 31, 2018 and 2017 was $0.05 and $0.03, respectively.
The aggregate intrinsic
value of options outstanding and options exercisable at March 31, 2018 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 $0.04 closing price of the Company's common stock on March 31, 2018.
As of March 31, 2018,
the fair value of unamortized compensation cost related to unvested stock option awards was $0.
The
weighted average assumptions made in calculating the fair value of warrants granted during the three months ended March 31,
2018 and 2017 are as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Expected volatility
|
|
|
0.00
|
%
|
|
|
151.49
|
%
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
Risk-free interest rate
|
|
|
0.00
|
%
|
|
|
151.49
|
%
|
Expected term (in years)
|
|
|
0.00
|
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Share
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
Outstanding, January 1, 2018
|
|
|
|
11,814,167
|
|
|
$
|
0.20
|
|
|
|
2.58
|
|
|
$
|
–
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
(540,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2018
|
|
|
|
11,274,167
|
|
|
$
|
0.19
|
|
|
|
2.50
|
|
|
|
–
|
|
|
Options warrants exercisable, March 31, 2018
|
|
|
|
11,274,167
|
|
|
$
|
0.19
|
|
|
|
2.50
|
|
|
$
|
–
|
|
NOTE 7: COMMITMENTS AND CONTINGENCIES
COMMITMENTS –
In March of 2014, we entered into a month-to-month
lease agreement for approximately 400 square feet of office space located in Manhattan, NY at a monthly cost of $3,700. In May
of 2015 we moved to a larger location with the same landlord on a month to month basis for $4,700 each month. In 2017 the Company
is leasing on a month-to-month basis two fully furnished executive suites in Manhattan at a monthly cost of approximately $6,700.
These executive suites are located at 85 Broadway, 16
th
Floor, Suites 16-035 and 16-040, New York, NY 10010.
There are currently no minimum future
rentals under non-cancelable lease commitments.
Rent and real estate tax expense was
approximately $18,812 and $449,883 for the quarters ended March 31, 2018 and 2017, respectively.
Transactions with major customers
During the quarter ended March 31, 2018,
two customers accounted for approximately 78% of revenues and for the year ended March 31, 2017, three customers accounted for
all our revenues.
NOTE 8: SUBSEQUENT EVENTS
There are no subsequent events required
to be disclosed in the Notes to Financial Statements through the date of the report, except as follows:
In May of 2018, the Company received two
unsecured Convertible Promissory Notes totaling $250,000, which include 7,000,000 shares of common stock for the prepayment of
interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information contained
in this Form 10-Q and documents incorporated herein by reference are intended to update the information contained in the Company's
Form 10-K for its fiscal year ended December 31, 2017 which includes our audited financial statements for the year ended December
31, 2017 and such information presumes that readers have access to, and will have read, the "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Risk Factors" and other information contained in such Form 10-K
and other Company filings with the Securities and Exchange Commission ("SEC").
This Quarterly Report
on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements
involve risks and uncertainties, and actual results could be significantly different than those discussed in this Form 10-Q. Certain
statements contained in Management's Discussion and Analysis, particularly in "Liquidity and Capital Resources," and
elsewhere in this Form 10-Q are forward-looking statements. These statements discuss, among other things, expected growth, future
revenues and future performance. Although we believe the expectations expressed in such forward-looking statements are based on
reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ
materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. The forward-looking
statements are subject to risks and uncertainties including, without limitation, the following: (a) changes in levels of competition
from current competitors and potential new competition, (b) possible loss of customers, and (c) the company's ability to attract
and retain key personnel, (d) The Company's ability to manage other risks, uncertainties and factors inherent in the business and
otherwise discussed in this 10-Q and in the Company's other filings with the SEC. The foregoing should not be construed as an exhaustive
list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made
by us. All forward-looking statements included in this document are made as of the date hereof, based on information available
to the Company on the date thereof, and the Company assumes no obligation to update any forward-looking statements.
Company Overview
The Company’s
wholly-owned subsidiary, 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. With its combined first party location data via its advanced SDK and its various exclusive data sets; 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; Advertising,
Data Licensing,
Footfall Reporting, Attribution Reporting,
Fraud Prevention, Real Estate Planning, Financial Forecasting and Custom Research.
As mentioned in previous
filings, Mobiquity Technologies’ will be focusing its full attention on Mobiquity Networks, which it believes represents
a large growth opportunity. Subsequently, former subsidiary, Ace Marketing, its legacy marketing and promotions business was successfully
sold on October 1, 2017 and is no longer part of Mobiquity Technologies or its business plan.
Critical Accounting Policies
Our discussion and
analysis of our financial condition 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
–Revenue is recognized with the billing of an advertising contract or data sale. The customer signs a contract directly
with us for an advertising campaign with mutually agreed upon term and is billed on the start date of the advertising campaign,
which are normally in short duration periods. The second type of revenue is through the licensing of our data. Revenue from data
can occur in two ways; the first is a direct feed, which is billed at the end of each month. The second way is through the purchasing
of audience segments. When an audience segment is purchased, we bill the buyer upon delivery, which is usually 1-2 days for the
order date.
Allowance For Doubtful
Accounts
. We are required to make judgments based on historical experience and future expectations, as to the realizability
of our accounts receivable. We make these assessments based on the following factors: (a) historical experience, (b) customer concentrations,
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.
Plan of Operation
Mobiquity Networks
derives its revenue utilizing the revenue streams mentioned above. All the products used to derive revenue for the Company are
reliant on the collection of data. To achieve management’s revenue goals moving forward, we have developed a strategy to
increase the two main driving forces behind our data collection. One strategy is to increase the total number of users we see on
a monthly basis (“MAU”), and the second strategy is to increase the total number of locations (Places) available to
see our MAU’s over the same time period. We are currently seeing approximately 50,000,000 unique mobile devices on a monthly
basis. The ability to see and collect the data required from these unique devices comes from the installation of our proprietary
Software Development Kit (SDK) into various mobile applications (Apps) or through a direct server-to-server data feed from our
App partners. To continue to grow the total number of unique devices we can see on a monthly basis, we need to increase our App
partnerships. We believe our unique offering to potential App partners gives us a competitive advantage over others in the industry.
The task of partnering with Apps is handled internally by our business development team.
As of April 2018, we
had over 2,000,000 Places in our proprietary Places database, and we expect growth to over 4,000,000 Places by the fourth quarter
of 2018, thus exponentially increasing the amount of data we collect. We have been able to steadily increase the number of locations
available in our Places database through the use of both open source and proprietary technologies. The task of growing our Places
database is handled by our internal technology team. The Company currently utilizes both internal and outsourced resources to market
and sell its product offerings. Management intends to hire additional sales personnel in the last three quarters of 2018 as working
capital permits.
Results of Operations
Quarter Ended March 31, 2018 versus
Quarter Ended March 31, 2017
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
|
|
|
|
March 31,
2018
|
|
|
March 31,
2017
|
|
Revenue
|
|
$
|
38,703
|
|
|
$
|
81,787
|
|
Cost of Revenues
|
|
|
(61,117
|
)
|
|
|
(96,292
|
)
|
Gross (Loss)
|
|
|
(22,414
|
)
|
|
|
(14,505
|
)
|
Selling, General and Administrative Expenses
|
|
|
(891,004
|
)
|
|
|
(1,679,335
|
)
|
Loss from operations
|
|
|
(913,418
|
)
|
|
|
(1,693,840
|
)
|
We generated
revenues of $38,703 in the first quarter of 2018 as compared to $81,787 in the same period for fiscal 2017, a change in
revenues of $43,084. In 2018, we are seeking to implement several new revenue streams from data collection and analysis
including, but not limited to; Advertising,
Data Licensing,
Footfall Reporting,
Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research.
Cost of revenues was
$61,117 or 157.9% of revenues in the first quarter of 2018 as compared to 96,292 or 117.7% of revenues in the same fiscal period
of fiscal 2017. Cost of revenues include web services for storage of our data and web engineers who are building and maintaining
our platforms. The generated savings, on a percentage basis, arise with our increased sales. Our ability to capture and store data
for sales does not translate to increased cost of sales.
Gross loss was $22,414
or 57.9% of revenues for the first quarter of 2018 as compared to $14,505 in the same fiscal period of 2017 or 17.7% of revenues.
As revenues from the use of our technologies increases, it is expected that our margins will increase significantly.
Selling, general, and
administrative expenses were $891,049 for the first quarter of fiscal 2018 compared to $1,679,335 in the comparable period of
the prior year, a decrease of approximately $788,331. Such operating cost reductions include payroll and related expenses, commissions,
insurance, rents, fee payments to malls, professional (consulting) and public awareness fees. The corporation has been trimming
expenses in order to shift its efforts in obtaining a new revenue stream. Our increased efforts in cutting expenses by streamlining
staff has fueled the savings in salaries. The other major savings is in the reduction of our rent expense. With our change in revenue
stream we no longer need access to the mall locations which has reduced our costs by close to two million dollars.
The net loss from
operations for the first quarter of fiscal 2018 was $913,418 as compared to $1,693,840 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 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.
Liquidity and Capital Resources
The Company had cash
and cash equivalents of $155,100 at March 31, 2018. Cash used in operating activities for the three months ended March 31, 2018
was $745,326. This resulted primarily from a net loss of $10,687,546, offset by stock based payments of $327,405 an increase in
accounts receivable of $11,855, a decrease in prepaid expenses and other assets of $17,638, a decrease of accounts payable and
accrued expenses of $7,799, the non-cash items of the change in fair value of derivative liabilities of $8,983,210, derivative
expense of $244,906, the amortization of discount on convertible debt of $336,843, and stock, incentive expensed of $31,375.
Net cash was provided by financing activities of $843,956 from the proceeds of the issuance of notes, net $898,500 for the quarter
ended March 31, 2018.
The Company had cash
and cash equivalents of $921,828 at March 31, 2017. Cash used in operating activities for the three months ended March 31, 2017
was $819,984. This resulted primarily from a net loss of $6,109,831, offset by stock based payments of $273,092, a decrease in
accounts receivable of $80,927, a decrease in prepaid expenses and other assets of $20,033, an increase of accounts payable and
accrued expenses of $96,418, and the non-cash items of the change in fair value of derivative liabilities of $462,193, derivative
expense of $1,038,439, the loss on settlement of debt of $2,706,197, and amortization of debt discount of $641,363. Net cash was
provided by financing activities of $1,703,944 from the sale of the Company's Common Stock for the quarter ended March 31, 2017
of $311,250, proceeds from the exercise of warrants of $95,834 and net proceeds from the issuance and extinguishment of notes
of $1,300,000.
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 2018 and beyond until cash flow from our proximity marketing operations become substantial.
Recent Financings
In 2016 and 2017, we
have completed various financings. See Item 5 under “Recent Sales of Unregistered Securities” in our Form 10-K for
the fiscal year ended December 31, 2017.
2017 Loan Agreements and Certain Transactions
As of May 7, 2018,
the Company has outstanding 206,825,600 shares of common stock, 850,588 shares of Series AAA preferred stock and $4,384,000 of
convertible notes. The convertible notes consist of $4,234,000 of secured notes and $150,000 of unsecured notes.