MOBIQUITY TECHNOLOGIES, INC. The following discussion should be read in conjunction with our financial
statements and the notes thereto appearing elsewhere in this Form 10-
This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" has been amended and restated for the fiscal year ended
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles in
Use of Estimates
Preparing financial statements in conformity with
36 Risks and Uncertainties
The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company's operations are subject to significant risks and uncertainties including financial and operational risks including the potential risk of business failure.
The Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company's distribution of the product. These factors, among others, make it difficult to project the Company's operating results on a consistent basis.
Fair Value of Financial Instruments
The Company accounts for financial instruments at fair value, which as is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect certain market assumptions. There are three levels of inputs that may be used to measure fair value:
· Level 1-Valuation based on quoted market prices in active markets for
identical assets or liabilities in active markets;
· Level 2-Valuation based on quoted prices in active markets for similar assets
and liabilities; and
· Level 3-Valuation based on unobservable inputs that are supported by little or
no market activity, which require management's best estimate of what market
participants would use as fair value.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management.
The respective carrying value of certain on-balance-sheet financial instruments
approximated their fair value. These financial instruments include accounts
receivable, accounts payable and accrued expenses, and contract liabilities. At
The Company does not have any other financial or non-financial assets or liabilities that would be characterized as Level 1, Level 2, or Level 3 instruments.
37 Accounts Receivable
Accounts receivable represent customer obligations under normal trade terms and are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.
Management periodically assesses the Company's accounts receivable and, if necessary, establishes an allowance for doubtful accounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made.
The allowance for doubtful accounts was approximately
Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.
Impairment of Long-lived Assets
Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 Impairment or Disposal of Long-Lived Assets. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company's business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets and compares this to the carrying amounts of the assets.
If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606) to align revenue recognition more closely with the delivery of the Company's services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
Identify the contract with a customer.
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
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Identify the performance obligations in the contract.
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
Determine the transaction price.
The transaction price is determined based on the consideration to which the
Company will be entitled in exchange for transferring services to the customer.
To the extent the transaction price includes variable consideration, the Company
estimates the amount of variable consideration that should be included in the
transaction price utilizing either the expected value method or the most likely
amount method depending on the nature of the variable consideration. Variable
consideration is included in the transaction price if, in the Company's
judgment, it is probable that a significant future reversal of cumulative
revenue under the contract will not occur. None of the Company's contracts as of
Allocate the transaction price to performance obligations in the contract.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation.
Recognize revenue when or as the Company satisfies a performance obligation.
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
Each of the Company's customer contracts is deemed to have a single performance obligation.
Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days.
Stock-Based Compensation
The Company accounts for our stock-based compensation under ASC 718 Compensation - Stock Compensation using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, which is generally the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.
39
The Company uses the Black-Scholes model for measuring the fair value of options and other equity instruments granted to both employees and non-employees.
When determining fair value of stock-based compensation, the Company considers the following assumptions incorporated into the Black-Scholes model:
· Exercise price, · Expected dividends, · Expected volatility, · Risk-free interest rate; and · Expected life of option
Recent Accounting Pronouncements
We consider the applicability and impact of all new accounting pronouncements on
our consolidated financial position, results of operations, stockholders'
deficit, cash flows, or presentation thereof. Management has evaluated all
recent accounting pronouncements, including the following pronouncements that
may affect the Company, as issued by the
Financial Instruments - Credit Losses:In
Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers: In
Fair Value Measurement of Equity Securities Subject to Contractual Sale
Restrictions: On
40
Accounting for Convertible Instruments:In
The Company adopted this pronouncement on
Plan of Operation
Results of Operations
Year Ended
The following table sets forth certain selected consolidated statement of operations data for the periods indicated in dollars. In addition, the period-to-period comparison may not be indicative of future performance.
Year Ended
December 31,
December 31, 2021
2022 (As Restated)
Revenues $ 4,167,272 $ 2,672,615
Cost of revenues 2,295,404 1,954,383
Gross profit (loss) 1,871,868 718,232
General and administrative expenses 9,213,632 13,607,759
Loss from operations $ (7,341,764 ) $ (12,889,527 )
41
We generated revenues of
Cost of revenues was
Gross profit was
General and administrative expenses were
The net loss from operations for fiscal 2022 was
Liquidity and Capital Resources
We have a history of operating losses, and our management has concluded that
factors raise substantial doubt about our ability to continue as a going concern
and our auditor has included an explanatory paragraph relating to our ability to
continue as a going concern in its audit report for the fiscal years ended
We had cash of
We had cash of
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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 2023 and beyond until cash flow from our proximity marketing operations becomes substantial.
Recent Financings
On
On
On
43
Each pre-funded warrant is exercisable at any time for the purchase of one share
of common stock at an exercise price of
The Company also granted the Underwriters a 45-day option to purchase up to an additional 1,209,678 shares of common stock and/or pre-funded warrants in lieu of shares, and accompanying Series 2023 Warrants to purchase 1,814,517 shares of common stock at the public offering price less the underwriting discounts and commissions, to cover over-allotments, if any.
The net proceeds to the Company from the sale of the Shares and Warrants, after
deducting the Underwriters' discounts and commissions and estimated offering
expenses payable by the Company, are expected to be approximately
Additionally, the Registration Statement acted as a post-effective amendment to
the Company's registration statement on Form S-1 (File No. 333-260364) which
registered, among other securities, five-year warrants, exercisable at
Between the closing of the
Description of Series 2023 Warrants and Pre-Funded Warrants Sold in the
Series 2023 Warrants General
The following is a brief summary of certain terms and conditions of the Series
2023 Warrants that were offered in the
Exercisability
The Series 2023 Warrants are immediately exercisable at any time after their original issuance up to the date that is five years after their original issuance. Each of the Series 2023 Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying the Series 2023 Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common stock underlying the Series 2023 Warrants under the Securities Act is not effective or available, the holder may, in its sole discretion, elect to exercise the Series 2023 Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the Series 2023 Warrant. No fractional shares of common stock will be issued in connection with the exercise of a Series 2023 Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
44
Alternative Cashless Exercise
On or after the earlier of (i)
Exercise Limitation
A holder will not have the right to exercise any portion of the Series 2023 Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election by a holder prior to the issuance of any warrants, 9.99%) of the number of shares of our shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, upon at least 61 days' prior notice from the holder to us with respect to any increase in such percentage.
Exercise Price
The exercise price per one and one-half shares of common stock purchasable upon
exercise of the Series 2023 Warrants is
Redemption
On or after
Transferability
Subject to applicable laws, the Series 2023 Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing
We do not intend to apply for the listing of the Series 2023 Warrants offered in the aforementioned offering on any stock exchange. Without an active trading market, the liquidity of the Series 2023 Warrants will be limited.
45 Rights as a Stockholder
Except as otherwise provided in the Series 2023 Warrants or by virtue of such holder's ownership of our shares of common stock, the holder of a Series 2023 Warrant does not have the rights or privileges of a holder of our shares of common stock, including any voting rights, until the holder exercises the warrant.
Fundamental Transactions
In the event of a fundamental transaction, as described in the Series 2023 Warrants and generally including, with certain exceptions, any reorganization, recapitalization or reclassification of our shares of common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding shares of common stock, the holders of the Series 2023 Warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction. Additionally, as more fully described in the Series 2023 Warrant, in the event of certain fundamental transactions, the holders of the Series 2023 Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the Series 2023 Warrants on the date of consummation of such transaction.
Governing Law
The Series 2023 Warrants are governed by
Pre-Funded Warrants General
The term "pre-funded" refers to the fact that the purchase price of the
pre-funded warrants in the recently completed offering includes almost the
entire exercise price that will be paid under the pre-funded warrants, except
for a nominal remaining exercise price of
The following is a brief summary of certain terms and conditions of the pre-funded warrants which were offered in our recently completed offering. The following description is subject in all respects to the provisions contained in the form of pre-funded warrant, the form of which was filed as an exhibit to the aforementioned registration statement.
Exercise Price
Pre-funded warrants have an exercise price of
Exercisability
The pre-funded warrants are exercisable at any time after their original issuance and until exercised in full. The pre-funded warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and by payment in full of the exercise price in immediately available funds for the number of shares of common stock purchased upon such exercise. As an alternative to payment in immediately available funds, the holder may elect to exercise the pre-funded warrant through a cashless exercise, in which the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the pre-funded warrant. No fractional shares of common stock will be issued in connection with the exercise of a pre-funded warrant.
46 Exercise limitations
The pre-funded warrants may not be exercised by the holder to the extent that the holder, together with its affiliates, would beneficially own, after such exercise more than 4.99% of the shares of our common stock then outstanding (including for such purpose the shares of our common stock issuable upon such exercise). However, any holder may increase or decrease such beneficial ownership limitation upon notice to us, provided that such limitation cannot exceed 9.99%, and provided that any increase in the beneficial ownership limitation shall not be effective until 61 days after such notice is delivered. Purchasers of pre-funded warrants in the recently completed offering may also elect prior to the issuance of the pre-funded warrants to have the initial exercise limitation set at 9.99% of our outstanding shares of common stock.
Transferability
Subject to applicable laws, the pre-funded warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange listing
There is no established trading market for the pre-funded warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the pre-funded warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of the pre-funded warrants will be limited.
Fundamental transactions
In the event of a fundamental transaction, as described in the pre-funded warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, upon consummation of such a fundamental transaction, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the pre-funded warrants immediately prior to such fundamental transaction without regard to any limitations on exercise contained in the pre-funded warrants.
No rights as a stockholder
Except as otherwise provided in the pre-funded warrant or by virtue of such holder's ownership of shares of our common stock, the holder of a pre-funded warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the pre-funded warrant. The pre-funded warrants will provide that holders have the right to participate in distributions or dividends paid on our common stock.
Off-Balance Sheet Arrangements
As of
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