Table of Contents

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

 
COMMISSION FILE NUMBER: 000-51160

 

MOBIQUITY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

 

NEW YORK   11-3427886
(State of jurisdiction of Incorporation)   (I.R.S. Employer Identification No.)

 

35 Torrington Lane
SHOREHAM, NY 11786

(Address of principal executive offices)

 

(516) 246-9422

(Registrant's telephone number)

 

____________________________________________

(Former name, address and fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒    No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒    No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

  Large accelerated filer  o Accelerated filer  o
  Non-accelerated filer  o Smaller reporting company  x
  Emerging growth company  o  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐    No ☒

 

As of October 23, 2020, the registrant had a total of 2,780,517 post-split shares of Common Stock outstanding.

 

 

Explanatory Note:

 

On September 29, 2020, the Company completed a 1-for-400 reverse stock split. All shares and per share amounts in this Form 10-Q give retroactive effect to the reverse stock split as if the stock split had occurred prior to the applicable reporting period

 

 

 

 

     

 

 

MOBIQUITY TECHNOLOGIES, INC.

 

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

 

    PAGE  
PART I. FINANCIAL INFORMATION     3  
         
Item 1. Financial Statements     3  
         
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations     28  
         
Item 3 Quantitative and Qualitative Disclosures     33  
         
Item 4. Controls and Procedures     33  
         
PART II. OTHER INFORMATION     34  
         
Item 1. Legal Proceedings     34  
         
Item la. Risk Factors     34  
         
Item 2. Changes in Securities     34  
         
Item 3. Defaults Upon Senior Securities     35  
         
Item 4. Mine Safety Disclosures     35  
         
Item 5. Other Information     35  
         
Item 6. Exhibits and Reports on Form 8-K     35  
         
SIGNATURES     38  

 

 

 

  2  

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Mobiquity Technology, Inc.

Condensed Consolidated Balance Sheets

 

 

    September 30,     December 31,  
    2020     2019  
    unaudited        
Assets                
Current Assets                
Cash   $ 539,757     $ 1,240,064  
Accounts receivable, net     1,793,162       3,611,378  
Prepaid expenses and other current assets     34,200       20,200  
Total Current Assets     2,367,119       4,871,642  
                 
Property and equipment (net of accumulated depreciation of $10,785 and $6,364, respectively)     23,278       21,100  
Goodwill     1,352,865       1,352,865  
Intangibles assets (net of accumulated amortization of $3,505,738 and $1,555,186, respectively)     9,497,938       11,448,490  
                 
Other assets                
Security deposits     9,000       9,000  
Investment in corporate stock     67       3,100  
                 
Total Assets   $ 13,250,267     $ 17,706,197  
                 
Liabilities and Stockholders' Equity                
Current Liabilities                
Accounts payable   $ 2,328,689     $ 2,958,108  
Accrued expenses     1,046,937       960,734  
Notes payable     839,353       566,250  
Total Current Liabilities     4,214,979       4,485,092  
                 
Long term portion convertible notes, net     2,452,000       2,300,000  
                 
Total Liabilities     6,666,979       6,785,092  
                 
Stockholders' Deficit                
AAA Preferred stock; 4,930,000 and 5,000,000 authorized; $0.0001 par value 56,413 and 46,413 shares issued and outstanding at September 30, 2020 and December 31, 2019     868,869       714,869  
Preferred stock Series C; $.0001 par value; 1,500 shares authorized 1,500 and 1,500 shares issued and outstanding at September 30, 2020 and December 31, 2019     15,000       15,000  
Preferred stock Series E; 70,000 authorized; $80 par value 61,688 and 65,625 shares issued and outstanding at September 30, 2020 and December 31, 2019     4,935,040       5,250,000  
Common stock: 100,000,000 authorized; $0.0001 par value 2,761,183 and 2,335,792 shares issued and outstanding at September 30, 2020 and December 31, 2019     278       234  
Treasury stock $36.00 par value 37,500 and 37,500 shares outstanding at September 30, 2020 and December 31, 2019     (1,350,000 )     (1,350,000 )
Additional paid in capital     184,231,046       177,427,524  
Accumulated deficit     (182,116,945 )     (171,136,522 )
Total Stockholders' Equity     6,583,288       10,921,105  
Total Liabilities and Stockholders' Equity   $ 13,250,267     $ 17,706,197  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

 

 

  3  

 

 

Mobiquity Technology, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

 

 

   

Three Months

Ended September 30,

   

Nine Months

Ended September 30,

 
    2020     2019     2020     2019  
                         
Revenue   $ 1,429,696     $ 2,800,174     $ 3,032,064     $ 6,647,668  
                                 
Cost of Revenues     952,779       1,669,245       2,612,690       3,830,389  
                                 
Gross Profit     476,917       1,130,929       419,374       2,817,279  
                                 
Operating Expenses                                
Selling, general and administrative     1,527,229       1,300,556       4,676,920       6,562,645  
Salaries     496,564       860,855       2,005,216       2,518,238  
Stock based compensation     54,589       1,880,000       1,331,459       6,599,000  
Total Operating Expenses     2,078,382       4,041,411       8,013,595       15,679,883  
                                 
Loss from operations     (1,601,465 )     (2,910,482 )     (7,594,221 )     (12,862,604 )
                                 
Other Income (Expenses)                                
Interest Expense     (201,047 )     (136,542 )     (532,475 )     (154,934 )
Acquisition expense     –       –       –       (2,970,364 )
Warrant proceeds     –       350,000       –       350,000  
Warrant expense     662,758       (486,150 )     63,864       (15,877,423 )
Unrealized holding gains arising during period     –       1,459,316       –       (291,227 )
Loss on sale of investments     –       (2,141,221 )     –       (2,458,125 )
Loss on sale of company stock     (2,821,393 )     (350,000 )     (2,914,558 )     (350,000 )
Total Other Income (Expense)     (2,359,682 )     (1,304,597 )     (3,383,169 )     (21,752,073 )
                                 
Loss from continuing operations   $ (3,961,147 )   $ (4,215,079 )   $ (10,977,390 )   $ (34,614,677 )
                                 
Other Comprehensive Income                                
Unrealized holding gain (loss) arising during period     (23 )     –       (3,033 )     –  
                                 
Net Comprehensive Loss   $ (3,961,170 )   $ (4,215,079 )   $ (10,980,423 )   $ (34,614,677 )
                                 
Net Comprehensive Loss Per Common Share:                                
For continued operations, basic and diluted   $ (1.43 )  
$ 		(2.12 )   $ (3.99 )   $ (19.39 )
                                 
Weighted Average Common Shares Outstanding, basic and diluted     2,761,183       1,984,617       2,753,446       1,784,896  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

 

 

  4  

 

 

Mobiquity Technology, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

 

    AAAA     Mezzanine     Series E Preferred Stock     Series C Preferred Stock              
    Preferred Stock     Preferred Stock     Preferred Stock     Preferred Stock     Common Stock  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  
Balance, at January 1, 2020     –     $ –       46,413     $ 714,869       65,625     $ 5,250,000       1,500     $ 15,000       2,335,792     $ 234  
Common stock issued for services     –       –       –       –       –       –       –       –       14,500       2  
Common stock issued for note conversion     –       –       –       –       –       –       –       –       1,919          
Warrant conversions     –       –       –       –       –       –       –       –       18,443       –  
Preferred stock series E     –       –       –       –       (3,937 )     (314,960 )     –       –       9,843       1  
Net Loss     –       –       –       –       –       –       –       –       –       –  
Balance, at March 31, 2020     –     $ –       46,413     $ 714,869       61,688     $ 4,935,040       1,500     $ 15,000       2,380,497     $ 237  
Common stock issued for services     –       –       –       –       –       –       –       –       (750 )     (0 )
Common stock issued for note conversion     –       –       –       –       –       –       –       –       –       –  
Warrant conversions     –       –       –       –       –       –       –       –       44,082       3  
Stock based compensation     –       –       –       –       –       –       –       –       –       –  
Mezzanine shares     –       –       10,000       154,000       –       –       –       –       –       –  
Warrants issued     –       –       –       –       –       –       –       –       –       –  
Net Loss     –       –       –       –       –       –       –       –       –       –  
Balance, at June 30, 2020     –     $ –       56,413     $ 868,869       61,688     $ 4,935,040       1,500     $ 15,000       2,423,829     $ 240  
Common stock issued for services     –       –       –       –       –       –       –       –       11,875       1  
Common stock issued for note conversion     –       –       –       –       –       –       –       –       –       –  
Common stock purchased     –       –       –       –       –       –       –       –       310,784       36  
Warrant conversions     –       –       –       –       –       –       –       –       14,695       1  
Stock based compensation     –       –       –       –       –       –       –       –       –       –  
Warrants issued     –       –       –       –       –       –       –       –       –       –  
Net Loss     –       –       –       –       –       –       –       –       –       –  
Balance, at September 30, 2020     –     $ –       56,413     $ 868,869       61,688     $ 4,935,040       1,500     $ 15,000       2,761,183     $ 278  

 

 

    AAAA     Mezzanine     Series E Preferred Stock     Series C Preferred Stock              
    Preferred Stock     Preferred Stock     Preferred Stock     Preferred Stock     Common Stock  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  
Balance, at January 1, 2019     800     $ 8,000       1,090,588       11,552,513       –     $ –       1,500     $ 15,000       1,572,667     $ 157  
Common stock issued for services     –       –       –       –       –       –       –       –       397       0  
Purchase of common stock     –       –       –       –       –       –       –       –       67,859       7  
Exchange shares     –       –       (141,356 )     (1,955,686 )     –       –       –       –       40,339       4  
Warrant conversions     –       –       –       –       –       –       –       –       1,792       0  
Warrants issued     –       –       –       –       –       –       –       –       –       –  
Net Loss     –       –       –       –       –       –       –       –       –       –  
Balance, at March 31, 2019     800     $ 8,000       949,232     $ 9,596,827       –     $ –       1,500     $ 15,000       1,683,055     $ 168  
Exchange shares     (800 )   $ (8,000 )     (5,000 )     277,500       –       –       –       –       196,250       20  
Purchase of common stock     –       –       –       –       –       –       –       –       4,375       4  
Stock based compensation     –       –       –       –       –       –       –       –       –       –  
Cash collected from sub-receivable     –       –       –       –       –       –       –       –       –       –  
Warrant conversion     –       –       –       –       –       –       –       –       510       0  
Warrants issued     –       –       –       –       –       –       –       –       –       –  
Net Loss     –       –       –       –       –       –       –     $ –       –       –  
Balance, at June 30, 2019     –     $ –       944,232     $ 9,874,327       –     $ –       1,500     $ 15,000       1,884,190     $ 192  
Issuance of Preferred stock Series E     –       –       –       –       65,625       5,250,000       –       –       –       –  
Stock based compensation     –       –       –       –       –       –       –       –       –       –  
Common stock issued for services     –       –       –       –       –       –       –       –       1,190       0  
Purchase of common stock     –       –       –       –       –       –       –       –       8,750       1  
Exchange shares     –       –       (70,000 )     (550,000 )     –       –       –       –       67,500       7  
Stock based compensation                                                                                
Acquisition of Treasury shares                                                                                
Warrant conversions     –       –       –       –       –       –       –       –       17,500       2  
Warrants issued     –       –       –       –       –       –       –       –       –       –  
Net Loss     –       –       –       –       –       –       –     $ –       –       –  
Balance, at September 30, 2019     –     $ –       874,232     $ 9,324,327       65,625     $ 5,250,000       1,500     $ 15,000       1,979,130     $ 202  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

  5  

 

 

Mobiquity Technology, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (continued)

 

 

    Additional           Non                       Total  
    Paid-in     Subscription     Controlling     Treasury Shares     Accumulated     Stockholders'  
    Capital     Receivable     Interest     Shares     Amount     Deficit     Deficit  
Balance, at January 1, 2020   $ 177,427,524     $ –     $ –       37,500     $ (1,350,000 )   $ (171,136,522 )   $ 10,921,105  
Common stock issued for services     384,000       –       –       –       –       –       384,002  
Common stock issued for note conversion     30,694       –       –       –       –       –       30,694  
Warrant conversions     403,267       –       –       –       –       –       403,267  
Preferred stock series E     314,959       –       –       –       –       –       (0 )
Net Loss     –       –       –       –       –       (2,435,793 )     (2,435,793 )
Balance, at March 31, 2020   $ 178,560,444     $ –     $ –       37,500     $ (1,350,000 )   $ (173,572,315 )   $ 9,303,275  
Common stock issued for services     (9,000 )     –       –       –       –       –       (9,000 )
Common stock issued for note conversion     –       –       –       –       –       –       –  
Warrant conversions     352,652       –       –       –       –       –       352,655  
Stock based compensation     1,276,870       –       –       –       –       –       1,276,870  
Mezzanine shares     (154,000 )     –       –       –       –       –       –  
Warrants issued     598,894       –       –       –       –       –       598,894  
Net Loss     –       –       –       –       –       (4,583,460 )     (4,583,460 )
Balance, at June 30, 2020     180,625,860     $ –     $ –       37,500     $ (1,350,000 )   $ (178,155,775 )   $ 6,939,234  
Common stock issued for services     94,998       –       –       –       –       –       94,999  
Common stock issued for note conversion     –       –       –       –       –       –       –  
Common stock purchased     3,338,049       –       –       –       –       –       3,338,085  
Warrant conversions     117,550       –       –       –       –       –       117,551  
Stock based compensation     54,589       –       –       –       –       –       54,589  
Warrants issued     –       –       –       –       –       –       –  
Net Loss     –       –       –       –       –       (3,961,170 )     (3,961,170 )
Balance, at September 30, 2020     184,231,046     $ –     $ –       37,500     $ (1,350,000 )   $ (182,116,945 )   $ 6,583,288  

 

 

    Additional           Non                       Total  
    Paid-in     Subscription     Controlling     Treasury Shares     Accumulated     Stockholders'  
    Capital     Receivable     Interest     Shares     Amount     Deficit     Deficit  
Balance, at January 1, 2019   $ 129,286,167     $ –     $ 663,478       –     $ –     $ (127,108,103 )   $ 14,417,212  
Common stock issued for services     29,942       –       –       –       –       –       29,942  
Purchase of common stock     1,876,287       (917,500 )     –       –       –       –       958,794  
Exchange shares     1,954,072       –       –       –       –       –       –  
Warrant conversions     (72 )     –       –       –       –       –       (72 )
Warrants issued     3,745,677       –       –       –       –       –       3,745,677  
Net Loss     –       –       (1,367,425 )     –       –       (1,591,500 )     (2,958,925 )
Balance, at March 31, 2019   $ 136,892,073     $ (917,500 )   $ (703,947 )     –       –     $ (128,699,603 )   $ 16,192,628  
Exchange shares     (242,350 )     –       –       –       –       –       27,170  
Purchase of common stock     1,333,748       –       –       –       –       –       1,333,752  
Stock based compensation     4,719,000       –       –       –       –       –       4,719,000  
Cash collected from sub-receivable     –       917,500       –       –       –       –       917,500  
Warrant conversion     (20 )     –       –       –       –       –       –  
Warrants issued     15,391,273       –       –       –       –       –       15,391,273  
Net Loss     –       –       703,947       –       –       (28,145,408 )     (27,441,461 )
Balance, at June 30, 2019   $ 158,093,724     $ –     $ –       –     $ –     $ (156,845,011 )   $ 11,139,862  
Issuance of Preferred stock Series E     –       –       –       –       –       –       5,250,000  
Stock based compensation     –       –       –       –       –       –       –  
Common stock issued for services     47,571       –       –       –       –       –       47,571  
Purchase of common stock     279,649       –       –       –       –       –       279,650  
Exchange shares     529,825       –       –       –       –       –       (20,168 )
Stock based compensation     1,880,000                               –       –       1,880,000  
Acquisition of Treasury shares             –       –       37,500       (1,350,000 )             (1,350,000 )
Warrant conversions     349,300       –       –       –       –       –       349,302  
Warrants issued     486,150       –       –       –       –       –       486,150  
Net Loss     –       –       –       –       –       (4,877,769 )     (4,877,769 )
Balance, at September 30, 2019   $ 161,666,219     $ –     $ –       37,500     $ (1,350,000 )   $ (161,722,780 )   $ 13,184,598  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

  6  

 

 

Mobiquity Technology, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

           

 

    Nine Months Ended  
    September 30,  
    2020     2019  
Cash Flows from Operating Activities:                
Net loss   $ (10,980,423 )   $ (34,614,677 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expense     4,421       3,012  
Amortization- Intangible Assets     1,950,552       374,064  
Allowance for uncollectible receivables     306,000       –  
Common stock issued for services     470,000       –  
Warrant expense     1,472,368       4,095,677  
Stock-based compensation     1,331,459       6,599,000  
Changes in operating assets and liabilities                
Accounts receivable     1,512,216       (877,973 )
Prepaid expenses and other assets     (14,000 )     –  
Accounts payable     (629,419 )     127,870  
Accrued expenses and other current liabilities     (95,310 )     (94,408 )
Accrued interest     181,513       8,880  
Total Adjustments     6,489,800       10,236,122  
Net Cash in Operating activities     (4,490,623 )     (24,378,555 )
                 
Cash Flows from Investing Activities                
Common stock issued for cash, net     3,338,084       3,529,500  
Purchase of property and equipment     (6,599 )     (11,419 )
Note conversion to common stock     30,695       –  
Proceeds from the sale of investments     –       166,800  
Acquisition expense     –       (2,970,364 )
Issuance of note on purchase of subsidiary     –       7,512,500  
Issuance of Series E Preferred stock     –       5,250,000  
Addition to Goodwill and Intangibles     –       (2,588,929 )
Net cash used in Investing Activities     3,362,180       10,888,088  
                 
Cash Flows from Financing Activities                
Proceeds from the issuance of notes, net     915,842       2,249,004  
Common stock issued for services     –       77,577  
Note conversion to Series E Preferred stock     –       (5,235,224 )
Loss on sale of investments     –       2,458,125  
AAAA preferred stock common to common stock     –       (17,475 )
 Warrant expense     –       15,877,423  
Cash paid on bank notes     (490,739 )     (1,640,567 )
Net cash used in Investing Activities     425,103       13,768,863  
                 
Net change in Cash and Cash Equivalents     (703,340 )     278,396  
Cash and Cash Equivalents, Beginning of period     1,240,064       624,338  
Non-controlling interest     –       (663,478 )
Unrealized holding change on securities     3,033       291,227  
Cash and Cash Equivalents, end of period   $ 539,757     $ 530,483  
                 
Supplemental Disclosure Information                
Cash paid for interest   $ 340,951     $ 146,054  
Cash paid for taxes   $ 14,869     $ 256,787  
                 
Non-cash Disclosures:                
Common stock issued for interest     –       –  
Conversion of notes and interest into AAA & AAAA Preferred and Common Stock     –       –  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

  7  

 

 

MOBIQUITY TECHNOLOGIES, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2020

(Unaudited)

 

 

NOTE 1: ORGANIZATION AND GOING CONCERN

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of September 30, 2020, the Company had an accumulated deficit of $182,116,945. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. We may continue to incur operating and net losses in future periods. These losses may increase, and we may never achieve profitability for a variety of reasons, including increased competition, decreased growth in the unified advertising industry and other factors described elsewhere in the “Risk Factors” section of our form 10-k for the year ended December 31, 2019. If we cannot achieve sustained profitability, our stockholders may lose all or a portion of their investment in our company.

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The recently acquired Advangelists LLC has also incurred losses and experienced negative cash flows from operations during the most recent fiscal year. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional capital through private and public offerings of its common stock, and the attainment of profitable operations. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Impacts of COVID-19 to Business and the general economy

  

COVID -19 has recently caused a material and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will likely experience a reduction in current projects, longer sales and collection cycles, deferral or delay of purchase commitments for our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially adversely affect revenue and our ability to remain a going concern.

 

 

 

 

  8  

 

 

In the event we remain a going concern, the impacts of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and then general economy, are currently not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing events, among other modifications. We lost millions of dollars in orders with organization directly related the COVID-19 pandemic. We have observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, although we do anticipate it to negatively impact our financial results during fiscal year 2020.

 

REVERSE STOCK SPLIT - On September 29, 2020, the Company completed a 1-for-400 reverse stock split. All shares and per share amounts in this Form 10-Q give retroactive effect to the reverse stock split as if the stock split had occurred prior to the applicable reporting period

 

PRINCIPLES OF CONSOLIDATION - The accompanying condensed consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing & Promotions, Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc. and its wholly- owned subsidiary, Advangelists, LLC, which subsidiary was 48% owned in the quarter ended March 31, 2019. All intercompany accounts and transactions have been eliminated in consolidation.

 

The Condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, the Condensed consolidated statements of operations for the three months and nine months ended September 30, 2020 and 2019, the Condensed consolidated statements of stockholders’ equity for the nine months ended September 30, 2020 and 2019 and the Condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 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 September 30, 2020, results of operations for the three months and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019. All such adjustments are of a normal recurring nature. The results of operations and cash flows for the nine months ended September 30, 2020 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 consolidated financial statements.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS – Mobiquity Technologies, Inc., a New York corporation (the “Company”), is the parent company of its operating subsidiaries; Mobiquity Networks, Inc. (“Mobiquity Networks”) and Advangelists, LLC (Advangelists). Mobiquity Networks has evolved and grown from a mobile advertising technology company focused on driving Foot-traffic throughout its indoor network, into a next generation location data intelligence company. Mobiquity Networks provides precise unique, at-scale location data and insights on consumer’s real-world behavior and trends for use in marketing and research. Mobiquity Networks provides one of the most accurate and scaled solution for mobile data collection and analysis, utilizing multiple geo-location technologies. Mobiquity Networks is seeking to implement several new revenue streams from its data collection and analysis, including, but not limited to; Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research. Advangelists is a developer of advertising and marketing technology focused on the creation, automation, and maintenance of an advertising technology operating system (or ATOS). Advangelists’ ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages and runs digital advertising campaigns.

 

 

 

 

  9  

 

 

The ATOS platform:

 

· creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of ad time slots (known as digital real estate) targeted at users while engaged on their connected TV, computer or mobile device, and
   
· gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by the using ads in both image and video formats (known as rich media) to increase their customer base and foot traffic to their physical locations.

 

Advangelists’ marketplace engages with approximately 20 billion advertisement opportunities per day. Our sales and marketing strategy is focused on creating a de-fragmented operating system that makes it considerably more efficient and effective for advertisers and publishers to transact with each other. Our goal is to create a standardized and transparent medium.

 

Advangelists' technology is proprietary and has all been developed internally. We own all of our technology.

 

Recent Developments and Employment Agreement with Deepanker Katyal

 

Deepanker Katyal’s employment agreement which commenced December 7, 2018 has a term of three years. Mr. Katyal is required to devote at least 40 hours per week pursuant to his responsibility as CEO of Advangelists. The agreement provides for full indemnification and participation in all benefit plans, programs and perquisites as are generally provided by the Company to its employees, including medical, dental, life insurance, disability and 401(k) participation. The agreement provides for termination for cause after giving employee 30 days’ prior written notice. The agreement provides for termination by the Company without cause after 60 days’ prior written notice with severance pay as described in his agreement. His employment agreement also provides for termination by disability for a period of more than six consecutive months in any 12-month period, termination by employee for good reason as defined in the agreement and restrictive covenants for a period of one year following the termination date.

 

Effective as of September 13, 2019, Mobiquity Technologies, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “GTECH SPA”) with GBT Technologies, Inc. (“GTECH”), pursuant to which the Company acquired from GTECH 15,000,000 shares of the Company’s common stock that was owned by GTECH (the “MOBQ Shares”). In consideration for the purchase of the MOBQ Shares from GTECH, the Company transferred to GTECH 110,000 shares of GTECH’s common stock that was owned by the Company.

 

On September 13, 2019, Advangelists, LLC (“AVNG”), a wholly-owned subsidiary of the Company, entered into Amendment No. 1 to Employment Agreement (the “Katyal Amendment”) with Deepankar Katyal, the CEO of AVNG, which amends Mr. Katyal’s original employment agreement (the “Original Katyal Agreement”), dated as of December 7, 2018. Pursuant to the Katyal Amendment, among other things, (i) the Company agreed to indemnify Mr. Katyal to the extent provided in the Company’s Certificate of Incorporation (the “Certificate”) and By-laws and to include Mr. Katyal as an insured under the Company’s applicable directors’ and officers’ liability insurance policies; (ii) AVNG agreed to provide Mr. Katyal with an automobile allowance of $550.00 per month, and (iii) the non-compete restrictive covenants contained in the Original Katyal Agreement ceased. In addition, the Katyal Amendment provides for the Company to redeem the shares of the Company’s Class B Preferred Stock (the “Class B Stock”) owned by Mr. Katyal, and entitles Mr. Katyal to the following additional compensation:

 

  · A bonus, payable in cash or common stock of the Company, equal to 1% of the Company’s gross revenue (the “Gross Revenue”) for each completed fiscal month during the 2019 fiscal year, subject to certain revenue thresholds as set forth in the Katyal Amendment;

 

  · Commissions equal to 10% of the Net Revenues (as defined in the Katyal Amendment) of all New Katyal Managed Accounts (as defined in the Katyal Amendment);

 

  · Options to purchase 37,500 shares of the Company’s common stock at an exercise price of $36.00 per share, of which 25,000 vest on the date of the Katyal Amendment, and of which 12,500 vest on the one year anniversary of the Katyal Amendment, all shares post reverse stock split.

 

 

 

  10  

 

 

In connection with the Katyal Amendment, on September 13, 2019, the Company entered into a Class B Preferred stock Redemption Agreement (the “Katyal Redemption Agreement”), pursuant to which the Company redeemed the Company’s Class B Stock owned by Katyal.

 

On September 13, 2019, AVNG entered into Amendment No. 1 to Employment Agreement (the “Katyal Amendment”) with Lokesh Mehta, which amends Mr. Mehta’s original employment agreement (the “Original Mehta Agreement”), dated as of December 7, 2018. Pursuant to the Mehta Amendment, among other things, (i) the Company agreed to indemnify Mr. Mehta to the extent provided in the Company’s Certificate and By-laws and to include Mr. Mehta as an insured under the Company’s applicable directors’ and officers’ liability insurance policies; (ii) AVNG agreed to provide Mr. Mehta with an automobile allowance of $550.00 per month, and (iii) the non-compete restrictive covenants contained in the Original Mehta Agreement ceased. In addition, the Mehta Amendment provides for the Company to redeem the shares of the Company’s Class B Preferred Stock (the “Class B Stock”) owned by Mr. Mehta, and entitles Mr. Mehta to the following additional compensation:

 

  · A bonus, payable in cash or common stock of the Company, equal to 1% of the Company’s Gross Revenue for each completed fiscal month during the 2019 fiscal year, subject to certain revenue thresholds as set forth in the Mehta Amendment:

 

  · Commissions equal to 5% of the Net Revenues (as defined in the Mehta Amendment) of all New Katyal Managed Accounts (as defined in the Katyal Amendment);

 

  · Options to purchase 37,500 shares of the Company’s common stock at an exercise price of $36.00 per share, of which 25,000 vest on the date of the Mehta Amendment, and of which 12,500 vest on the one year anniversary of the Mehta Amendment, all shares post reverse split.

 

In connection with the Mehta Amendment, on September 13, 2019, the Company entered into a Class B Preferred Stock Redemption Agreement (the “Mehta Redemption Agreement”), pursuant to which the Company redeemed the Company’s Class B Stock owned by Mehta in exchange for an employment agreement and other good and valuable consideration including an automobile allowance.

 

Risks Related to Our Financial Results and Financing Plans

 

Management has plans to address the Company’s financial situation as follows:

 

In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan related to technology. Management will continue to seek out equity and/or debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders and investors will continue to advance capital to the Company or that the new business operations will be profitable.

 

In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s efforts to raise equity and debt at acceptable terms or that the planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.

 

 

 

 

  11  

 

 

Related Parties

 

Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. We consider the following individuals / companies to be related parties:

 

Dean Julia – Principal Executive Officer President and Director

Sean McDonnell – Chief Financial Officer

Sean Trepeta – Board of Directors

Deepankar Katyal – Principal Officer

Dr. Eugene Salkind – Board of Directors

 

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, convertible debt, approximate their fair values because of the short maturity of these instruments for the nine months ended September 30, 2020 and for the years ended December 31, 2019.

 

    Level 1     Level 2     Level 3     Total  
Fair value of derivatives   $ –     $ –     $ –     $ –  

 

 

 

 

  12  

 

 

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. 

  

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 September 30, 2020, and December 31, 2019, the balances are $539,757 and $1,240,064, respectively.

 

CONCENTRATION OF CREDIT RISK - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and cash and cash equivalents.

 

Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, consequently, believes that its receivable credit risk exposure is limited. Our current receivables at December 31, 2019 consist of 47% held by four of our largest customers. Our September 30, 2020 receivables consist of 48% held by four of our largest customers.

 

The Company places its temporary cash investments with high credit quality financial institutions. At times, the Company maintains bank account balances, which exceed FDIC limits. As of September 30, 2020, and December 31, 2019, the Company exceeded FDIC limits by $0 and $749,037, respectively.

 

REVENUE RECOGNITION – On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), to update the financial reporting requirements for revenue recognition. Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance became effective for the Company beginning on January 1, 2018, and entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company adopted this standard using the modified retrospective approach on January 1, 2018.

 

In preparation for adoption of the standard, the Company evaluated each of the five steps in Topic 606, which are as follows: 1) Identify the contract with the customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations; and 5) Recognize revenue when (or as) performance obligations are satisfied.

 

Reported revenue was not affected materially in any period due to the adoption of ASC Topic 606 because: (1) the Company expects to identify similar performance obligations under Topic 606 as compared with deliverables and separate units of account previously identified; (2) the Company has determined the transaction price to be consistent; and (3) the Company records revenue at the same point in time, upon delivery of services, under both ASC Topic 605 and Topic 606, as applicable under the terms of the contract with the customer. Additionally, the Company does not expect the accounting for fulfillment costs or costs incurred to obtain a contract to be affected materially in any period due to the adoption of Topic 606. 

 

 

 

 

  13  

 

 

ALLOWANCE FOR DOUBTFUL ACCOUNTS - Management must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of September 30, 2020, and December 31, 2019, allowance for doubtful accounts were $386,600 and $80,600, respectively. It is currently unclear how customer payments will be affected by the COVID-19 crisis, although we are seeing a significant slowdown in accounts receivable collections.

 

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation is expensed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are being amortized using the straight-line method over the estimated useful lives of the related assets or the remaining term of the lease. The costs of additions and improvements, which substantially extend the useful life of a particular asset, are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the account and the gain or loss on disposition is reflected in operating income.

 

LONG LIVED ASSETS – In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. The Company recognized no impairment losses for the period ended September 30, 2020.

 

Transactions with major customers

 

During the nine months ended September 30, 2020, four customers accounted for approximately 48% of revenues as compared to 52% of revenues for four customers for the nine months ended September 30, 2019.

 

ADVERTISING COSTS - Advertising costs are expensed as incurred. For the nine months ended September 30, 2020 and September 30, 2019, there were advertising costs of $929 and $9,746, respectively.

 

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 7 “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.

 

  

 

 

  14  

 

 

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

 

We adopted the lease standard ACS 842 effective January 1, 2019 and have elected to use January 1, 2019 as our date of initial application. Consequently, financial information will not be updated, and disclosures required under the new standard will not be provided for periods presented before January 1, 2019 as these prior periods conform to the Accounting Standards Codification 840. We elected the package of practical expedients permitted under the transition guidance within the new standard. By adopting these practical expedients, we were not required to reassess (1) whether an existing contract meets the definition of a lease; (2) the lease classification for existing leases; or (3) costs previously capitalized as initial direct costs. As of December 10, 2019, we are not a lessor or lessee under any lease arrangements.

 

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or result of operations.

 

NET LOSS PER SHARE

 

Basic net loss per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants. The number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted loss per common share calculation was approximately 769,794 because they are anti-dilutive, as a result of a net loss for the nine months ended September 30, 2020.

 

NOTE 3: ACQUISITION OF ADVANGELISTS, LLC

 

In December 2018, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with Glen Eagles Acquisition LP (“GEAL”) and Mobiquity Technologies, Inc. purchased of all the issued and outstanding capital stock and membership interest of Advangelists LLC. The Company closed and completed the acquisition on December 6, 2018.

 

The purchase price paid includes the assumption of certain assets, liabilities and contracts associated with Advangelists, LLC, at closing the sellers received $500,000 cash, warrants and stock and the issuance of a nineteen- month promissory note in aggregate principal amount of $9,500,000.

 

 

 

 

  15  

 

 

The following table summarizes the allocation of the purchase price as of the acquisition date:

 

Purchase Price

 

$9,500,000 Promissory note   $ 9,500,000  
Cash     500,000  
Mobiquity Technologies, Inc. warrants     3,844,444  
Gopher Protocol Inc. common stock     6,155,556  
    $ 20,000,000  

 

On April 30, 2019, the Company entered into a Membership Interest Purchase Agreement with GEAL, which the Company acquired from GEAL 3% of the membership interest of Advangelists, LLC for $600,000 in cash. Giving the Company a 51% interest.

 

On May 8, 2019, the Company entered into a Membership Purchase Agreement with Gopher Protocol, Inc. to acquire the 49% interest of Advangelists, LLC which it contemporaneously purchased from GEAL. The purchase price was paid by the issuance of a $7,512,500 promissory note. As a result of the transaction, the Company owns 100% of Advangelists LLC.

 

On September 13, 2019, the Company repurchased fifteen million shares of common stock for the aggregate by exchanging 110,000 shares of GTCH common stock held for investment purposes.

 

On September 13, 2019, Dr. Gene Salkind, is a related party who is a director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible promissory notes (the “Note”) and loaned to the Company an aggregate of $2,300,000 (the “Loans”) on a secured basis.

 

The Notes bear interest at a fixed rate of 15% per annum, computed based on a 360-day year of twelve 30-day months and will be payable monthly in arrears. Interest on the Notes is payable in cash, or, at the Lenders’ option, in shares of the Company’s common stock. The principal amount due under the Notes will be payable on September 30, 2029, unless earlier converted pursuant to the terms of the Notes.

 

Subject to the Company obtaining prior approval from the Company’s shareholders for the issuance of shares of common stock upon conversion of the Notes, if and to the extent required by the New York Business Corporation Law, the Notes will be convertible into equity of the Company upon the following events on the following terms:

 

  · At any time at the option of the Lenders, the outstanding principal under the Notes will be converted into shares of common stock of the Company at a conversion price of $32.00 per post-split share (the “Conversion Price”).

 

  · at any time that the trailing thirty (30) day volume weighted average price per share (as more particularly described in the Notes) of the Company’s common stock is above $400.00 per share, until the Notes are no longer outstanding, the Company may convert the entire unpaid un-converted principal amount of the Notes, plus all accrued and unpaid interest thereon, into shares of the Company’s common stock at the Conversion Price.

 

The Notes contain customary events of default, which, if uncured, entitle the Lenders thereof to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, their Notes.

 

 

 

 

  16  

 

 

In connection with the subscription of the Notes, the Company issued to each Lender a warrant to purchase 400 post-split shares of the Company’s common stock for every two shares of common stock issuable upon conversion of the Notes, at an exercise price of $48.00 per p0ost-split share (the “Lender Warrants”).

 

On September 13, 2019, Advangelists, LLC, a wholly-owned subsidiary of the Company (“AVNG”), entered into Amendment No. 1 to Employment Agreement (the “Katyal Amendment”) with Deepankar Katyal, who is a related party and the CEO of AVNG, which amends Mr. Katyal’s original employment agreement (the “Original Katyal Agreement”), dated as of December 7, 2018. Pursuant to the Katyal Amendment, among other things, (i) the Company agreed to indemnify Mr. Katyal to the extent provided in the Company’s Certificate of Incorporation (the “Certificate”) and By-laws and to include Mr. Katyal as an insured under the Company’s applicable directors’ and officers’ liability insurance policies; (ii) AVNG agreed to provide Mr. Katyal with an automobile allowance of $550.00 per month, and (iii) the non-compete restrictive covenants contained in the Original Katyal Agreement ceased. In addition, the Katyal Amendment provides for the Company to redeem the shares of the Company’s Class B Preferred Stock (the “Class B Stock”) owned by Mr. Katyal, and entitles Mr. Katyal to the following additional compensation:

 

  · A bonus, payable in cash or common stock of the Company, equal to 1% of the Company’s gross revenue (the “Gross Revenue”) for each completed fiscal month during the 2019 fiscal year, subject to certain revenue thresholds as set forth in the Katyal Amendment;

 

  · Commissions equal to 10% of the Net Revenues (as defined in the Katyal Amendment) of all New Katyal Managed Accounts (as defined in the Katyal Amendment);

 

  · Options to purchase 37,500 post-split shares of the Company’s common stock at an exercise price of $36.00 per share, of which 25,000 vest on the date of the Katyal Amendment, and of which 12,500 vest on the one year anniversary of the Katyal Amendment, post reverse split figures.

 

In connection with the Katyal Amendment, on September 13, 2019, the Company entered into a Class B Preferred stock Redemption Agreement (the “Katyal Redemption Agreement”), pursuant to which the Company redeemed the Company’s Class B Stock owned by Katyal.

 

In May 2019, the Company assumed a promissory note (the “AVNG Note”) payable to Deepankar Katyal (the “Payee”), as representative of the former owners of AVNG, which at the time of assumption had a remaining principal balance of $7,512,500. Simultaneously with the assumption of the AVNG Note, the AVNG Note was amended and restated as disclosed in the May 8-K (the “First Amended AVNG Note”). Effective as of September 13, 2019, the Company and Payee entered into a Second Amended and Restated Promissory Note (the “Second Amended AVNG Note”), in the principal amount of $6,750,000, pursuant to which the repayment terms under the First Amended AVNG Note were amended and restated as follows:

 

  · $5,250,000 of the principal balance remaining due under the Second Amended AVNG Note is payable by the delivery of (i) 65,625 shares of the Company’s newly designated Class E Preferred Stock, which is convertible into 164,063 post-split shares the Company’s common stock, and (ii) common stock purchase warrants to purchase 82,032 post-split shares of the Company’s common stock, at an exercise price of $48.00 per share (the “AVNG Warrant”).

 

  · $1,530,000 of the principal balance, inclusive of all accrued and unpaid interest, remaining due under the Second Amended AVNG Note in three equal consecutive monthly installments of $510,000, commencing on September 15, 2019 and on the 15th day of each month thereafter until paid in full.

 

The Second Amended AVNG Note provides that upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class E Preferred Stock issuable pursuant to the terms of the Second Amended AVNG Note, and any shares of the Company’s common stock issued upon the conversion of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First Amended AVNG Note.

 

 

 

 

  17  

 

 

Merger

 

Mobiquity entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Glen Eagles Acquisition LP (“GEAL”) (which at the time owned 412,000 post-split shares of common stock of Mobiquity, equivalent to approximately 29.6% of the outstanding shares), AVNG Acquisition Sub, LLC (“Merger Sub”) and Advangelists, LLC (“Advangelists”) on November 20, 2018 which provided for Merger Sub to merge into Advangelists, with Advangelists as the surviving company following the merger.

 

On December 6, 2018, Mobiquity and the other parties to the Merger Agreement entered into the First Amendment to Agreement and Plan of Merger (the “Amendment”) which amended the Merger Agreement as follows:

 

  · The number of warrants to purchase shares of Mobiquity’s common stock issuable as part of the merger consideration was changed from 225,000 post-split shares to 269,385 post-split shares, and the exercise price of the warrants was changed from $36.00 per share to $56.00 per share; and

 

  · The number of shares of Gopher Protocol Inc.’s common stock to be transferred by Mobiquity as part of the merger consideration changed from 11,111,111 to 9,209,722 shares.

 

Under the Merger Agreement and the Amendment, in consideration for the Merger:

 

  · Mobiquity issued warrants for 269,384 post-split shares of Mobiquity common stock at an exercise price of $56.00 per share and, subject to the vesting threshold described below, Mobiquity transferred 9,209,722 shares of Gopher Protocol, Inc. common stock, to the pre-merger Advangelists members. The Gopher common stock was unvested at the time of transfer subject to vesting in February 2019 only if Advangelists’ combined revenues for the months of December 2018 and January 2019 were at least $250,000. The vesting threshold was met.
     
  · GEAL paid the pre-merger Advangelists members $10 million in cash. $500,000 was paid at closing and $9,500,000 will be paid under a promissory note that was issued at closing, in 19 monthly installments of $500,000 each, commencing on January 6, 2019.

  

The transactions contemplated by the Merger Agreement were consummated on December 7, 2018 upon the filing of a Certificate of Merger by Advangelists. As a result of the merger, Mobiquity owned 48% and GEAL owned 52% of Advangelists; and Mobiquity is the sole manager of, and controls, Advangelists at that time.

 

As a result of Mobiquity having 100% control over Advangelists as of December 31, 2018, ASC 810-10-05-3 states “that for LLCs with managing and non-managing members, a managing member is the functional equivalent of a general partner and a non-managing member is the functional equivalent of a limited partner. In this case, a reporting entity with an interest in an LLC (which is not a VIE) would likely apply the consolidation model for limited partnerships if the managing member has the right to make the significant operating and financial decisions of the LLC.” In this case Mobiquity has the right to make the significant operating and financial decisions of Advangelists resulting in consolidation of Advangelists. 

 

On April 30, 2019, the Company entered into a Membership Interest Purchase Agreement with GEAL, pursuant to which the Company acquired from GEAL 3% of the membership interests of Advangelists, for cash in the amount of $600,000 (the “Purchase Price”). The Purchase Price was paid by the Company to GEAL on May 3, 2019. As a result of the Transaction, the Company then owned 51% of the membership interests of Advangelists, with GEAL owning 49% of the membership interests of Advangelists.

 

 

 

 

  18  

 

 

On May 10, 2019, the Company entered into a Membership Purchase Agreement effective as of May 8, 2019 with Gopher Protocol, Inc. to acquire the 49% interest of Advangelists, which it contemporaneously purchased from GEAL. As a result of this transaction, the Company owns 100% of Advangelists’s Membership Interests.

 

The acquisition of the 49% of Advangelists membership interests was accomplished in a transaction involving Mobiquity, Glen Eagles Acquisition LP, and Gopher Protocol, Inc.

 

Recognized amount of identifiable assets acquired, liabilities assumed, and consideration expensed:

 

Financial assets:        
Cash and cash equivalents   $ 216,799  
Accounts receivable, net     2,679,698  
Property and equipment, net     20,335  
Intangible assets (a)     10,000,000  
Accounts payable and accrued liabilities     (2,871,673 )
Purchase price expensed     9,954,841  
    $ 20,000,000  

 

The ATOS platform:

 

· creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of ad time slots (known as digital real estate) targeted at users while engaged on their connected TV, computer or mobile device, and
   
· gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by the using ads in both image and video formats (known as rich media) to increase their customer base and foot traffic to their physical locations.

 

The Company tests goodwill for impairment at least annually on December 31st and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgement is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.

 

Our goodwill balance is not amortized to expense, instead it is tested for impairment at least annually. We perform our annual goodwill impairment analysis at the end of the fourth quarter. If events or indicators of impairment occur between annual impairment analyses, we perform an impairment analysis of goodwill at that date. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant asset. In testing for a potential impairment of goodwill, we: (1) verify there are no changes to our reporting units with goodwill balances; (2) allocate goodwill to our various reporting units to which the acquired goodwill relates; (3) determine the carrying value, or book value, of our reporting units, as some of the assets and liabilities related to each reporting unit are held by a corporate function; (4) estimate the fair value of each reporting unit using a discounted cash flow model; (5) reconcile the fair value of our reporting units in total to our market capitalization adjusted for a subjectively estimated control premium and other identifiable factors; (6) compare the fair value of each reporting unit to its carrying value; and (7) if the estimated fair value of a reporting unit is less than the carrying value, we must estimate the fair value of all identifiable assets and liabilities of that reporting unit, in a manner similar to a purchase price allocation for an acquired business to calculate the implied fair value of the reporting unit’s goodwill and recognize an impairment charge if the implied fair value of the reporting unit’s goodwill is less than the carrying value. There were no impairment charges during the year ended December 31, 2019 or the nine months ended September 30, 2020. 

 

 

 

  19  

 

 

Intangible Assets

 

At each balance sheet date herein, definite-lived intangible assets primarily consist of customer relationships which are being amortized over their estimated useful lives of five years.

 

The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they will be removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.

  

    Useful Lives   September 30, 2020     December 31,2019  
                 
Customer relationships   5 years   $ 3,003,676     $ 3,003,676  
ATOS Platform   5 years     10,000,000       10,000,000  
          13,003,676       13,003,676  
Less accumulated amortization         (3,505,738 )     (1,555,186 )
Net carrying value       $ 9,497,938     $ 11,448,490  

 

Future amortization, for the years ending December 31, is as follows:

 

2020     $ 650,184  
2021     $ 2,600,736  
2022     $ 2,600,736  
2023     $ 2,600,736  
2024     $ 1,045,546  
Thereafter     $ –  

 

NOTE 4: NOTES PAYABLE AND DERIVATIVE LIABILITIES

 

Summary of Notes payable:

 

   

September 30,

2020

   

December 31,

2019

 
Berg Notes (a)   $ –     $ 50,000  
Dr. Salkind, et al     2,550,000       2,550,000  
Small Business Administration (b)     415,842       –  
Business Capital Providers (c)     325,511       266,250  
                 
Total Debt     3,291,353       2,866,250  
Current portion of debt     839,353       566,250  
Long-term portion of debt   $ 2,452,000     $ 2,300,000  

 

 

  

  20  

 

 

  (a) Between August and December 2015, the Company borrowed $3,675,000 from accredited investors. These loans are due and payable the earlier of December 31, 2016 or the completion of an equity financing of at least $2,500,000. Upon the sale of the unsecured promissory notes, the Company issued $1 of principal, one share of common stock and a warrant to purchase one share of common stock at an exercise price of $0.40 per share through August 31, 2017. Accordingly, an aggregate of 3,675,000 shares of common stock and warrants to purchase a like amount were issued in the last six months of 2015. Each noteholder has the right to convert the principal of their note and accrued interest thereon at a conversion price of $0.30 per share or at the noteholder’s option, into equity securities of the Company on the same terms as the last equity transaction completed by the Company prior to each respective conversion date. All other notes have been converted to equity.
     
  (b) In May of 2020, the Companies applied and received Small Business Administration Cares Act loans due to the COVID-19 Pandemic. Each loan carries a five-year term, carrying a one percent interest rate. The loans turn into grants if the funds are use the for the SBA accepted purposes. The window to use the funds for the SBA specific purposes is a twenty-four-week period. If the funds are used for the allotted expenses the loans turn into grants with each loan being forgiven. The Company also received an Economic Injury Disaster Loan from the SBA which carries a thirty-year term, carrying a three point seven five percent interest rate.
     
  (c)

On June 26, 2019, the Company entered into a merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan paid in full.

 

On August 1, 2019, the Company entered into a second merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan paid in full.

 

On November 6, 2019, the Company entered into a third merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan paid in full.

 

On February 20, 2020, the Company entered into a fourth merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days, loan paid in full.

 

On June 12, 2020, the Company entered into a fifth merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for the term of 132 business days.

 

On August 11, 2020, the Company entered into a sixth merchant agreement with Business Capital Providers, Inc. in the amount of $250,000 payable daily at $2,556.82, per payment for a term of 132 business days.

  

On May 10, 2019, the Company entered into a $7,512,500 Promissory note with Deepankar Katyal, et al, for the acquisition of the balance of Advangelists, LLC, requiring six monthly payments of $250,000 starting May 15, 2019 through October 6, 2019, a payment of $1,500,000 on December 6, 2019, and beginning in January of 2020, ten monthly payments of $500,000 each until October of 2020, with a stated interest rate of 1.5%.

     

On September 13, 2019, Dr. Gene Salkind, who is a director of the Company, and an affiliate of Dr. Salkind (collectively, the “Lenders”) subscribed for convertible promissory notes (the “Notes”) and loaned to the Company an aggregate of $2,300,000 (the “Loans”) on a secured basis payable in three installments in September 13 received net $720.000, balance received October and November 2019.

 

The Notes bear interest at a fixed rate of 15% per annum, computed based on a 360-day year of twelve 30-day months and will be payable monthly in arrears. Interest on the Notes is payable in cash or, at the Lenders’ option, in shares of the Company’s common stock. The principal amount due under the Notes will be payable on September 30, 2029, unless earlier converted pursuant to the terms of the Notes.

 

 

 

 

  21  

 

 

Subject to the Company obtaining prior approval from the Company’s shareholders for the issuance of shares of common stock upon conversion of the Notes, if and to the extent required by the New York Business Corporation Law, the Notes will be convertible into equity of the Company upon the following events on the following terms:

 

  · At any time at the option of the Lenders, the outstanding principal under the Notes will be converted into shares of common stock of the Company at a conversion price of $32 per post-split per share (the “Conversion Price”).

 

  · at any time that the trailing thirty (30) day volume weighted average price per share (as more particularly described in the Notes) of the Company’s common stock is above $400.00 per share, until the Notes are no longer outstanding, the Company may convert the entire unpaid un-converted principal amount of the Notes, plus all accrued and unpaid interest thereon, into shares of the Company’s common stock at the Conversion Price.

 

The Notes contain customary events of default, which, if uncured, entitle the Lenders thereof to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, their Notes.

 

In connection with the subscription of the Notes, the Company issued to each Lender a warrant to purchase one share of the Company’s common stock for every two shares of common stock issuable upon conversion of the Notes, at an exercise price of $48.00 per post-split share (the “Lender Warrants”).

 

On May 16, 2019, the Company assumed a promissory note (the “AVNG Note”) payable to Deepankar Katyal (the “Payee”), as representative of the former owners of AVNG, which at the time of assumption had a remaining principal balance of $7,512,500. Simultaneously with the assumption of the AVNG Note, the AVNG Note was amended and restated (the “First Amended AVNG Note”). Effective as of September 13, 2019, the Company and Payee entered into a Second Amended and Restated Promissory Note (the “Second Amended AVNG Note”), in the principal amount of $6,750,000, pursuant to which the repayment terms under the First Amended AVNG Note were amended and restated as follows:

 

  · $5,250,000 of the principal balance remaining due under the Second Amended AVNG Note is payable by the delivery of (i) 65,625 shares of the Company’s newly designated Class E Preferred Stock, which is convertible into 164,063 post-split shares the Company’s common stock, and (ii) common stock purchase warrants to purchase 82,031 post-split shares of the Company’s common stock, at an exercise price of $48.00 per share (the “AVNG Warrant”).

 

  · $1,530,000 of the principal balance, inclusive of all accrued and unpaid interest, remaining due under the Second Amended AVNG Note in three equal consecutive monthly installments of $510,000, commencing on September 15, 2019 and on the 15th day of each month thereafter until paid in full.

 

The Second Amended AVNG Note provides that upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class E Preferred Stock issuable pursuant to the terms of the Second Amended AVNG Note, and any shares of the Company’s common stock issued upon the conversion of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First Amended AVNG Note.

 

 

 

 

  22  

 

 

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. 

 

NOTE 5: INCOME TAXES

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

The Company conducts business, and files federal and state income, franchise or net worth, tax returns in the United States, in various states within the United States. The Company determines it’s filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year statutes of limitations for income tax assessment vary from state to state. Tax authorities of the U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years.

 

NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIT)

 

Shares issued for services

 

During the nine months ended September 30, 2020, the Company issued 25,625 post-split shares of common stock, at $8.00 to $40.00 per share for $470,000 in exchange for services rendered. During the nine months ended September 30, 2019, the Company issued 1,588 post-split shares of common stock, at $10.00 to $88.00 per share for $75,777 in exchange for services rendered.

  

 

 

 

  23  

 

 

Shares issued for interest

 

During the nine months ended September 30, 2020 and September 30, 2019, no shares were issued for interest.

   

During the nine months ended September 30, 2020, one holder of our Series E Preferred Stock converted 3,937 shares to 9,843 post-split shares of our common stock. In the nine months ended September 30, 2019, five holders of our Series AAA Preferred Stock converted 146,356 shares to 41,589 post-split shares of our common stock and 41,489 warrants at an exercise price of $20.00 per share with an expiration date of December 31, 2019.

  

During the nine months ended September 30, 2020, 77,220 warrants were converted to common stock, at $8.00 to $28.00 per share. During the nine months ended September 30, 2019, 3,650 warrants were converted in a cashless exercise transaction submitted to the Company for 2,303 shares of common stock, post-split shares.

 

No equity subscription agreements occurred during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, the Company received equity subscription agreements totaling $3,245,035, net, which include warrant coverage, at an exercise price between $24.00 and $48.00 with an expiration date of September 30, 2023. The Company issued 111,609 post-split shares of common stock and 46,224 post-split warrants in connection with these transactions.

 

During the nine months ended September 30, 2020 one note holder converted $30,695 of their note into 1,918 post-split common shares at a conversion rate of $16 per post-split share and cash payment of $5,000. No note conversion took place during the nine months ended September 30, 2019.

 

Consulting Agreements

 

Upon consummation of the Merger, Mobiquity entered into consulting agreements (the “Consulting Agreements”) with certain employees and contractors of Advangelists (the “Consultants”), pursuant to which Mobiquity (i) issued to the Consultants warrants to purchase an aggregate of 55,616 post-split shares of its common stock and (ii) agreed to transfer to the Consultants an aggregate of 1,901,389 shares of common stock of Gopher Protocol Inc. The terms of the Consultant’s warrants are substantially similar to the terms of the warrants issued in the merger.

 

NOTE 7: OPTIONS AND WARRANTS

 

The Company’s results for the for the three months and nine months ended September 30, 2020 include employee share-based compensation expense described herein. Such amounts have been included in the Statements of Operations within selling, general and administrative expenses and other expenses. No income tax benefit has been recognized in the statement of operations for share-based compensation arrangements due to a history of operating losses.

 

The following table summarizes stock-based compensation expense for the for the quarter and nine months ended September 30, 2020 and September 30, 2019:

 

 

    Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
    2020     2019     2020     2019  
Employee stock-based compensation - option grants   $ 54,589     $ 1,880,000     $ 1,331,459     $ 6,599,000  
Employee stock-based compensation - stock grants     –       –       –       –  
Non-Employee stock-based compensation - option grants     –       –       –       –  
Non-Employee stock-based compensation - stock grants     –       –       –       –  
Non-Employee stock-based compensation-stock warrant     –       486,150       598,894       19,623,100  
Total   $ 54,589     $ 2,366,150     $ 1,930,353     $ 26,222,100  

    

 

 

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NOTE 8: STOCK OPTION PLANS

 

During Fiscal 2005, the Company established, and the stockholders approved, an Employee Benefit and Consulting Services Compensation Plan (the “2005 Plan”) for the granting of up to 5,000 post-split non-statutory and incentive stock options and stock awards to directors, officers, consultants and key employees of the Company. On June 9, 2005, the Board of Directors amended the Plan to increase the number of stock options and awards to be granted under the Plan to 10,000 post-split shares. During Fiscal 2009, the Company established a plan of long-term stock-based compensation incentives for selected Eligible Participants of the Company covering 10,0000 post-split shares. This plan was adopted by the Board of Directors and approved by stockholders in October 2009 and shall be known as the 2009 Employee Benefit and Consulting Services Compensation Plan (the “2009 Plan”). In September 2013, the Company’s stockholders approved an increase in the number of shares covered by the 2009 Plan to 25,000 post-split shares. In February 2015, the Board approved, subject to stockholder approval within one year, an increase in the number of shares under the 2009 Plan to 50,000 post-split shares; however, stockholder approval was not obtained within the requisite one year and the anticipated increase in the 2009 Plan was canceled. In the first quarter of 2016, the Board approved, and stockholders ratified a 2016 Employee Benefit and Consulting Services Compensation Plan covering 25,000 post-split shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits to the 2016 Plan. In December 2018, the Board of Directors adopted and in February 2019. the stockholders ratified the 2018 Employee Benefit and Consulting Services Compensation Plan covering 75,000 post-split shares (the “2018 Plan”). On April 2, 2019, the Board approved the “2019 Plan” identical to the 2018 Plan, except that the 2019 Plan covers 150,000 post-split shares. The 2019 Plan required stockholder approval by April 2, 2020 in order to be able to grant incentive stock options under the 2019 Plan. The 2005, 2009, 2016, 2018 and 2019 plans are collectively referred to as the “Plans.”

 

All stock options under the Plans are granted at or above the fair market value of the common stock at the grant date. Employee and non-employee stock options vest over varying periods and generally expire either 5 or 10 years from the grant date. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. For option grants, the Company will take into consideration payments subject to the provisions of ASC 718 “Stock Compensation”, previously Revised SFAS No. 123 “Share-Based Payment” (“SFAS 123 (R)”). The fair values of these restricted stock awards are equal to the market value of the Company’s stock on the date of grant, after taking into certain discounts. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. Previously, such assumptions were determined based on historical data. The weighted average assumptions made in calculating the fair values of options granted during the three months and nine months ended September 30, 2020 and September 30, 2019 are as follows:

 

    Three Months Ended
September 30 		    Nine Months Ended
September 30 		 
    2020     2019     2020     2019  
Expected volatility     746.54%       162.42%       592.89%       242.39%  
Expected dividend yield     –           –           –           –      
Risk-free interest rate     0.27%       2.41%       0.74%       2.32%  
Expected term (in years)     5.00           7.50           5.00           6.00      

 

 

 

 

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    Share     Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining Contractual
Term 		    Aggregate Intrinsic
Value 		 
 Outstanding, January 1, 2020     281,000     $ 48.00       6.15     $ 769,500  
Granted     25,313       –       –       –  
Exercised     –       –       –       –  
Cancelled & Expired     (3,155 )     –       –       –  
Outstanding, September 30, 2020     303,158     $ 45.85       5.34     $ –  
Options exercisable, September 30, 2020     282,182     $ 45.13       6.17     $ –  

 

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2020 and 2019 was $0 and $0, respectively.

 

The aggregate intrinsic value of options outstanding and options exercisable at September 30, 2020 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 closing price of the Company's common stock on September 30, 2020.

 

As of September 30, 2020, the fair value of unamortized compensation cost related to unvested stock option awards is $1,093,630.

 

The weighted average assumptions made in calculating the fair value of warrants granted during the three and nine months ended September 30, 2020 and 2019 are as follows:

 

    Three Months Ended
September 30 		    Nine Months Ended
September 30 		 
    2020     2019     2020     2019  
Expected volatility     –       140.17 %     449.47 %     173.58 %
Expected dividend yield     –       –       –       –  
Risk-free interest rate     –       11.10 %     0.91 %     8.32 %
Expected term (in years)     –       3.43       5.83       3.50  

 

    Share     Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining Contractual
Term 		    Aggregate Intrinsic
Value 		 
Outstanding, January 1, 2020     642,620     $ 44.00       5.81     $ 2,500,502  
Granted     30,638       –       –       –  
Exercised     (33,138 )     –       –       –  
Expired     (173,484 )     –       –       –  
Outstanding, September 30, 2020     466,636     $ 52.52       6.56     $ –  
Warrants exercisable, September 30, 2020     466,636     $ 52.52       6.56     $ –  

 

 

 

 

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NOTE 9: LITIGATION

 

We are not a party to any pending material legal proceedings, except as follow:

 

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 alleging default on 36 commercial leases which the Company had entered into in 36 separate shopping mall locations across the United States. Plaintiff alleges damages from unpaid rent of $892,332. Plaintiff is seeking a judgment from the Court to collect said unpaid rent plus attorneys’ fees and other costs of collection. On September 18,2020, the Parties entered into a settlement agreement with respect to this lawsuit. Subject to the terms, conditions, and provisions of the settlement Agreement, Mobiquity shall pay to WPG One Hundred Thousand Dollars and No/100 Cents ($100,000.00) in five (5) equal installments of Twenty Thousand Dollars ($20,000), with Twenty Thousand Dollars ($20,000) being paid by Mobiquity to WPG upon the parties’ execution of this Agreement and the remainder in four (4) monthly payments as follows: October 15, 2020 $20,000 November 15, 2020 $20,000 December 15, 2020 $20,000 January 15, 2021 $20,000. If WPG determines that Mobiquity failed to pay any installment as set forth above, WPG must provide written notice to Mobiquity within fifteen (15) days of discovery of such failure to pay. Mobiquity will then have fifteen (15) days to cure the default. If Mobiquity fails to pay the installment within the fifteen (15) day cure period, then this Settlerment Agreement shall become null and void and WPG shall have the right to pursue its claims in full against Mobiquity, less any payments received from Mobiquity.

 

NOTE 10: COMMITMENTS:

 

  · $5,250,000 of the principal balance remaining due under the Second Amended AVNG Note is payable by the delivery of (i) 65,625 shares of the Company’s newly designated Class E Preferred Stock, which is convertible into 164,063 post-split shares the Company’s common stock, and (ii) common stock purchase warrants to purchase 82,032 shares of the Company’s common stock, at an exercise price of $48.00 post-split per share (the “AVNG Warrant”).

 

  · $1,530,000 of the principal balance, inclusive of all accrued and unpaid interest, remaining due under the Second Amended AVNG Note in three equal consecutive monthly installments of $510,000, commencing on September 15, 2019 and on the 15th day of each month thereafter until paid in full.

 

The Second Amended AVNG Note provides that upon an Event of Default (as defined in the Second Amended AVNG Note), and upon the election of the Payee, (i) the shares of Class E Preferred Stock issuable pursuant to the terms of the Second Amended AVNG Note, and any shares of the Company’s common stock issued upon the conversion of the Class E Preferred Stock, shall be cancelled and cease to issued and outstanding, (ii) the AVNG Warrants (as defined below), to the extent unexercised, shall be cancelled, and (iii) the Second Amended AVNG Note shall be cancelled and the repayment of the principal amount remaining due to Payee shall be paid in accordance with the terms of the First Amended AVNG Note.

 

NOTE 11: OTHER MATERIAL EVENTS

 

In May of 2020, Deepankar Katyal resigned from the board to spend more time necessary to run the day to day operations of Advangelists, LLC focusing on technology and revenue growth.

 

Interest payments due on Dr. Salkind notes have been halted in the second quarter of 2020 due to COVID-19 issues affecting our collections on our accounts receivable.

 

NOTE 12: SUBSEQUENT EVENTS

 

As a result of our declining revenue, during the COVID-19 pandemic, our management team decided it was necessary to reduce overhead. The following steps were taken to lower expenses, while still keeping the business operational and ready to expand when needed; salaries were cut by approximately forty (40%) percent, several employees were laid-off, all travel was suspended and office space rent was suspended, allowing the entire staff to work remotely.

 

   

 

 

 

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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, 2019 which includes our audited financial statements for the year ended December 31, 2019 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

 

Advangelists is a developer of advertising and marketing technology focused on the creation, automation, and maintenance of an advertising technology operating system (or ATOS). Advangelists’ ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages and runs digital advertising campaigns.

 

Mobiquity Networks is a next generation location data intelligence company. Mobiquity Networks provides precise unique, at-scale location-based data and insights on consumer’s real-world behavior and trends for use in marketing and research. We provide accurate and precise location data on over hundreds of millions of mobile devices to help marketers and researchers better understand consumer’s real-world behavior and trends.

 

 

 

 

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COVID 19

 

Impacts of COVID-19 to Business and the general economy

  

COVID -19 has recently caused a material and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will likely experience a reduction in current projects, longer sales and collection cycles, deferral or delay of purchase commitments for our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially adversely affect revenue and our ability to remain a going concern.

 

In the event we remain a going concern, the impacts of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and then general economy, are currently not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing events, among other modifications. We lost a purchase order in excess of one million dollars with major US sports organization. We have observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, although we do anticipate it to negatively impact our financial results during fiscal year 2020.

 

As a result of our declining revenue, during the COVID-19 pandemic, our management team decided it was necessary to reduce overhead. The following steps were taken to lower expenses, while still keeping the business operational and ready to expand when needed; salaries were cut by approximately forty (40%) percent, several employees were laid-off, all travel was suspended and office space rent was suspended, allowing the entire staff to work remotely.

 

Critical Accounting Policies

 

Revenue Recognition –The Company recognized revenue on arrangements in accordance with FASB Codification Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”). Under ASC Topic 606, 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 data for a period of time based on the contract life between one month to one year. 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.

 

 

 

 

  29  

 

 

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’s sales team will focus on Advertising Agencies, Brands and publishers to help increase both supply and demand across the Advangelists platform. The Advangelists platform creates three revenue streams for Mobiquity. The first is licensing the Advangelists platform as a white-label product for use by Advertising Agencies, DSP’s and Brands. Under the White-Label scenario, the user licenses the technology and is responsible for running its own business operations and is billed a percentage of volume run through the platform. The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through the platform, but all services are managed by the Mobiquity/Advangelists team. The third revenue model is a seat model, whereas the user is billed a percentage of revenue run through the platform and business operations are shared between the user and the Mobiquity/Advangelists team. The goal of the sales team is to inform potential users of the benefits in efficiency and effectiveness of utilizing the end-to-end, fully integrated ATOS created by Advangelists.

 

Mobiquity Networks derives its revenue utilizing the revenue streams mentioned above. All the products used to derive revenue for the Company are reliant on accurate audience data. To achieve management’s revenue goals moving forward, we have developed a strategy to increase our audience data collection. One strategy is to partner with website and mobile application (apps) owners directly and offer our platforming services in exchange they would provide valuable first party audience data. The second strategy is to partner with various data compliant providers to increase our overall number of mobile devices available to use for audience targeting.

 

As of September 2020, we had approximately 6,500,000 Places in our proprietary Places database. 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.

 

Results of Operations –

 

Quarter Ended September 30, 2020 versus Quarter Ended September 30, 2019

 

The following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.

 

    Quarter Ended  
    September 30,
2020 		    September 30,
2019 		 
Revenue   $ 1,429,696     $ 2,800,174  
Cost of Revenues     (952,779 )     (1,669,245 )
Gross Income     476,917       1,130,929  
Selling, General and Administrative Expenses     (2,078,382 )     (4,041,411 )
Loss from operations     (1,601,465 )     (2,910,482 )

 

 

 

 

  30  

 

 

We generated revenues of $1,429,696 in the quarter ended September 30, 2020 as compared to $2,800,174 in the same period for 2019, a change in revenues of $1,370,478. The nationwide economic shutdown due to COVID-19 during the first nine months of 2020 severely reduced operations at the end of the September of 2020.

 

Cost of revenues was $952,779 or 66.6% of revenues in the quarter ended September 30, 2020 as compared to 1,669,245 or 59.6% of revenues in the same fiscal period of 2019. Cost of revenues include web services for processing and storage of our data and web engineers who are building and maintaining our platforms. Our ability to capture, process and store data for sales does not translate to increased cost of sales.

 

Gross Income was $476,917 or 33.4% of revenues for the quarter ended September 30, 2020 as compared to $1,130,929 in the same fiscal period of 2019 or 40.3% of revenues. We believe when the country comes out of the COVID-19 crisis and the economy begins to turn around we should see a significant increase to income. Management believes there will be a surge in advertising spent in the fourth quarter, due to both traditional businesses reopening and the presidential election.

 

 

Selling, general, and administrative expenses were $2,708,382 for the third quarter of 2020 compared to $4,041,411 in the comparable period of the prior year, a decrease of approximately $1,333,029. Decreased operating costs include travel related costs $42,297 salaries of $364,291 and non-cash warrant expense of $486,150 and non-cash amortization costs of $1,825,411. The increased professional fees and interest expenses totaling $119,013 an increase in non-cash amortization costs of $500,000.

 

The net loss from operations for the third quarter of fiscal 2020 was $1,601,465 as compared to $2,910,482 for the comparable period of the prior year. The continuing operating loss is attributable to the focused effort in creating the infrastructure required to move forward with our Mobiquity and Advangelists network business. The nationwide economic shutdown due to COVID-19 during the first six months of 2020 severely reduced operations at the end of the September of 2020.

 

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.

 

    Nine Months Ended  
    September 30,
2020 		    September 30,
2019 		 
Revenue   $ 3,032,064       6,647,668  
Cost of Revenues     (2,612,690 )     (3,830,389 )
Gross Income     419,374       2,817,279  
Selling, General and Administrative Expenses     (8,013,595 )     (15,679,883 )
Loss from operations     (7,594,221 )     (12,862,604 )

 

We generated revenues of $3,032,064 in the first nine months of 2020 as compared to $6,647,668 for the same period for fiscal 2019, a change in revenues of $3,615,604. In 2019, with the acquisition of Advangelists LLC, we have implemented 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. The nationwide economic shutdown due to COVID-19 during the first nine months of 2020 severely reduced operations at the end of the September of 2020.

 

 

 

 

 

  31  

 

 

Cost of revenues was $2,612,690 or 86.2% of revenues in the first six months of 2020 as compared to 3,830,389 or 57.6% of revenues in the same fiscal period of fiscal 2019. 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 Income was $419,374 or 13.8% of revenues for the first nine months of 2019 as compared to $2,817,279 in the same fiscal period of 2019 or 42.4% of revenues. As revenues from the use of our technology’s increases, it is expected that our margins will increase significantly.

 

Selling, general, and administrative expenses were $8,013,595 for the first nine months of fiscal 2020 compared to $15,679,883 in the comparable period of the prior year, a decrease of approximately $7,666,288. Such operating cost decreases include payroll, rent, salaries and commissions, non-cash stock-based compensation of $6,107,693.

 

The net loss from operations in the first nine months of fiscal 2020 was $7,594,221 as compared to $12,862,604 for the comparable period of the prior year. The nationwide economic shutdown due to COVID-19 during the first nine months of 2020 severely reduced operations at the end of the September of 2020.

 

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 $539,757 at September 30, 2020. Cash used in operating activities for the nine months ended September 30, 2020 was $4,490,623. This resulted primarily from a net loss of $10,980,423 offset by stock based compensation of $1,331,459, warrant expense of $1,472,368 amortization of $1,950,552, increase in allowance of uncollectible receivables of $306,000, common stock issued for professional services of $470,000, decrease in accounts receivable of $1,512,216, change in accrued expenses and other current liabilities of $95,310 and a change in of accounts payable and accrued expenses of $447,906. Cash flow from investing activities includes the issuance of common stock for cash of $3,338,084and the conversion of a note for common stock of $30,695, purchase of property and equipment of $6,599. Cash flow from financing activities of $425,103 resulted from the proceeds from the issuance of the Company's convertible notes of $915,842 and cash paid on bank loans $490,739.

 

The Company had cash and cash equivalents of $530,483 at September 30, 2019. Cash used in operating activities for the nine months ended September 30, 2019 was $24,378,555 This resulted primarily from a net loss of $34,614,677 offset by stock based compensation of $6,599,000, warrant expense of $4,095,677 amortization of $374,064, increase in accounts receivable of $877,973, change in accrued expenses and other current liabilities of $94,408 and a change in of accounts payable and accrued expenses of $127,870. Change in cash flow from investing activities of $7,358,588 resulted in sales of common stock of $3,529,500, issuance of note on purchase of subsidiary of $7,512,500, issuance of series E preferred stock of $5,250,000. Cash flow from financing activities of $13,768,863 resulted from the proceeds from the issuance of the Company's convertible notes of $2,249,004 loss on sale of company stock $2,458,125, warrant expense $15,877,423, conversion of note to preferred stock $5,235,224, cash paid on bank loans $1,640,567.

 

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 2019 and beyond until cash flow from our proximity marketing operations become substantial.

 

 

 

 

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Recent Financings

 

We have completed various financings as described as described under the Notes to Consolidated Financial Statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short-term money market investments. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Under the supervision and with the participation of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

 

There were no changes in the Company's internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

As of the filing date of this Form 10-Q, we are not a party to any pending legal proceedings except as described in Note 9.

 

ITEM 1A. RISK FACTORS

 

As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1A. Nevertheless, reference is made to our Form 10-K for the fiscal year ended December 31, 2019 for a description of our risk factors.

  

ITEM 2. CHANGES IN SECURITIES.

 

  (a) From January 1, 2020 through September 30, 2020 and January 1, 2019 through September 30, 2019, we had no sales or issuances of unregistered capital stock, except as referenced above and in the table below, shares below listed post-split:

 

Date of Sale   Title of Security   Number Sold   Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to
Purchasers 		  Exemption from
Registration Claimed 		  If Option, Warrant or Convertible
Security, terms of exercise or conversion
Jan. – Sept. 2020   Common Stock   25,625 shares   Services rendered  

Rule 506,

Section 4(2)

  Not applicable
                     
Jan. – Sept. 2020   Common Stock   1,919 shares   Note conversion   Section 3(a)(9)   Not applicable
                     

Jan. – Sept. 2020

  Common Stock   77,220 shares   $873,473 Warrant conversions  

Rule 506,

Section 4(2)

  Each warrant exercise price from $8.00 to $20.00, expiration dates 1-23-2025 and 2-4-2025
                     

Jan. – Sept. 2020

 

  Common Stock   9,843 shares   Series E Preferred Stock conversion   Section 3(a)(9)   1,968,500 warrant exercise price $48.00 expiration date 1-8-2025
                     

Jan - Sept 2020

 

  Common Stock   310,784 shares   Shares sold for cash  

Rule 506,

Section 4(2)

  Not applicable
                     
Jan. – Sept 2019   Common Stock and Warrants   120,359 shares; 40,339 warrants   $3,529,500  

Section

(a)(9)

  Not applicable
                     

Jan- Sept 2019

  Common Stock   1,588 shares   Services rendered; no commissions paid   Section 4(2)   Not applicable
                     
Jan. – Sept 2019  

Common Stock and Warrants

 

  304,089 shares and 357,735 warrants sold upon conversion of preferred stock and cashless exercise of warrants   No receipt of funds, Commissions paid in cashless warrants   Rule 506   Each warrant exercise price from $20.00 to $48.00, expiration dates 12-31-2019 and 9-30-2023

  

In the nine months ended September 30, 2020 and 2019, there were no repurchases by the Company of its Common Stock, except for 37,500 post-split shares of common stock repurchased on September 10, 2019 in exchange for 110,000 shares of GBT shares.

 

 

 

 

  34  

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

Not applicable.

  

ITEM 6. EXHIBITS.

 

Exhibit    
Number   Exhibit Title
2.1   Agreement and Plan of Merger – Advangelists LLC (25)
2.2   First Amendment to Exhibit 2.1 (25)
3.1   Certificate of Incorporation filed March 26, 1998 (1)
3.2   Amendment to Certificate of Incorporation filed June 10, 1999 (1)
3.3   Amendment to Certificate of Incorporation approved by stockholders in 2005(1)
3.4   Amendment to Certificate of Incorporation dated September 11, 2008 (11)
3.5   Amendment to Certificate of Incorporation dated October 7, 2009 (11)
3.6   Amendment to Certificate of Incorporation dated May 18, 2012 (11)
3.7   Amendment to Certificate of Incorporation dated September 10, 2013 (17)
3.8   Amended By-Laws (1)
3.9   2014 Amendment to By-Laws (19)
3.10   Amendment to Certificate of Incorporation filed December 22, 2015 (23)
3.11   Amendment to Certificate of Incorporation dated March 24, 2016 (21)
3.12   Amendment to Certificate of Incorporation (22)
3.13   Amendment to Certificate of Incorporation – September 2018 (26)
3.14   Amendment to Certificate of Incorporation – February 2019 (26)
3.15   Amendment to Certificate of Incorporation – December 17, 2018 (26)
3.16   Amendment to Certificate of Incorporation – December 4, 2018 (26)
3.17   Restated Certificate of Incorporation (27)
3.18   Amendment to Certificate of Incorporation dated September 13, 2019 (32)
3.19   Amendment to Restated Certificate of Incorporation*
4.1   Registration Rights Agreement (18)
10.1   Employment Agreement - Michael Trepeta (2)
10.2   Employment Agreement - Dean Julia (2)
10.3   Amendments to Employment Agreement - Michael Trepeta (5) (7)
10.4   Amendments to Employment Agreement - Dean L. Julia (5) (7)
10.5   Amendment to Exhibits 10.3 and 10.4 dated April 7, 2010 (10)
10.6   Amendment to Employment Agreement – Dean L. Julia (11)

 

 

 

  35  

 

 

Exhibit    
Number   Exhibit Title
10.7   Amendment to Employment Agreement – Michael D. Trepeta (11)
10.8   Amendment to Dean L. Julia’s Employment Agreement (16)
10.9   Amendment to Michael D. Trepeta’s Employment Agreement (16)
10.10   Employment Agreement – Sean Trepeta (19)
10.11   Employment Agreement – Paul Bauersfeld (19)
10.12   Employment Agreement – Thomas Arnost (20)
10.13   Separation Agreement with Michael D. Trepeta (24)
10.14   Form of Consulting Agreement and Form of Warrant to purchase common stock – (25)
10.15   Employment Agreement dated April 2, 2019 – Dean L. Julia (30)
10.16   Employment Agreement dated April 2, 2019 – Sean Trepeta (30)
10.17   Employment Agreement dated April 2, 2019 – Paul Bauersfeld (30)
10.18   Employment Agreement dated December 7, 2018 – Deepanker Katyal (30)
10.19   Membership Interest Purchase Agreement dated as of April 30, 2019 (28)
10.20   Membership Interest Purchase Agreement, effective as of May 8, 2019 between Mobiquity Technologies, Inc. and Gopher Protocol, Inc. (29)
10.21   Amended and Restated $7,512,500 Promissory Note dated as of May 10, 2019 from Mobiquity Technologies, Inc. to Deepanker Katyal, as representative of the former members of Advangelists, LLC (29)
10.22   Assignment and Assumption Agreement effective as of May 8. 2019 between Mobiquity Technologies, Inc. and Gopher Protocol, Inc. (29)
10.23   Stock Purchase Agreement, effective as of September 13, 2019, by and between Mobiquity Technologies, Inc. and GBT Technologies, Inc. (31)
10.24   Amendment No. 1 to Employment Agreement, dated as of September 13, 2019, by and between Advaneglists, LLC and Deepankar Katyal (31)
10.25   Class B Preferred Stock Redemption Agreement, dated as of September 13, 2019, by and between Mobiquity Technologies, Inc. and Deepankar Katyal (31)
10.26   Amendment No. 1 to Employment Agreement, dated as of September 13, 2019, by and between Advaneglists, LLC and Lokesh Mehta (31)
10.27   Class B Preferred Stock Redemption Agreement, dated as of September 13, 2019, by and between Mobiquity Technologies, Inc. and Lokseh Mehta (31)
10.28   Subscription Agreement, dated as of September 13, 2019, by and between Mobiquity Technologies, Inc. and Dr. Gene Salkind (32)
10.29   Convertible Promissory Note in favor of Dr. Gene Salkind, dated as of September 13, 2019 (32)
10.30   Subscription Agreement, dated as of September 13, 2019, by and between Mobiquity Technologies, Inc. and Marital Trust GST Subject U/W/O Leopold Salkind (32)
10.31   Convertible Promissory Note in favor of Marital Trust GST Subject U/W/O Leopold Salkind, dated as of September 13, 2019 (32)
10.32   Form of Lender Warrant (32)
10.33   Second Amended and Restated Promissory Note, dated as of September 13, 2019, by and between Mobiquity Technologies, Inc. and Deepankar Katyal, as representative of the former owners of Advangelists, LLC (31)
10.34   Form of Common Stock Purchase Warrant (31)
11.1   Statement re: Computation of per share earnings. See Statement of Operations and Notes to Financial Statements
14.1   Code of Ethics/Code of Conduct (Incorporated by reference to Form 10-K for the year ended December 31, 2014)
21.1   Subsidiaries of the Issuer (26)
31.1   Rule 13a-14(a) Certification in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (*)
31.2   Rule 13a-14(a) Certification in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (*)
32.1   Certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)
32.2   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)

 

 

 

 

  36  

 

 

Exhibit    
Number   Exhibit Title
99.1   2005 Employee Benefit and Consulting Services Compensation Plan (2)
99.2   Amendment to 2005 Plan (4)
99.3   2009 Employee Benefit and Consulting Services Compensation Plan (3)
99.4   2018 Employee Benefit and Consulting Services Compensation Plan. (Incorporated by reference to Definitive Proxy Statement filed with the SEC on January 11, 2019.)
101.INS   XBRL Instance Document *
101.SCH   Document, XBRL Taxonomy Extension *
101.CAL   Calculation Linkbase, XBRL Taxonomy Extension Definition *
101.DEF   Linkbase, XBRL Taxonomy Extension Labels *
101.LAB   Linkbase, XBRL Taxonomy Extension *
101.PRE   Presentation Linkbase *

_____________________

* Filed herewith.

 

(1) Incorporated by reference to Registrant's Registration Statement on Form 10-SB as filed with the Commission on February 10, 2005.
(2) Incorporated by reference to Registrant’s Registration Statement on Form 10-SB/A filed with the Commission March 21, 2005.
(3) Incorporated by reference to Form 10-K filed for the fiscal year ended December 31, 2009.
(4) Incorporated by reference to the Registrant's Form 10-QSB/A filed with the Commission on August 15, 2005.
(5) Incorporated by reference to the Registrant's Form 10-KSB for its fiscal year ended December 31, 2005.
(6) Left blank intentionally.
(7) Incorporated by reference to the Registrant's Form 8-K dated September 21, 2007.
(8) Left blank intentionally.
(9) Left blank intentionally.
(10) Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended June 30, 2011.
(11) Incorporated by reference to the Registrant's Form 10-K for its fiscal year ended December 31, 2012.
(12) Left blank intentionally.
(13) Left blank intentionally.
(14) Left blank intentionally.
(15) Left blank intentionally.
(16) Incorporated by reference to Form 8-K filed June 6, 2013.
(17) Left blank intentionally.
(18) Left blank intentionally.
(19) Incorporated by reference to Form 8-K filed with the SEC on December 24, 2014.

(20)

(21)

Incorporated by reference to Form 8-K dated December 19, 2014.

Incorporated by reference to Form 8-K dated March 24, 2016.

(22) Incorporated by reference to Form 8-K dated March 1, 2017.
(23) Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2015.
(24) Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2016.

(25)

(26)

Incorporated by reference to Form 8-K dated December 11, 2018.

Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2018.

(27) Incorporated by reference to Form 8-K dated July 15, 2019.
(28) Incorporated by reference to Form 8-K dated April 30, 2019.
(29) Incorporated by reference to Form 8-K dated May 10, 2019.
(30) Incorporated by reference to Form 10-K/A filed with the SEC on April 26, 2019.
(31) Incorporated by reference to Form 8-K dated September 13, 2019.
(32) Incorporated by reference to Form 8-K/A dated September 13, 2019.

 

 

 

 

  37  

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MOBIQUITY TECHNOLOGIES, INC.
     
Date: October 30, 2020 By: /s/ Dean L. Julia
    Dean L. Julia,
    Principal Executive Officer
     
     
Date: October 30, 2020 By: /s/ Sean McDonnell
    Sean McDonnell,
    Principal Financial Officer

 

 

 

 

 

 

 

 

 

 

 

  38  

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