The report of the Independent
Registered Public Accounting Firm, Financial Statements and Schedules are set forth herein.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2017 AND 2016
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
NATURE OF OPERATIONS –
On September 10, 2013, Mobiquity Technologies, Inc. changed its name from Ace Marketing & Promotions, Inc.
“the Company” or “Mobiquity”). We operate through two wholly-owned U.S. subsidiaries, namely,
Mobiquity Networks, Inc. and Ace Marketing& Promotions, Inc. Mobiquity Networks owns 100% of Mobiquity Wireless S.L.U, a
company incorporated in Spain. This corporation had an office in Spain to support our U.S. operations, which office was
closed in the fourth quarter of 2016. Ace Marketing, its legacy marketing and promotions business was successfully sold on
October 1, 2017, allowing us to focus our full attention to Mobiquity Networks.
Mobiquity Technologies,
Inc., a New York corporation (the “Company”), is the parent company of its operating subsidiary; Mobiquity Networks,
Inc. (“Mobiquity Networks”). The Company’s wholly-owned subsidiary, Mobiquity Networks has evolved and grown
from a mobile advertising technology company focused on driving Foot-traffic throughout its indoor network, into a next generation
location data intelligence company. Mobiquity Networks provides precise unique, at-scale location data and insights on consumer’s
real-world behavior and trends for use in marketing and research. With its combined first party location data via its advanced
SDK and its various exclusive data sets; Mobiquity Networks provides one of the most accurate and scaled solution for
mobile data collection and analysis, utilizing multiple geo-location technologies. Mobiquity Networks is seeking to implement several
new revenue streams from its data collection and analysis, including, but not limited to; Advertising,
Data
Licensing,
Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research.
GOING CONCERN - The accompanying
consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company's
continued existence is dependent upon the Company's ability to obtain additional debt and/or equity financing to advance its
new technology revenue stream. The Company has incurred losses from continued operations for the years ending December
31, 2017 and December 31, 2016 of $10,245,493 and $10,178,492, respectively. As of December 31, 2017, the Company has
an accumulated deficit of $61,298,475. The Company has had negative cash flows from operating activities of $3,665,537
and $5,929,852 for the years ending December 31, 2017 and 2016, respectively. These factors raise substantial doubt about
the ability of the Company to continue as a going concern.
Management has plans to address the Company’s
financial situation as follows:
In the near term, management plans to continue
to focus on raising the funds necessary to implement the Company’s business plan related to technology. Management will continue
to seek out equity and/or debt financing to obtain the capital required to meet the Company’s financial obligations. There
is no assurance, however, that lenders and investors will continue to advance capital to the Company or that the new business operations
will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability
raises doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that
the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to
finance the Company’s future growth. However, there can be no assurances that the Company’s efforts to raise equity
and debt at acceptable terms or that the planned activities will be successful, or that the Company will ultimately attain profitability.
The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current
commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability
and cash flows from operations to sustain its operations.
PRINCIPLES OF CONSOLIDATION - The
accompanying consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing
& Promotions, Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc., All intercompany accounts and transactions have
been eliminated in consolidation.
ESTIMATES - The preparation of financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS- The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques,
are assigned a hierarchical level.
The following are the hierarchical levels
of inputs to measure fair value:
|
·
|
Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
|
·
|
Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
·
|
Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The carrying amounts of the Company's financial
assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain
notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative
liabilities, at fair value, on a recurring basis under level 3.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Fair value of derivatives
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
666,123
|
|
|
$
|
666,123
|
|
Embedded Conversion Features
The Company evaluates embedded conversion
features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value
recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated
under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature.
Derivative Financial Instruments
The
Company has financial instruments that are considered derivatives or contain embedded features subject to derivative
accounting
related to 15 convertible notes issued totaling $3,234,000 which included a ratchet provision in the
conversion price of $.05 or $.30 or a price equal to the last equity transaction completed by the Company as part of a
subscription agreement
. The notes have maturity dates ranging from February 11, 2018
– March 28, 2018. The Company also has financial instruments that are considered derivatives or contain embedded
features subject to derivative accounting
related to 2,200,000 warrants which included a ratchet provision in the
conversion price of $.05 as part of a conversion of preferred AAA shares, and 1,000,000 warrants which included a ratchet
provision in the conversion price of $.055 as part of a placement fee related to a note.
Embedded
derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the
Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in
their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of
these embedded derivatives for convertible debentures and associated warrants using a multinomial lattice model as of
December 31, 2017. The fair values of the derivative instruments are measured each quarter, which resulted in a gain of
$3,376,620 and initial derivative expense of $1,284,704 during the year ended December 31, 2017. As of December 31, 2017, the
fair market value of the derivatives aggregated $666,123 using the following assumptions: estimated 0.1 to 4.33-year term,
estimated volatility of 183.70% to 415.83%, and a discount rate of 0.00% to 1.87%.
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 December 31, 2017 and 2016, the balances are $56,470 and $193,933, respectively.
CONCENTRATION OF CREDIT RISK - Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and
cash and cash equivalents.
Concentration of credit risk
with respect to trade receivables is generally diversified due to the large number of entities comprising the
Company’s customer base and their dispersion across geographic areas principally within the United States. The Company
routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk
exposure is limited. Our current receivable at December 31, 2017 is all with a single customer. Two customers constitute
75.44% of our sales. Customer A percentage of sales was 42.28% and customer B was 33.16%
The Company places its temporary cash investments
with high credit quality financial institutions. At times, the Company maintains bank account balances, which exceed FDIC limits.
As of December 31, 2017 and 2016, the Company exceeded FDIC limits by $0 and $0, respectively.
REVENUE RECOGNITION – The Company
recognizes revenue, for all revenue streams, when it is realized or realizable and estimable in accordance with ASC 605, “
Revenue
Recognition
”. The Company will recognize revenue only when all of the following criteria have been met:
|
·
|
Persuasive evidence for an agreement exists;
|
|
·
|
Service has been provided or shipment has occurred;
|
|
·
|
The fee is fixed or determinable; and,
|
|
·
|
Collection is reasonably assured.
|
MOBIQUITY NETWORKS – Revenue is recognized
with the billing of an advertising contract or data sale. The customer signs a contract directly with us for an advertising campaign
with mutually agreed upon term and is billed on the start date of the advertising campaign, which are normally in short duration
periods. The second type of revenue is through the licensing of our data. Revenue from data can occur in two ways; the first is
a direct feed, which is billed at the end of each month. The second way is through the purchasing of audience segments. When an
audience segment is purchased, we bill the buyer upon delivery, which is usually 1-2 days for the order date.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - Management
must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts. As of December 31, 2017 and 2016, allowance for doubtful
accounts were $0 and $0, respectively.
PROPERTY AND EQUIPMENT - Property and equipment
are stated at cost. Depreciation is expensed using the straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are being amortized using the straight-line method over the estimated useful lives of the related assets
or the remaining term of the lease. The costs of additions and improvements, which substantially extend the useful life of a particular
asset, are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the
cost and related accumulated depreciation are removed from the account and the gain or loss on disposition is reflected in operating
income.
LONG LIVED ASSETS - Long-lived assets such
as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that
the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on
the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets,
if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its
undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the
asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at
a rate commensurate with the risk associated with the recovery of the assets. The Company recognized no impairment losses for the
period ended December 31, 2017.
PATENTS and TRADEMARKS - Patents and trademarks
developed during the prior years were capitalized for the period of development and testing. Expenditures during the planning stage
and after implementation have been expensed in accordance with ASC 985.
ADVERTISING COSTS - Advertising costs are
expensed as incurred. For the years ended December 31, 2017 and 2016, there were advertising costs of $0 and $3,841, 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 8 “Stock Option Plans” in the Notes to Consolidated
Financial Statements in this report for a more detailed discussion.
BENEFICIAL CONVERSION FEATURES -
Debt instruments that contain a beneficial conversion feature are recorded as deemed interest to the holders of the convertible
debt instruments. The beneficial conversion is calculated as the difference between the fair values of the underlying common stock
less the proceeds that have been received for the debt instrument limited to the value received.
FOREIGN CURRENCY TRANSLATIONS - The Company’s
functional and reporting currency is the U.S. dollar. We owned a subsidiary in Europe with it operations in 2016 consolidated into
our U.S. location. Our subsidiary’s functional currency in 2016 is the EURO. All transactions initiated in EUROs are translated
into U.S. dollars in accordance with ASC 830-30,
“Translation of Financial Statements,”
as follows:
|
(i)
|
Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.
|
|
|
|
|
(ii)
|
Fixed assets and equity transactions at historical rates.
|
|
|
|
|
(iii)
|
Revenue and expense items at the average rate of exchange prevailing during the period.
|
Adjustments arising from such translations
are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive
income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive
income.
No significant realized exchange gains
or losses were recorded since March 7, 2013 (date of acquisition of subsidiary) to December 31, 2016 the date operations were
consolidated into our U.S. location.
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.
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. 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 110,453,240 and 51,912,242 because they are
anti-dilutive, as a result of a net loss for the years ended December 31, 2017 and 2016, respectively.
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS - ASC 606, Revenue from contracts with customers, the effective date for ASC 606 is for annual reporting
periods beginning after December 15, 2017. It provides accounting guidance related to revenue from contracts with customers.
The Guidance applies to all entities and to all customers. The accounting for ASC 606 will take effect for our company
starting in January of 2018.
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.
NOTE 2: PROPERTY AND EQUIPMENT
Property and equipment, net, consist of
the following at December 31:
|
|
USEFUL LIVES
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Furniture and Fixtures
|
|
3 or 5 years
|
|
$
|
55,702
|
|
|
$
|
73,450
|
|
|
|
|
|
|
55,702
|
|
|
|
73,450
|
|
Less Accumulated Depreciation
|
|
|
|
|
55,702
|
|
|
|
64,263
|
|
|
|
|
|
$
|
–
|
|
|
$
|
9,187
|
|
Depreciation expense from
continuing operations for the years ended December 31, 2017 and 2016 was $5,667 and $119,332, respectively. No deposition or
impairment of assets during 2017. In 2016 the company disposed of approximately $736,100 of outdated fixed assets resulting
in a loss on disposal of $17,526. In 2016, the Company performed an impairment assessment in accordance with ASC
360-10-35-17, and determined that an impairment loss of $223,487 of the capitalized costs for internal use software exists
as of December 31, 2016, no impairment loss was recorded for December 31, 2017.
NOTE 3: INTANGIBLE ASSETS
Intangible assets, net, consist of the
following at December 31:
|
|
USEFUL LIVES
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Acquisition of intellectual property (FuturLink)
|
|
5 years
|
|
|
98,000
|
|
|
|
98,000
|
|
|
|
|
|
|
98,000
|
|
|
|
98,000
|
|
Less Accumulated Amortization
|
|
|
|
|
88,040
|
|
|
|
68,440
|
|
|
|
|
|
$
|
9,960
|
|
|
$
|
29,560
|
|
Future amortization, for the years ending
December 31, is as follows:
2018
|
|
|
9,960
|
|
2019
|
|
|
–
|
|
Thereafter
|
|
|
–
|
|
|
|
$
|
9,960
|
|
Amortization expense from continuing
operations for the years ended December 31, 2017 and 2016 was $19,600 and $19,600, respectively.
NOTE 4: CONVERTIBLE DEBT AND DERIVATIVE
LIABILITIES
Summary of Convertible Promissory Notes:
|
|
2017
|
|
|
2016
|
|
Arnost Note
|
|
$
|
–
|
|
|
$
|
322,000
|
|
CAVU Notes, net of $0 for 2017 and $8,379 for 2016
|
|
|
100,000
|
|
|
|
241,621
|
|
Berg Notes (a)
|
|
|
50,000
|
|
|
|
3,722,000
|
|
Investor Notes, net of discounts of $0 and $529,107, respectively
|
|
|
–
|
|
|
|
6,546,654
|
|
Secured Notes (b) net of discounts of $234,502 for 2017 and $0 for 2016
|
|
|
2,999,498
|
|
|
|
–
|
|
Total Debt
|
|
|
3,149,498
|
|
|
|
10,832,275
|
|
Current portion of debt
|
|
|
3,149,498
|
|
|
|
10,832,275
|
|
Long-term portion of debt
|
|
$
|
–
|
|
|
$
|
–
|
|
|
(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.
|
|
|
|
|
(b)
|
On February 28, 2017, the Company entered into an agreement with two non-affiliated persons to provide $1.6 million of short term secured debt financing in three monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible promissory note. In connection with this transaction, the Company agreed to issue an origination fee of 3,200,000 warrants. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction. In August, September and October 2017, the noteholders exchanged their $1,600,000 of notes that were coming due in August through October 2017 plus a 30% premium and accrued interest for new six-month notes in the principal amount of $2,184,000. As additional consideration for the exchange, the Company issued 533,334 shares of common stock..
|
The
Company has financial instruments that are considered derivatives or contain embedded features subject to derivative
accounting
related to 15 convertible notes issued totaling $3,234,000 which included a ratchet provision in the
conversion price of $.05 or $.30 or a price equal to the last equity transaction completed by the Company as part of a
subscription agreement
. The notes have maturity dates ranging from July 31, 2017
– June 13, 2018. The Company also has financial instruments that are considered derivatives or contain embedded
features subject to derivative accounting
related to 2,200,000 warrants which included a ratchet provision in the
conversion price of $.05 as part of a conversion of preferred AAA shares, and 1,000,000 warrants which included a ratchet
provision in the conversion price of $.055 as part of a placement fee related to a note
.
Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the
Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in
their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of
these embedded derivatives for convertible debentures and associated warrants using a multinomial lattice model as of
December 31, 2017. The fair values of the derivative instruments are measured each quarter, which resulted in a gain of
$3,376,620 and initial derivative expense of $1,284,704 during the period ended December 31, 2017. As of December 31, 2017,
the fair market value of the derivatives aggregated $666,123 using the following assumptions: estimated 0.1 to 4.33-year
term, estimated volatility of 183.70% to 415.83%, and a discount rate of 0.00% to 1.87%.
In February 2017, The
Company debt holders converted $3,672,000 of notes being converted at 0.05 per share into 73,440,000 shares of common stock.
In
February 2017, the Company reported that substantially all of its outstanding debt
both secured and unsecured have been converted into equity securities of the Company as outlined below. It should be noted
that the capital transactions below were based on a premium to the average closing sale price of $0.045 per share during the
60 day period prior to February 08, 2017. The Company had outstanding 882,588 shares of newly designated Series AAA
preferred stock and $1,350,000 of convertible notes. The convertible notes consisted of $1,200,000 of secured notes and
$150,000 of unsecured notes. The 882,588
shares of Series AAA preferred stock were issued in exchange for the conversion of principal and accrued interest of
approximately $9,147,891 of unsecured debt. This conversion resulted in a loss on extinguishment of debt of $2,706,197.
Between August and December 2017, the Company issued $3,234,000 of secured notes due in six months to various investors. The
notes are convertible at $.05 per share through the maturity date, subject to adjustment in the event of default. A total of
3,234,000 origination shares of common stock were issued to the noteholders. Thomas Arnost, Chairman of the Company, invested
$100,000 in the loan transaction. The terms of the Series AAA preferred stock can be summarized as follows:
The price of each preferred
share shall be, at the option of the holder, convertible into 100 shares of Common Stock. If the preferred shares are converted,
the subscriber will then receive 100% warrant coverage, with each warrant exercisable at $.05 per share with a cash payment to
the Company through the close of business on December 31, 2019. The preferred shares have no voting or other preferences except
as required by law other than the right of conversion described above and a liquidation preference equal to $.01 per share.
In February 2017, Thomas
Arnost, our Executive Vice Chairman, and another principal stockholder agreed to convert letters of credit in the principal amount
of $2,700,000 and $322,000 of secured debt into shares of common stock at the then marketing price of $.05 per share. Accrued interest
on these obligations were either previously converted into our common stock or were upon conversion of the principal, converted
into common stock at the fair market value of our common stock at each interest accrual date.
A recap of the derivative instruments is as follows:
Derivative Liability 2016
|
Beginning balance
|
|
$
|
(576,557
|
)
|
New Issuances
|
|
|
(1,079,016
|
)
|
Discount on new derivative in excess of note face value
|
|
|
(565,780
|
)
|
Gain on revaluation of derivatives
|
|
|
1,870,653
|
|
Ending balance
|
|
$
|
(350,700
|
)
|
Derivative Liability 2017
|
Beginning balance
|
|
$
|
(350,700
|
)
|
Discount on new issuances
|
|
|
(1,867,287
|
)
|
Discount on new derivatives in excess of note face value
|
|
|
(1,284,704
|
)
|
Gain on revaluation of derivatives
|
|
|
3,376,620
|
|
Conversions
|
|
|
229,939
|
|
Effect of debt extinguishment
|
|
|
(769,991
|
)
|
Ending balance
|
|
$
|
(666,123
|
)
|
NOTE 5: FAIR VALUE MEASUREMENTS
Our financial assets and liabilities carried
at fair value measured on a recurring basis as of December 31, 2017 and 2016, consisted of the following:
|
|
Total fair
|
|
|
Quoted prices
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
value at
|
|
|
in active
|
|
|
observable
|
|
|
unobservable
|
|
|
|
December 31,
|
|
|
markets
|
|
|
inputs
|
|
|
inputs
|
|
Description
|
|
2017
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Derivative liability (1)
|
|
$
|
666,123
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
666,123
|
|
|
|
Total fair
|
|
|
Quoted prices
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
value at
|
|
|
in active
|
|
|
observable
|
|
|
unobservable
|
|
|
|
December 31,
|
|
|
markets
|
|
|
inputs
|
|
|
inputs
|
|
Description
|
|
2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Derivative liability (1)
|
|
$
|
350,700
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
350,700
|
|
|
(1)
|
The Company has estimated the fair value of these embedded derivatives for convertible debenture using a multinomial lattice model.
|
NOTE 6: INCOME TAXES
The provision for income taxes for the
years ended December 31, 2017 and 2016 is summarized as follows:
|
|
|
2017
|
|
|
|
2016
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
–
|
|
|
|
–
|
|
State
|
|
|
–
|
|
|
|
–
|
|
|
|
|
–
|
|
|
|
–
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
–
|
|
|
|
–
|
|
State
|
|
|
–
|
|
|
|
–
|
|
|
|
$
|
–
|
|
|
$
|
–
|
|
The Company has federal and state net operating
loss carry forwards of approximately $60,876,000, which begin to expire 2025 and can be used to reduce future taxable income
through 2034. The Company is open for tax years for the years ended 2008 through present.
The tax effects of temporary differences
which give rise to deferred tax assets (liabilities) are summarized as follows:
|
|
YEARS ENDED DECEMBER 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net operating loss carry-forwards
|
|
$
|
(24,351,000
|
)
|
|
$
|
(20,261,000
|
)
|
Stock based compensation – options/warrants
|
|
|
3,778,000
|
|
|
|
3,540,000
|
|
Stock issued for services
|
|
|
971,000
|
|
|
|
971,000
|
|
Gain on derivative instrument
|
|
|
(2,361,000
|
)
|
|
|
(1,011,000
|
)
|
Disallowed entertainment expense
|
|
|
59,000
|
|
|
|
56,000
|
|
Charitable contribution limitation
|
|
|
11,000
|
|
|
|
11,000
|
|
Preferred Stock
|
|
|
39,000
|
|
|
|
39,000
|
|
Bad debt expense & reserves
|
|
|
47,000
|
|
|
|
47,000
|
|
Penalties
|
|
|
1,000
|
|
|
|
1,000
|
|
Loss on extinguishment of debt
|
|
|
1,743,000
|
|
|
|
114,000
|
|
Beneficial conversion features
|
|
|
119,000
|
|
|
|
119,000
|
|
Mobiquity-Spain – net loss
|
|
|
830,000
|
|
|
|
830,000
|
|
Impairment of long lived assets
|
|
|
89,000
|
|
|
|
89,000
|
|
Stock issued for interest
|
|
|
376,000
|
|
|
|
–
|
|
Nondeductible insurance
|
|
|
10,000
|
|
|
|
–
|
|
Stock incentives
|
|
|
24,000
|
|
|
|
–
|
|
Derivative expense
|
|
|
514,000
|
|
|
|
–
|
|
Amortization of debt discount
|
|
|
2,246,000
|
|
|
|
1,311,000
|
|
Deferred Tax Assets
|
|
|
(15,855,000
|
)
|
|
|
(14,144,000
|
)
|
Less Valuation Allowance
|
|
|
15,855,000
|
|
|
|
14,144,000
|
|
Net Deferred Tax Asset
|
|
$
|
–
|
|
|
$
|
–
|
|
A reconciliation of the federal statutory
rate to the Company’s effective tax rate is as follows:
|
|
YEARS ENDED DECEMBER 31,
|
|
|
|
2016
|
|
|
2015
|
|
Federal Statutory Tax Rate
|
|
|
34.00%
|
|
|
|
34.00%
|
|
State Taxes, net of Federal benefit
|
|
|
6.00%
|
|
|
|
6.00%
|
|
Change in Valuation Allowance
|
|
|
(40.00%
|
)
|
|
|
(40.00%
|
)
|
Total Tax Expense
|
|
|
0.00%
|
|
|
|
0.00%
|
|
NOTE 7: STOCKHOLDERS’ EQUITY (DEFICIT)
Shares issued for services
During the year ended December 31, 2017,
the Company issued 5,038,332 shares of common stock, at $0.05 to $0.13 per share for $406,454 in exchange for services rendered.
Shares issued for accrued interest
During the year ended December 31, 2017,
the Company issued 9,002,164 common shares, at $0.04 to $0.09 per share, valued at $494,492 and AAA preferred shares of 47,588,
at $10.00 per share, valued at $475,841 as payment of interest.
NOTE 8: OPTIONS AND WARRANTS
The Company’s results for the years
ended December 31, 2017 and 2016 include employee share-based compensation expense totaling $595,692 and $683,036, respectively.
Such amounts have been included in the Statements of Operations within selling, general and administrative expenses. No income
tax benefit has been recognized in the statement of operations for share-based compensation arrangements due to a history of operating
losses.
The following table summarizes stock-based
compensation expense for the years ended December 31, 2017 and 2016:
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Employee stock-based compensation - option grants
|
|
$
|
473,192
|
|
|
$
|
603,536
|
|
Employee stock-based compensation-stock grants
|
|
|
–
|
|
|
|
–
|
|
Non-Employee stock-based compensation - option grants
|
|
|
11,500
|
|
|
|
79,500
|
|
Non-Employee stock-based compensation-stock grants
|
|
|
–
|
|
|
|
–
|
|
Non-Employee stock-based compensation-stock warrant
|
|
|
111,000
|
|
|
|
–
|
|
|
|
$
|
595,692
|
|
|
$
|
683,036
|
|
NOTE 9: STOCK OPTION PLANS
During Fiscal 2005, the Company established,
and the stockholders approved, an Employee Benefit and Consulting Services Compensation Plan (the “2005 Plan”) for
the granting of up to 2,000,000 non-statutory and incentive stock options and stock awards to directors, officers, consultants
and key employees of the Company. On June 9, 2005, the Board of Directors amended the Plan to increase the number of stock options
and awards to be granted under the Plan to 4,000,000. During Fiscal 2009, the Company established a plan of long-term stock-based
compensation incentives for selected Eligible Participants of the Company covering 4,000,000 shares. This plan was adopted by the
Board of Directors and approved by stockholders in October 2009 and shall be known as the 2009 Employee Benefit and Consulting
Services Compensation Plan (the “2009 Plan”). In September 2013, the Company’s stockholders approved an increase
in the number of shares covered by the 2009 Plan to 10,000,000. 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 20,000,000 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 10,000,000
shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits to the 2016 Plan. The
2005, 2009 and 2016 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 years ended December 31, 2017 and 2016 are as follows:
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Expected volatility
|
|
|
146.8%
|
|
|
|
135.6%
|
|
Expected dividend yield
|
|
|
0
|
|
|
|
0
|
|
Risk-free interest rate
|
|
|
1.89%
|
|
|
|
1.25%
|
|
Expected term (in years)
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Share
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Outstanding, January 1, 2017
|
|
|
18,315,001
|
|
|
$
|
0.41
|
|
|
|
5.18
|
|
|
|
5,625
|
|
Granted
|
|
|
250,000
|
|
|
$
|
0.05
|
|
|
|
4.00
|
|
|
|
–
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Cancelled / Expired
|
|
|
(1,050,000
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2017
|
|
|
17,515,001
|
|
|
$
|
0.39
|
|
|
|
4.43
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, December 31, 2017
|
|
|
17,037,918
|
|
|
$
|
0.39
|
|
|
|
4.40
|
|
|
|
–
|
|
The weighted-average grant-date fair value
of options granted during the years ended December 31, 2017 and 2016 was $0.05 and $0.08, respectively. The aggregate intrinsic
value of options outstanding and options exercisable at December 31, 2016 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 $0.02 closing price of the Company’s common stock on December 31, 2017.
As of December 31, 2017, the fair value
of unamortized compensation cost related to unvested stock option awards was $24,955.
The option information provided above includes
options granted outside of the Plans, which total 4,115,000 as of December 31, 2017.
The weighted average assumptions made in calculating the fair
value of warrants granted during the years ended December 31, 2017 and 2016 are as follows:
|
|
Years Ended
|
|
|
|
2017
|
|
|
2016
|
|
Expected volatility
|
|
|
157.84%
|
|
|
|
0%
|
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
Risk-free interest rate
|
|
|
1.87%
|
|
|
|
0%
|
|
Expected term (in years)
|
|
|
4.10
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Share
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Outstanding, January 1, 2017
|
|
|
21,252,734
|
|
|
$
|
0.48
|
|
|
|
1.40
|
|
|
|
–
|
|
Granted
|
|
|
7,400,000
|
|
|
$
|
0.06
|
|
|
|
3.02
|
|
|
|
–
|
|
Exercised
|
|
|
(1,916,667
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Cancelled/Expired
|
|
|
(14,754,400
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Outstanding, December 31, 2017
|
|
|
11,981,667
|
|
|
$
|
0.20
|
|
|
|
2.58
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable, December 31, 2017
|
|
|
11,981,667
|
|
|
$
|
0.20
|
|
|
|
2.58
|
|
|
|
–
|
|
NOTE 10: COMMITMENTS AND CONTINGENCIES
COMMITMENTS –
In April 2011, we entered into our agreement
with Simon Property Group, which agreement was amended first in September 2013 and then in July 2014. This second amendment provides
for us to expand our location-based mobile mall network footprint to about 195 current Simon malls across the United States. Our
agreement with Simon currently expires December 31, 2017. Simon is entitled to receive fees from us equal to the greater of a pre-set
per mall fee or a percentage of revenues derived from within the Simon Mall network. The revenue share agreement in which Simon
participates will exceed the minimum annual mall fees if the Company has generated revenues within the Simon network of about $15
million or more in a calendar year. Our agreement with Simon requires the company to maintain letters of credit for each calendar
year under the agreement represented by the minimum amount of fees due for such calendar year. For 2015, the minimum fees of $2.7
million has been secured through two bank letters of credit, one of which was issued in the amount of $1,350,000 utilizing the
funds of a non-affiliated stockholder and the second letter of credit was obtained in the same amount through the funds of Thomas
Arnost, our Executive Chairman. In the event Simon draws down upon either letter of credit, we have until the next minimum payment
due date (approximately 90 days) after the draw down to obtain replacement letters of credit. Each person who secured our letters
of credit has the opportunity to notify us that they wish to turn the cash funds securing the letters of credit over to us and
to convert such funds into Common Stock currently at a conversion price of $.20 per share. Also, each person who issued the letter
of credit is receiving quarterly, while the letters of credit are outstanding, options to purchase 125,000 shares of Common Stock,
exercisable at the prevailing market price per share on the date of grant and interest at the rate of 8% per annum on the monies
that they have had to set aside in their bank accounts and are unable to have access to such monies. In April, July and October
2016, and January, March 2017, Simon drew down on each bank letter of credit for an aggregate of $1,350,000 owed to each letter
of credit provider. Simon agreement expired in May 2017.
Pursuant to a master agreement effective
August, 2015, we entered into an agreement with PREIT pursuant to which we have the right to install our Mobi-Beacons and to send
information across the air space of the common areas of our PREIT mall network, which will include approximately 27 malls in select
states in the United States. Our right to install our Mobi-Beacons to market and sell third party paid advertising in the interior
common areas of these malls is exclusive. Under our agreement between us and PREIT, PREIT is entitled to an agreed upon revenue
share over the four-year term of the agreement. In the event the net revenue share as defined in the agreement is not attained
for any measurement period, also as defined in the agreement, either party may terminate the agreement upon 90 days prior written
notice. PREIT may also terminate the agreement if it determines that Mobiquity’s installed equipment is not adequate and/or
provides a negative user experience for the visitors to the PREIT malls. The agreement also provides for PREIT to adjust the number
of malls subject to the agreement from time-to-time based upon changes in its beneficial ownership in the malls. This agreement
is no longer material as it is a revenue sharing agreement with respect to a discontinued line of business.
In January 2016, we entered into
a license agreement with GGP, with an effective date of November 20, 2015. Pursuant to our agreement with GGP, we have the right
to install Mobi-Beacons to send information across the air space of the common areas of our GGP mall network in up to 120 malls
across the United States. Our right to install our Mobi-Beacons to market and sell third party paid advertising in the interior
common areas of these malls is exclusive. In the fourth quarter of 2016, GGP terminated this agreement.
Pursuant to a master agreement entered
into in 2015, we entered into an agreement with Rouse pursuant to which we have the right to install our Mobi-Beacons to send information
across the air space of the common areas of our Rouse mall network, which will include approximately 30 malls in select states
in the United States. Our right to install our Mobi-Beacons to market and sell third party paid advertising in the interior common
areas of these malls is exclusive. Under our agreement between us and Rouse, Rouse is entitled to an agreed upon revenue share
over the four-year term of the agreement. In the event the net revenue share as defined in the agreement is not attained for any
measurement period, also as defined in the agreement, either party may terminate the agreement upon 90 days prior written notice.
Either party may also terminate the agreement due to a material breach which is not cured within 30 days of written notice. Also,
Rouse upon at least 60 days written notice to us prior to the end of the second contract year, may terminate the agreement with
respect to any participating property for any reason at the end of the second contract year. The agreement also provides for Rouse
to adjust the number of malls subject to the agreement from time-to-time based upon changes in its beneficial ownership in the
malls. This agreement is no longer material as it is a revenue sharing agreement with respect to a discontinued line of business.
In February 2012, the Company entered into
a lease agreement for new executive office space of approximately 4,200 square feet located at 600 Old Country Road, Suite 541,
Garden City, NY 11530. The lease agreement is for 63 months, commencing April 2012 and expiring June 2017. The annual rent under
this office facility for the first year was estimated at $127,000, including electricity, subject to an annual increase of 3%.
This lease was not renewed.
Our lease for approximately 2,000 square
feet of space at an annual cost of approximately $28,600 (inclusive of taxes) at 1105 Portion Road, Farmingville, NY 11738 expired
in November 2013. We leased this property on a month to month basis for approximately $2,500 per month from December 2014 to September
2017, with a 5% increase in rent each month until Ace was sold in October 2017.
In March of 2014, we
entered into a month-to-month lease agreement for approximately 400 square feet of office space located in Manhattan, NY at a monthly
cost of $3,700. In May of 2015 we moved to a larger location with the same landlord on a month to month basis for $4,700 each month.
In 2017 the Company is leasing on a month-to-month basis two fully furnished executive suites in Manhattan at a monthly cost of
approximately $6,700. These executive suites are located at 85 Broadway, 16
th
Floor, Suites 16-035 and 16-040, New York,
NY 10010.
Minimum future rentals under non-cancelable
lease commitments are as follows:
YEARS ENDING DECEMBER 31,
|
|
|
|
|
2018
|
|
|
–
|
|
2019
|
|
|
–
|
|
2019 and thereafter
|
|
|
–
|
|
|
|
$
|
–
|
|
Rent and real estate tax expense was approximately
$1,032,272 and $3,534,439 for the years December 31, 2017 and 2016, respectively.
EMPLOYMENT CONTRACTS –
Dean L. Julia
On March 1, 2005, the Company entered into
employment contracts with Dean L. Julia. The employment agreement provides for minimum annual salaries plus bonuses equal to 5%
of pre-tax earnings (as defined) and other perquisites commonly found in such agreements.
On August 22, 2007, the Company approved
a three-year extension of the employment contract with Mr. Julia expiring on February 28, 2011. The employment agreements provided
for minimum annual salaries with scheduled increases per annum to occur on every anniversary date of the contract and extension
commencing on March 1, 2008. A signing bonus of options to purchase 150,000 shares granted to Mr. Julia were fully vested at the
date of the grant and exercisable at $1.20 per share through August 22, 2017. Ten year options to purchase 50,000 shares of common
stock are to be granted at fair market value on each anniversary date of the contract and extension commencing March 1, 2008. Termination
pay of one year base salary based upon the scheduled annual salary of Mr. Julia for the next contract year, plus the amount of
bonuses paid (or entitle to be paid) to Mr. Julia for the current fiscal year of the preceding fiscal year, whichever is higher.
On April 7, 2010, the Board of Directors
approved a five-year extension of the employment contract of Dean L. Julia to expire on March 1, 2015. The Board approved
the continuation of Mr. Julia’s current salary and scheduled salary increases on March 1
st
of each year. The Board
also approved a signing bonus of stock options to purchase 200,000 shares granted to each officer which is fully vested at the
date of grant and exercisable at $.50 per share through April 7, 2020; ten-year stock options to purchase 100,000 shares of Common
Stock to be granted to Mr. Julia at fair market value on each anniversary date of the contract and extension thereof commencing
March 1, 2011; and termination pay of one year base salary based upon the scheduled annual salary of Mr. Julia for the next contract
year plus the amount of bonuses paid or entitled to be paid to Mr. Julia for the current fiscal year or the preceding fiscal year,
whichever is higher. In the event of termination, Mr. Julia will continue to receive all benefits included in the employment
agreement through the scheduled expiration date of said employment agreement prior to the acceleration of the termination date
thereof.
In July 2012, the Company approved and
in January 2013 the Company implemented amending the employment agreement of Mr. Julia to expire on February 28, 2017, subject
to an automatic one year renewal on March 1, 2013 and on each March 1
st
thereafter, unless the Employment Agreement
is terminated in accordance with its terms on or before December 30
th
of the prior calendar year. In the event of termination
without cause, the executives will continue to receive all salary and benefits included in the employment agreement through the
scheduled expiration date of said employment agreement prior to the acceleration of the termination date thereof, plus one year
termination pay.
On May 28, 2013, the Company approved amending
the employment agreement of Mr. Julia to provide that Mr. Julia may choose an annual bonus equal to 5% of pre-tax earnings for
the most recently completed year before deduction of annual bonuses paid to officers or, in the event majority control of the Company
is acquired by a person or a group of persons during the prior fiscal year, Mr. Julia may choose to receive the aforementioned
bonus or 1% of the control consideration paid by acquirer(s) to acquire majority control of the Company.
Michael Trepeta
In April 2017, Michael Trepeta, who had
an identical agreement to Mr. Julia and served as Co-Chief Executive Officer and President of the Company, entered into a separation
agreement with the Company pursuant to which he resigned as an executive officer and director. There is currently a vacancy in
the Board of Directors of the Company. After his resignation, the Board changed Dean Julia’s title from Co-Chief Executive
Officer to Chief Executive Officer.
Pursuant to Michael Trepeta’s separation
agreement, Mr. Trepeta is entitled to the following benefits:
|
·
|
Six months’ coverage under the Company’s existing director/officer insurance policy;
|
|
·
|
Indemnification per existing employment agreement;
|
|
·
|
Expense reimbursement through May 31, 2017;
|
|
·
|
All options vested shall continue until their normal expiration date; and
|
Thomas Arnost
In December 2014, we entered into a three-year
employment agreement with Thomas Arnost serving as Executive Chairman of the board. Mr. Arnost receives a monthly salary of
$10,000 plus an annual grant of options for serving on the board of directors. In the event of his termination, by Mr. Arnost or
by the company for cause, Mr. Arnost will receive his pay through the termination date. In the event that Mr. Arnost is terminated
without cause, he shall be entitled to receive his salary paid through the end of the term of his agreement. Mr. Arnost may terminate
the agreement at any time by giving three months’ prior written notice to our board of directors. Mr. Arnost will also be
entitled to indemnification against all claims, judgments, damages, liabilities, costs and expenses (including reasonably legal
fees) arising out of, based upon or related to his performance of services to us, to the maximum extent permitted by law. This
agreement has expired.
Sean Trepeta
In December 2014, Mobiquity Networks entered
into an employment agreement with Sean Trepeta, to serve as President of Mobiquity Networks as an employee at will. Mr. Trepeta,
as a full-time employee, is to be paid a salary at the rate of $20,000 per month. Upon the execution of the agreement, he received
10-year options to purchase 1,500,000 shares of our common stock vesting quarterly over a period of three years. For calendar 2015,
he will be entitled to a bonus of $125,000 upon revenues of Mobiquity Networks achieving a minimum of $6 million in revenues and
a further bonus of $125,000 for a total of $250,000 at such time as Mobiquity Network’s revenues achieve a minimum of $12
million, it being understood that any revenues which do not have a 30% margin shall not count toward these totals. All options
granted to Mr. Trepeta will become immediately vested in the event of a change in control of our Company or sale of substantially
all of our assets. In the event we terminate Mr. Trepeta without cause, after six months of continued employment under the
employment agreement, Mr. Trepeta is entitled to receive three months’ severance pay.
Paul Bauersfeld
In December 2014, we entered into an employment
agreement with Paul Bauersfeld, our Chief Technology Officer, who is an employee at will. Mr. Bauersfeld, as a full-time employee,
is to be paid a salary at the rate of $25,000 per month. Upon the execution of the agreement, he received 10-year options to purchase
1,000,000 shares of our common stock vesting quarterly over a period of three years. For calendar 2015, he will be entitled to
a bonus of $125,000 upon revenues of Mobiquity Networks achieving a minimum of $6 million in revenues and a further bonus of $125,000
for a total of $250,000 at such time as Mobiquity Network’s revenues achieve a minimum of $12 million, it being understood
that any revenues which do not have a 30% margin shall not count toward these totals. The foregoing compensatory arrangements with
Mr. Bauersfeld is in addition to the non-statutory stock options to purchase 2,600,000 shares of our common stock previously granted
to Mr. Bauersfeld. All options granted to Mr. Bauersfeld will become immediately vested in the event of a change of control
of our company or sale of substantially all of our assets. In the event we terminate Mr. Bauersfeld without cause. Mr. Bauersfeld
is entitled to receive six months’ severance pay.
Sean McDonnell
Sean McDonnell, our Chief Financial Officer,
is an employee at will and is currently receiving a salary of $132,000 per annum.
Transactions with major customers
During the year ended December 31,
2017, two customers accounted for approximately 75% of revenues and for the year ended December 31, 2016, three customers
accounted for all our revenues.
NOTE 11: DISCONTINUED OPERATIONS
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,945,940
|
|
|
$
|
2,202,591
|
|
Cost of service revenue
|
|
|
(1,495,507
|
)
|
|
|
(1,564,201
|
)
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
450,433
|
|
|
|
638,390
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
–
|
|
|
|
2,500
|
|
Depreciation
|
|
|
1,229
|
|
|
|
11,312
|
|
Amortization
|
|
|
7,022
|
|
|
|
9,613
|
|
Rent
|
|
|
80,286
|
|
|
|
75,387
|
|
Other SG & A
|
|
|
477,077
|
|
|
|
1,067,129
|
|
Interest
|
|
|
34,427
|
|
|
|
4,460
|
|
|
|
|
|
|
|
|
|
|
Loss on discontinued operations, net
|
|
$
|
(149,608
|
)
|
|
$
|
(532,011
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
–
|
|
|
$
|
298,928
|
|
Inventory, net
|
|
|
–
|
|
|
|
79,291
|
|
Property and equipment
|
|
|
–
|
|
|
|
6,205
|
|
Intangibles, net
|
|
|
–
|
|
|
|
7,557
|
|
Other
|
|
|
–
|
|
|
|
58,699
|
|
Assets of discontinued operations, net
|
|
|
–
|
|
|
|
450,680
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
–
|
|
|
|
295,962
|
|
Accrued expenses
|
|
|
–
|
|
|
|
211,080
|
|
Liabilities of discontinued operations, net
|
|
$
|
–
|
|
|
$
|
507,042
|
|
NOTE 12: SUBSEQUENT EVENTS
In the first quarter of 2018, the Company entered into an agreement with a non-affiliated persons to provide $1,000,000 of short term secured debt
financing in four monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible promissory
note. In connection with this transaction, the Company agreed to issue an origination fee of 1,000,000 shares of restricted common
stock. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction.