Item
1. Financial Statements
MOBIQUITY
TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
Audited
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
121,034
|
|
|
$
|
56,470
|
|
Accounts receivable, net
|
|
|
221,960
|
|
|
|
18,576
|
|
Prepaid expenses and other current assets
|
|
|
11,700
|
|
|
|
17,638
|
|
Total Current Assets
|
|
|
354,694
|
|
|
|
92,684
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
160
|
|
|
|
9,960
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
Security deposit
|
|
|
9,900
|
|
|
|
11,275
|
|
Investment in corporate stock
|
|
|
7,560,000
|
|
|
|
–
|
|
Total Other Assets
|
|
|
7,569,900
|
|
|
|
11,275
|
|
Total Assets
|
|
$
|
7,924,754
|
|
|
$
|
113,919
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
420,189
|
|
|
$
|
458,280
|
|
Accrued expenses
|
|
|
1,320,911
|
|
|
|
735,431
|
|
Derivative liability
|
|
|
11,119,717
|
|
|
|
666,123
|
|
Note payables-Bank
|
|
|
–
|
|
|
|
54,644
|
|
Convertible promissory notes, net
|
|
|
4,390,010
|
|
|
|
3,149,498
|
|
Total Current Liabilities
|
|
|
17,250,827
|
|
|
|
5,063,976
|
|
|
|
|
|
|
|
|
|
|
AAA Preferred Stock, $.0001 par value; 5,000,000 shares authorized 850,588 and 850,588 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
|
|
|
11,552,513
|
|
|
|
11,552,513
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit:
|
|
|
|
|
|
|
|
|
Preferred Stock, $.0001 par value; 5,000,000 shares authorized, 240,000 and 240,000 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
|
|
|
25
|
|
|
|
25
|
|
Common stock, $.0001 par value; 900,000,000 and 900,000,000 shares authorized; 377,975,600 and 199,375,600 shares issued and outstanding at June 30, 2018, and December 31, 2017, respectively
|
|
|
37,810
|
|
|
|
19,850
|
|
Additional paid-in capital
|
|
|
60,531,589
|
|
|
|
44,776,029
|
|
Stock subscription
|
|
|
(260,000
|
)
|
|
|
–
|
|
Accumulated deficit
|
|
|
(81,188,010
|
)
|
|
|
(61,298,474
|
)
|
Total Stockholders' Deficit
|
|
|
(20,878,586
|
)
|
|
|
(16,502,570
|
)
|
Total Liabilities and Stockholders' Deficit
|
|
$
|
7,924,754
|
|
|
$
|
113,919
|
|
See
notes to condensed consolidated financial statements
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed Consolidated Statements of Operations
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
241,573
|
|
|
$
|
100,204
|
|
|
$
|
280,276
|
|
|
$
|
181,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenues
|
|
|
324,984
|
|
|
|
309,739
|
|
|
|
386,101
|
|
|
|
406,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
(83,411
|
)
|
|
|
(209,535
|
)
|
|
|
(105,825
|
)
|
|
|
(224,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
782,410
|
|
|
|
1,413,197
|
|
|
|
1,673,414
|
|
|
|
3,024,957
|
|
Total
Operating Expenses
|
|
|
782,410
|
|
|
|
1,413,197
|
|
|
|
1,673,414
|
|
|
|
3,024,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(865,821
|
)
|
|
|
(1,622,732
|
)
|
|
|
(1,779,239
|
)
|
|
|
(3,248,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(928,121
|
)
|
|
|
(758,107
|
)
|
|
|
(1,474,133
|
)
|
|
|
(1,891,235
|
)
|
Gain/(Loss)
on Derivative Instrument
|
|
|
(263,225
|
)
|
|
|
1,006,309
|
|
|
|
(9,246,435
|
)
|
|
|
1,284,031
|
|
Initial
derivative expense
|
|
|
(314,822
|
)
|
|
|
(181,265
|
)
|
|
|
(559,728
|
)
|
|
|
(1,284,704
|
)
|
Gain/(Loss)
on Settlement of Debt
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,706,197
|
)
|
Impairment
of intangible assets
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(12,127
|
)
|
Loss
on sale of company stock
|
|
|
(6,965,000
|
)
|
|
|
–
|
|
|
|
(6,965,000
|
)
|
|
|
–
|
|
Total
Other Income (Expense)
|
|
|
(8,471,168
|
)
|
|
|
66,937
|
|
|
|
(18,245,296
|
)
|
|
|
(4,610,232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
(9,336,989
|
)
|
|
$
|
(1,555,795
|
)
|
|
|
(20,024,535
|
)
|
|
$
|
(7,859,229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
13,047
|
|
Unrealized gain on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising during period
|
|
|
135,000
|
|
|
|
–
|
|
|
|
135,000
|
|
|
|
–
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations of discontinued entity
|
|
|
–
|
|
|
|
(13,113
|
)
|
|
|
–
|
|
|
|
(244,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Comprehensive Loss
|
|
$
|
(9,201,989
|
)
|
|
$
|
(1,568,908
|
)
|
|
$
|
(19,889,535
|
)
|
|
$
|
(8,090,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
|
226,733,752
|
|
|
|
191,606,423
|
|
|
|
227,203,861
|
|
|
|
170,802,429
|
|
See notes to condensed
consolidated financial statements
MOBIQUITY
TECHNOLOGIES,
INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30,
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(20,024,535
|
)
|
|
$
|
(7,859,229
|
)
|
Adjustments to reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation Expense
|
|
|
–
|
|
|
|
6,451
|
|
Amortization - Intangible Assets
|
|
|
9,800
|
|
|
|
14,300
|
|
Amortization - Debt discount
|
|
|
874,443
|
|
|
|
1,363,013
|
|
Common stock issued for services
|
|
|
189,740
|
|
|
|
314,310
|
|
Common stock issued for interest
|
|
|
406,375
|
|
|
|
–
|
|
Loss on sale of company stock
|
|
|
6,965,000
|
|
|
|
–
|
|
Change in derivative instrument
|
|
|
9,246,435
|
|
|
|
(1,284,031
|
)
|
Stock-based compensation
|
|
|
327,405
|
|
|
|
425,358
|
|
Initial derivative expense
|
|
|
559,728
|
|
|
|
1,284,704
|
|
Gain on settlement of debt
|
|
|
–
|
|
|
|
2,706,197
|
|
Loss on disposal of assets
|
|
|
–
|
|
|
|
12,241
|
|
Expenses paid from note
|
|
|
–
|
|
|
|
567,737
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(203,384
|
)
|
|
|
(84,676
|
)
|
Inventory
|
|
|
–
|
|
|
|
13,149
|
|
Prepaid expenses and other assets
|
|
|
7,313
|
|
|
|
48,461
|
|
Investment in corporate stock
|
|
|
(7,560,000
|
)
|
|
|
–
|
|
Accounts payable
|
|
|
(38,092
|
)
|
|
|
(163,310
|
)
|
Accrued expenses and other current liabilities
|
|
|
137,872
|
|
|
|
361,064
|
|
Accrued interest
|
|
|
447,608
|
|
|
|
–
|
|
Total adjustments
|
|
|
11,370,243
|
|
|
|
5,584,968
|
|
Net Cash Used in Operating Activities
|
|
|
(8,654,292
|
)
|
|
|
(2,274,261
|
)
|
Net Cash Used in Operating Activities-discontinued operations
|
|
|
–
|
|
|
|
(244,298
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of notes, net
|
|
|
1,273,500
|
|
|
|
1,735,000
|
|
Proceeds from issuance of common stock
|
|
|
460,000
|
|
|
|
311,250
|
|
Proceeds received from exercising warrants
|
|
|
–
|
|
|
|
95,834
|
|
Proceeds from the collection of stock subscription receivable
|
|
|
200,000
|
|
|
|
456,503
|
|
Stock subscription receivable
|
|
|
(260,000
|
)
|
|
|
–
|
|
Cash received from bank loans
|
|
|
143,077
|
|
|
|
–
|
|
Cash paid on bank loans
|
|
|
(197,721
|
)
|
|
|
–
|
|
Loss on sale of company stock
|
|
|
6,965,000
|
|
|
|
–
|
|
Net Cash Provided by Financing Activities
|
|
|
8,583,856
|
|
|
|
2,598,587
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
64,564
|
|
|
|
80,028
|
|
Cash and Cash Equivalents, beginning of period
|
|
|
56,470
|
|
|
|
213,184
|
|
Change in foreign currency
|
|
|
–
|
|
|
|
13,047
|
|
Unrealized gain on securities
|
|
|
135,000
|
|
|
|
–
|
|
Cash and Cash Equivalents, end of period
|
|
$
|
121,034
|
|
|
$
|
306,259
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure Information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
5,000
|
|
|
$
|
3,140
|
|
Cash paid for taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
Non-cash Financing and Investing Activities:
|
|
|
|
|
|
|
|
|
Stock issued for interest
|
|
$
|
406,375
|
|
|
$
|
–
|
|
Original debt discount against derivative liabilities
|
|
$
|
–
|
|
|
$
|
1,600,000
|
|
Investment in corporate stock
|
|
$
|
7,425,000
|
|
|
$
|
–
|
|
Conversion of note and interest into AAA Preferred and Common Stock
|
|
$
|
–
|
|
|
$
|
12,791,476
|
|
Recognition of debt discount
|
|
$
|
1,123,931
|
|
|
$
|
294,939
|
|
See
notes to condensed consolidated financial statements.
MOBIQUITY
TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE
OF OPERATIONS — On September 10, 2013, Mobiquity Technologies, Inc. changed its name from Ace Marketing & Promotions,
Inc. “the Company” or “Mobiquity”). We operate through a wholly-owned U.S. subsidiary, named, Mobiquity
Networks, Inc. Mobiquity Networks owns 100% of Mobiquity Wireless S.L.U, a company incorporated in Spain. This corporation had
an office in Spain to support our U.S. operations, which office was closed in the fourth quarter of 2016. Ace Marketing, its legacy
marketing and promotions business was successfully sold on October 1, 2017, allowing us to focus our full attention to Mobiquity
Networks.
Mobiquity
Technologies, Inc., a New York corporation (the “Company”), is the parent company of its operating subsidiary; Mobiquity
Networks, Inc. (“Mobiquity Networks”). The Company’s wholly-owned subsidiary, Mobiquity Networks has evolved
and grown from a mobile advertising technology company focused on driving Foot-traffic throughout its indoor network, into a next
generation location data intelligence company. Mobiquity Networks provides precise unique, at-scale location data and insights
on consumer’s real-world behavior and trends for use in marketing and research. With its combined first party location data
via its advanced SDK and its various exclusive data sets; Mobiquity Networks provides one of the most accurate and scaled solution
for mobile data collection and analysis, utilizing multiple geo-location technologies. Mobiquity Networks is seeking to implement
several new revenue streams from its data collection and analysis, including, but not limited to; Advertising,
Data
Licensing,
Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research.
GOING CONCERN - The accompanying condensed
financial statements have been prepared assuming the Company will continue as a going concern. The Company's continued existence
is dependent upon the Company's ability to obtain additional debt and/or equity financing to advance its new technology revenue
stream. The Company has incurred losses from continued operations for the six months ended June 30, 2018 of $20,024,535. As of
June 30, 2018, the Company has an accumulated deficit of $81,188,010. The Company has had negative cash flows from operating activities
of $8,654,292, for the six months ended June 30, 2018. These factors raise substantial doubt about the ability of the Company
to continue as a going concern.
Management
has plans to address the Company’s financial situation as follows:
In
the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business
plan related to technology. Management will continue to seek out equity and/or debt financing to obtain the capital required to
meet the Company’s financial obligations. There is no assurance, however, that lenders and investors will continue to advance
capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional
funding and the potential inability to achieve profitability raises doubts about the Company’s ability to continue as a
going concern.
In
the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash
flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the
Company’s efforts to raise equity and debt at acceptable terms or that the planned activities will be successful, or that
the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate
sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability
of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
PRINCIPLES
OF CONSOLIDATION — The accompanying consolidated financial statements include the accounts, of Mobiquity Technologies, Inc.,
formerly known as Ace Marketing & Promotions, Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc.
The
Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, the Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 2018 and 2017 and the Condensed Statements of Cash Flows for the six months
ended June 30, 2018 and 2017 have been prepared by us without audit, and in accordance with the requirements of Form 10-Q and,
therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results
of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. In
our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present
fairly in all material respects our financial position as of June 30, 2018, results of operations for the three months and six
months ended June 30, 2018 and 2017 and cash flows for the six months ended June 30, 2018 and 2017. All such adjustments are of
a normal recurring nature. The results of operations and cash flows for the three months and six months ended June 30, 2018 and
2017 are not necessarily indicative of the results to be expected for the full year. We have evaluated subsequent events through
the filing of this Form 10-Q with the SEC and determined there have not been any events that have occurred that would require
adjustments to our unaudited Condensed Financial Statements.
ESTIMATES
— The preparation of financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
— For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable,
accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their
short maturities.
FASB ASC Topic 820,
Fair Value
Measurements and Disclosures
, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC
Topic 825,
Financial Instruments
, defines fair value, and establishes a three-level valuation hierarchy for disclosures
of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the
consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable
estimate of their fair values because of the short period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
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
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
11,119,717
|
|
|
$
|
11,119,717
|
|
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 22 convertible notes issued totaling
$4,609,000 which have a variable conversion price equal to 50% of the lowest volume weighted average price in the 30 days prior
to conversion
. The notes have maturity dates ranging from February 2, 2018 – October
21, 2018. The Company also has financial instruments that are considered derivatives or contain embedded features subject to derivative
accounting
related to 2,200,000 warrants which included a ratchet provision in the conversion price of $.05 as part of
a conversion of preferred AAA shares, and 1,000,000 warrants which included a ratchet provision in the conversion price of $.055
as part of a placement fee related to a note.
Embedded derivatives are valued separately
from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures
these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations
during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures
and associated warrants using a multinomial lattice model as of June 30, 2018. The fair values of the derivative instruments are
measured each quarter, which resulted in a loss of $9,246,435 and derivative expense of $559,728 during the six months ended June
30, 2018. As of June 30, 2018, the fair market value of the derivatives aggregated $11,119,717 using the following assumptions:
estimated 0.1 to 4.1-year term, estimated volatility of 196.98% to 394.26%, and a discount rate of 0.00% to 2.09%.
CASH
AND CASH EQUIVALENTS — The Company considers all highly liquid debt instruments with a maturity of three months or less,
as well as bank money market accounts, to be cash equivalents. As of June 30, 2018, and December 31, 2017, the balances were $121,034
and $56,470, respectively.
CONCENTRATION
OF CREDIT RISK — Financial instruments, which potentially subject the Company to concentrations of credit risk, consist
principally of trade receivables and cash and cash equivalents.
Concentration
of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s
customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses
the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. Our
current receivables at June 30, 2018 are with five customers. One customer constitutes 82.79% of our sales.
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 June 30, 2018, and December 31, 2017, the Company did not exceed FDIC limits.
REVENUE
RECOGNITION — The Company recognized revenue on arrangements in accordance with FASB Codification
Topic 606, Revenue from Contracts with Customers. Revenue represents amounts earned for data licensing arrangements
consisting of flat fee, per use basis or revenue share. Licensee is sent data on a daily basis, has use of the data for a period
of time based on the contract life between one month to one year.
We
recognize revenues in the period in which the data transmission is provided to the licensee.
Under
these policies, the Company evaluates each of these criteria as follows:
|
•
|
Evidence of an arrangement.
We consider a signed insertion order or contract by the licensee or its agency to be evidence of an arrangement.
|
|
•
|
Delivery. Delivery
is considered to occur daily with the transmission of the data from our network servers to the licensee.
|
|
•
|
Fixed or determinable
fee. The Company recognizes revenue for data license arrangements ratably over the term of the insertion order or contract.
Our arrangements with the licensee is noted in the signed contracts which specifies the price to be paid and due date of remittance.
Contracts that include fixed-fee data transmission are invoiced upon acceptance of the insertion order or contract and billed
at time of delivery. The Company’s terms as stated in the contracts. Final billing is based on usage of delivered data.
At the end of the period (usually monthly) an acknowledgment of data amount delivered is sent to licensee, who then verifies
usage and at the point a final invoice is generated.
|
|
•
|
Collection is deemed
reasonably assured. We deem collection reasonably assured if we expect that the licensee will be able to pay the amounts under
the arrangement as payments become due. Collection is deemed not reasonably assured when a licensee is perceived to be in
financial distress, which may be evidenced by weak industry conditions, a bankruptcy filing, or previously billed amounts
that are past due. If we determine that collection is not reasonably assured, then we would defer the revenue and recognize
the revenue upon cash collection.
|
|
•
|
No other warranties
and or obligations are implied or due once the data transmission has been completed with the licensee.
|
MOBIQUITY
NETWORKS — Revenue is recognized with the billing of an advertising contract or data sale. The customer signs a contract
directly with us for an advertising campaign with mutually agreed upon term and is billed on the start date of the advertising
campaign, which are normally in short duration periods. The second type of revenue is through the licensing of our data. Revenue
from data can occur in two ways; the first is a direct feed, which is billed at the end of each month. The second way is through
the purchasing of audience segments. When an audience segment is purchased, we bill the buyer upon delivery, which is usually
1-2 days for the order date.
ALLOWANCE
FOR DOUBTFUL ACCOUNTS — Management must make estimates of the collectability of accounts receivable. Management specifically
analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic
trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of June 30,
2018, and December 31, 2017, allowance for doubtful accounts were $0 and $0, respectively.
PROPERTY
AND EQUIPMENT — Property and equipment are stated at cost. Depreciation is expensed using the straight-line method over
the estimated useful lives of the related assets. Leasehold improvements are being amortized using the straight-line method over
the estimated useful lives of the related assets or the remaining term of the lease. The costs of additions and improvements,
which substantially extend the useful life of a particular asset, are capitalized. Repair and maintenance costs are charged to
expense. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the account
and the gain or loss on disposition is reflected in operating income.
LONG
LIVED ASSETS — Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever
facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to
be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future
cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the
long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between
the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the
expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company
recognized no impairment losses for the period ended June 30, 2018.
PATENTS
and TRADEMARKS — Patents and trademarks developed during the prior years were capitalized for the period of development
and testing. Expenditures during the planning stage and after implementation have been expensed in accordance with ASC 985.
ADVERTISING
COSTS — Advertising costs are expensed as incurred. For the quarter ended June 30, 2018 and for the year ended December
31, 2017, there were no advertising costs.
ACCOUNTING
FOR STOCK BASED COMPENSATION — Stock based compensation cost is measured at the grant date fair value of the award and is
recognized as expense over the requisite service period. The Company uses the Black-Sholes option-pricing model to determine fair
value of the awards, which involves certain subjective assumptions. These assumptions include estimating the length of time employees
will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company’s
common stock price over the expected term (“volatility”) and the number of options for which vesting requirements
will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates of fair
value stock-based compensation, and the related amount recognized on the consolidated statements of operations. Refer to Note
8 “Stock Option Plans” in the Notes to Consolidated Financial Statements in this report for a more detailed discussion.
BENEFICIAL
CONVERSION FEATURES — Debt instruments that contain a beneficial conversion feature are recorded as deemed interest to the
holders of the convertible debt instruments. The beneficial conversion is calculated as the difference between the fair values
of the underlying common stock less the proceeds that have been received for the debt instrument limited to the value received.
INCOME
TAXES — Deferred income taxes are recognized for temporary differences between financial statement and income tax basis
of assets and liabilities for which income tax or tax benefits are expected to be realized in future years. A valuation allowance
is established to reduce deferred tax assets, if it is more likely than not, that all or some portion of such deferred tax assets
will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes
the enactment date.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS —
Revenue from Contracts with Customers (Topic 606)
. The company adopted Revenue
Recognition Standard, ASC 606 on January 1, 2018 and after for the recognition for our revenue policy.
We
have completed our assessment of the impact under the new revenue standard on our condensed financial statements. Based on our
assessment, we have concluded that our financial statements will not be materially impacted upon adoption.
NOTE
2: LOSS PER SHARE
Basic
loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Dilutive loss per share gives effect to stock options and warrants, which are considered to be dilutive common stock
equivalents. Basic loss per common share was computed by dividing net loss by the weighted average number of shares of common
stock outstanding. The number of common shares potentially issuable upon the exercise of certain options and warrants that were
excluded from the diluted loss per common share calculation was approximately 357,519,663 because they are anti-dilutive as a
result of a net loss for the six months ended June 30, 2018.
NOTE
3: CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES
Summary
of Convertible Promissory Notes:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
CAVU Notes, net
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
Berg Note
|
|
|
50,000
|
|
|
|
50,000
|
|
Secured and unsecured Notes net of discounts of $368,990 for June 30, 2018 and $234,502 for December 31, 2017
|
|
|
4,240,010
|
|
|
|
2,999,498
|
|
Total Debt
|
|
|
4,390,010
|
|
|
|
3,149,498
|
|
Current portion of debt
|
|
|
4,390,010
|
|
|
|
3,149,498
|
|
Long-term portion of debt
|
|
$
|
–
|
|
|
$
|
–
|
|
In
the first quarter of 2018, the Company entered into agreements with non-affiliated persons to provide $1,000,000 of short term
secured debt financing in four monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible
promissory note. In connection with this transaction, the Company agreed to issue an origination fee of 1,000,000 shares of restricted
common stock. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction. Each of these new notes are on
the terms of the Company's 10% Senior Secured debt.
The
Company's 10% Senior Secured Debt consists of 19 convertible notes issued totaling $4,234,000. These notes mature 6 months from
the date of issuance, accrue interest at 10%, and had a base conversion price of $.05. As of June 30, 2018, the 10% Senior Secured
Debt notes are in default for breach of covenants due to notes which have matured during the period not being settled. The default
on these notes triggered an increase in the interest rate from 10% to 24% on the principal balance, a 9% late fee being charged
on interest accrued, and a variable conversion price equal to 50% of the lowest volume weighted average price in the 30 days prior
to conversion. On February 27, 2018 the Company reduced the base conversion price from $.05 to $.02. The Company accounted for
this modification per ASC 470-50 "Modifications and Extinguishments". Due to the variable rate in effect from the default
provisions of the 10% Senior Secured Debt notes this reduction in base conversion price had no material change on the value of
the notes.
In
the second quarter of 2018, the Company borrowed $375,000 from investors, including $125,000 from the Chairman of the Company.
A total of 10,500,000 shares of common stock were issued as origination fees. The principal of the loans are due and payable the
earlier of July 31, 2018 or upon the completion of a financing of at least $1,000,000
.
A
recap of the derivative liability is as follows:
Derivative
Liability 2018
|
Beginning
balance
|
|
$
|
(666,123
|
)
|
New Issuances
|
|
|
(559,728
|
)
|
Discount on new issuances
|
|
|
(647,431
|
)
|
Gain
(Loss) on revaluation of derivative liability
|
|
|
(9,246,435
|
)
|
Ending balance
|
|
$
|
(11,119,717
|
)
|
NOTE
4: STOCKHOLDERS’ (DEFICIT)
Shares
issued for Original Interest Discount
During
the quarter ended June 30, 2018, the Company issued 10,500,000 shares of common stock at a price per share between $0.04 and $0.05
for original issue discount on receipt of $375,000 in unsecured convertible promissory notes.
On
June 20, 2018, the Company entered into a strategic investment transaction with Glen Eagles Acquisitions LP (“GEA”).
As part of the strategic investment, the Company received 4,500,000 shares of Gopher Protocol Inc. common stock (traded in the
OTC Market under the symbol “GOPH”) and cash in exchange for 150,000,000 shares of its restricted common stock. There
was also an origination fee of 15,000,000 shares of its restricted common stock paid to GEA by the Company in connection with
this transaction. There were no commissions or finder’s fees paid by the Company in connection with this transaction.
NOTE
5: STOCK-BASED COMPENSATION
Compensation
costs related to share-based payment transactions, including employee stock options, are recognized in the financial statements
utilizing the straight-line method for the cost of these awards.
The
Company's results for the three-month period ended June 30, 2018 and 2017 include employee share-based compensation expense totaling
$0.00 and $152,266, respectively. The Company's results for the six-month period ended June 30, 2018 and 2017 include employee
share-based compensation expense totaling $327,405 and $425,358, respectively. Such amounts have been included in the Condensed
Consolidated Statements of Operations within selling, general and administrative expenses. No income tax benefit has been recognized
in the statement of operations for share-based compensation arrangements due to a history of operating losses.
|
|
Three
Months Ended
June 30,
|
|
Six
Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Employee
stock-based compensation - option grants
|
|
$
|
–
|
|
|
$
|
152,266
|
|
|
$
|
273,945
|
|
|
$
|
302,858
|
|
Employee
stock-based compensation - stock grants
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
11,500
|
|
Non-Employee
stock-based compensation - option grants
|
|
|
–
|
|
|
|
–
|
|
|
|
53,460
|
|
|
|
–
|
|
Non-Employee
stock-based compensation - stock grants
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Non-Employee
stock-based compensation-stock warrant
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
111,000
|
|
Total
|
|
$
|
–
|
|
|
$
|
152,266
|
|
|
$
|
327,405
|
|
|
$
|
425,358
|
|
NOTE
6: STOCK OPTION PLAN
In
the first quarter of 2016, the Board approved, and stockholders ratified a 2016 Employee Benefit and Consulting Services Compensation
Plan covering 10,000,000 shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits
to the 2016 Plan.
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 and six months ended June
30, 2018 and 2017 are as follows:
|
|
Three
Months Ended
June 30
|
|
Six
Months Ended
June 30
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Expected
volatility
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
173.00
|
%
|
|
|
146.77
|
%
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Risk-free interest
rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
2.43
|
%
|
|
|
1.89
|
%
|
Expected term (in years)
|
|
|
0
|
|
|
|
0
|
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
Share
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding, January 1, 2018
|
|
|
17,515,001
|
|
|
|
0.39
|
|
|
|
4.43
|
|
|
$
|
–
|
|
Granted
|
|
|
19,250,000
|
|
|
|
0.05
|
|
|
|
4.50
|
|
|
|
577,500
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled & Expired
|
|
|
(11,615,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, June 30, 2018
|
|
|
25,150,000
|
|
|
|
0.12
|
|
|
|
4.00
|
|
|
$
|
599,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, June 30, 2018
|
|
|
25,150,000
|
|
|
|
0.12
|
|
|
|
4.00
|
|
|
$
|
599,500
|
|
The
weighted-average grant-date fair value of options granted during the six months ended June 30, 2018 and 2017 was $0.05 and $0.05,
respectively.
The
aggregate intrinsic value of options outstanding and options exercisable at June 30, 2018 is calculated as the difference between
the exercise price of the underlying options and the market price of the Company's common stock for the shares that had exercise
prices, that were lower than the $0.08 closing price of the Company's common stock on June 30, 2018.
As
of June 30, 2018, the fair value of unamortized compensation cost related to unvested stock option awards is $0.00.
The
weighted average assumptions made in calculating the fair value of warrants granted during the three and six months ended June
30, 2018 and 2017 are as follows:
|
|
Three
Months Ended
June 30
|
|
Six
Months Ended
June 30
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Expected
volatility
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
151.49
|
%
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Risk-free interest
rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected term (in years)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4.75
|
|
|
|
Share
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining Contractual
Term
|
|
|
Aggregate Intrinsic
Value
|
|
Outstanding, January 1, 2018
|
|
|
11,814,167
|
|
|
$
|
0.20
|
|
|
|
2.58
|
|
|
$
|
–
|
|
Granted
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Exercised
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Expired
|
|
|
(1,040,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, June 30, 2018
|
|
|
10,774,167
|
|
|
$
|
0.19
|
|
|
|
1.85
|
|
|
|
176,000
|
|
Warrants exercisable, June 30, 2018
|
|
|
10,774,167
|
|
|
$
|
0.19
|
|
|
|
1.85
|
|
|
|
176,000
|
|
NOTE
7: COMMITMENTS AND CONTINGENCIES
COMMITMENTS
–
In
March of 2014, we entered into a month-to-month lease agreement for approximately 400 square feet of office space located in Manhattan,
NY at a monthly cost of $3,700. In May of 2015 we moved to a larger location with the same landlord on a month to month basis
for $4,700 each month. In 2017 the Company is leasing on a month-to-month basis two fully furnished executive suites in Manhattan
at a monthly cost of approximately $6,600. These executive suites are located at 85 Broadway, 16
th
Floor, Suites 16-035
and 16-040, New York, NY 10010.
There
are currently no minimum future rentals under non-cancelable lease commitments.
Rent
and real estate tax expense was approximately $14,575 and $571,084 for the quarters ended June 30, 2018 and 2017, respectively,
and approximately $33,387 and $1,053,619, respectively for the six months ended June 30, 2018 and 2017.
Transactions
with major customers
During
the quarter ended June 30, 2018, one customer accounted for approximately 88% of revenues. During the quarter ended June 30, 2017,
two customers accounted for 100% of revenues. During the six months ended June 30, 2018, one customer accounted for approximately
82.79% of revenues. During the six months ended June 30, 2017, two customers accounted for 93.42% of revenues.
NOTE
8: SUBSEQUENT EVENTS
There
are no subsequent events required to be disclosed in the Notes to Financial Statements through the date of the report.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING
STATEMENTS
The
information contained in this Form 10-Q and documents incorporated herein by reference are intended to update the information
contained in the Company's Form 10-K for its fiscal year ended December 31, 2017 which includes our audited financial statements
for the year ended December 31, 2017 and such information presumes that readers have access to, and will have read, the "Management's
Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors" and other information
contained in such Form 10-K and other Company filings with the Securities and Exchange Commission ("SEC").
This
Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, and actual results could be significantly different than those discussed in this Form
10-Q. Certain statements contained in Management's Discussion and Analysis, particularly in "Liquidity and Capital Resources,"
and elsewhere in this Form 10-Q are forward-looking statements. These statements discuss, among other things, expected growth,
future revenues and future performance. Although we believe the expectations expressed in such forward-looking statements are
based on reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results
to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf.
The forward-looking statements are subject to risks and uncertainties including, without limitation, the following: (a) changes
in levels of competition from current competitors and potential new competition, (b) possible loss of customers, and (c) the company's
ability to attract and retain key personnel, (d) The Company's ability to manage other risks, uncertainties and factors inherent
in the business and otherwise discussed in this 10-Q and in the Company's other filings with the SEC. The foregoing should not
be construed as an exhaustive list of all factors that could cause actual results to differ materially from those expressed in
forward-looking statements made by us. All forward-looking statements included in this document are made as of the date hereof,
based on information available to the Company on the date thereof, and the Company assumes no obligation to update any forward-looking
statements.
Company
Overview
The
Company’s wholly-owned subsidiary, Mobiquity Networks has evolved and grown from a mobile advertising technology company
focused on driving Foot-traffic throughout its indoor network, into a next generation location data intelligence company. Mobiquity
Networks provides precise unique, at-scale location data and insights on consumer’s real-world behavior and trends for use
in marketing and research. With its combined first party location data via its advanced SDK and its various exclusive data sets;
Mobiquity Networks provides one of the most accurate and scaled solution for mobile data collection and analysis, utilizing
multiple geo-location technologies. Mobiquity Networks is seeking to implement several new revenue streams from its data collection
and analysis, including, but not limited to; Advertising,
Data Licensing,
Footfall
Reporting, Attribution Reporting, Fraud Prevention, Real Estate Planning, Financial Forecasting and Custom Research.
As
mentioned in previous filings, Mobiquity Technologies’ will be focusing its full attention on Mobiquity Networks, which
it believes represents a large growth opportunity. Subsequently, former subsidiary, Ace Marketing, its legacy marketing and promotions
business was successfully sold on October 1, 2017 and is no longer part of Mobiquity Technologies or its business plan.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have
been prepared in accordance with generally accepted accounting principles in the United States. The preparation of
financial statements requires management to make estimates and disclosures on the date of the financial statements. On an on-going
basis, we evaluate our estimates including, but not limited to, those related to revenue recognition. We use authoritative pronouncements,
historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.
We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation
of our financial statements.
Revenue Recognition
–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.
Allowance
for Doubtful Accounts
. We are required to make judgments based on historical experience and future expectations, as to the
realizability of our accounts receivable. We make these assessments based on the following factors: (a) historical experience,
(b) customer concentrations, customer credit worthiness, (d) current economic conditions, and (e) changes in customer payment
terms.
Accounting
for Stock Based Compensation
. Stock based compensation cost is measured at the grant date fair value of the award and is recognized
as expense over the requisite service period. The company uses the Black-Sholes option-pricing model to determine fair value of
the awards, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will
retain their vested stock options before exercising them (“expected term”), the estimated volatility of the company’s
common stock price over the expected term (“volatility”) and the number of options for which vesting requirements
will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates of fair
value stock-based compensation, and the related amount recognized on the consolidated statements of operations.
Plan
of Operation
Mobiquity
Networks derives its revenue utilizing the revenue streams mentioned above. All the products used to derive revenue for the Company
are reliant on the collection of data. To achieve management’s revenue goals moving forward, we have developed a strategy
to increase the two main driving forces behind our data collection. One strategy is to increase the total number of users we see
on a monthly basis (“MAU”), and the second strategy is to increase the total number of locations (Places) available
to see our MAU’s over the same time period. We are currently seeing approximately 50,000,000 unique mobile devices on a
monthly basis. The ability to see and collect the data required from these unique devices comes from the installation of our proprietary
Software Development Kit (SDK) into various mobile applications (Apps) or through a direct server-to-server data feed from our
App partners. To continue to grow the total number of unique devices we can see on a monthly basis, we need to increase our App
partnerships. We believe our unique offering to potential App partners gives us a competitive advantage over others in the industry.
The task of partnering with Apps is handled internally by our business development team.
As
of April 2018, we had over 2,000,000 Places in our proprietary Places database, and we expect growth to over 4,000,000 Places
by the fourth quarter of 2018, thus exponentially increasing the amount of data we collect. We have been able to steadily increase
the number of locations available in our Places database using both open source and proprietary technologies. The task of growing
our Places database is handled by our internal technology team. The Company currently utilizes both internal and outsourced resources
to market and sell its product offerings. Management intends to hire additional sales personnel in the last six months of 2018
as working capital permits.
Results
of Operations
Quarter
Ended June 30, 2018 versus Quarter Ended June 30, 2017
The
following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition,
we note that the period-to-period comparison may not be indicative of future performance.
|
|
Quarter Ended
|
|
|
|
June 30,
2018
|
|
|
June 30,
2017
|
|
Revenue
|
|
$
|
241,573
|
|
|
$
|
100,204
|
|
Cost of Revenues
|
|
|
(324,984
|
)
|
|
|
(309,739
|
)
|
Gross (Loss)
|
|
|
(83,411
|
)
|
|
|
(209,535
|
)
|
Selling, General and Administrative Expenses
|
|
|
(782,410
|
)
|
|
|
(1,413,197
|
)
|
Loss from operations
|
|
$
|
(865,821
|
)
|
|
$
|
(1,622,732
|
)
|
We
generated revenues of $241,573 in the second quarter of 2018 as compared to $100,204 in the same period for fiscal 2017, a change
in revenues of $141,369. In 2018, we are seeking to implement several new revenue streams from data collection and analysis including,
but not limited to; Advertising,
Data Licensing,
Footfall Reporting, Attribution
Reporting, Real Estate Planning, Financial Forecasting and Custom Research.
Cost
of revenues was $324,984 or 134.53% of revenues in the second quarter of 2018 as compared to $309,739 or 309.11% of revenues in
the same fiscal period of fiscal 2017. Cost of revenues include web services for storage of our data and web engineers who are
building and maintaining our platforms. The generated savings, on a percentage basis, arise with our increased sales. Our ability
to capture and store data for sales does not translate to increased cost of sales.
Gross
loss was $83,411 or 34.53% of revenues for the second quarter of 2018 as compared to $209,535 in the same fiscal period of 2017
or 209.11% of revenues. As revenues from the use of our technologies increases, it is expected that our margins will increase
significantly.
Selling,
general, and administrative expenses were $782,410 for the second quarter of fiscal 2018 compared to $1,413,197 in the comparable
period of the prior year, a decrease of approximately $630,787. Such operating cost reductions include commissions, rents, fee
payments to malls, professional (consulting) and public awareness fees. The corporation has been trimming expenses to shift its
efforts in obtaining a new revenue stream. Our increased efforts in cutting expenses by streamlining staff has fueled the savings
in salaries. The other major savings is in the reduction of our rent expense. With our change in revenue stream we no longer need
access to the mall locations which has reduced our costs by close to two million dollars.
The
net loss from operations for the second quarter of fiscal 2018 was $865,821 as compared to $1,622,732 for the comparable period
of the prior year. The continuing operating loss is attributable to the focused effort in creating the infrastructure required
to move forward with our Mobiquity network business.
No
benefit for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets.
Our ability to be profitable in the future is dependent upon the successful introduction and usage of our data collection and
analysis including Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting
and Custom Research services.
Six
Months Ended June 30, 2018 versus Six Months Ended June 30, 2017
The
following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition,
we note that the period-to-period comparison may not be indicative of future performance.
|
|
Six Months
|
|
|
|
June 30,
2018
|
|
|
June 30,
2017
|
|
Revenues
|
|
$
|
280,276
|
|
|
|
181,991
|
|
Cost of Revenues
|
|
|
(386,101
|
)
|
|
|
(406,031
|
)
|
Gross (Loss)
|
|
|
(105,825
|
)
|
|
|
(224,040
|
)
|
Selling, General and Administrative Expenses
|
|
|
(1,673,414
|
)
|
|
|
(3,024,957
|
)
|
Loss from operations
|
|
|
(1,779,239
|
)
|
|
|
(3,248,997
|
)
|
We
generated revenues of $280,276 in the second quarter of 2018 as compared to $181,991 in the same period for fiscal 2017, a change
in revenues of $98,285. In 2018, we are seeking to implement several new revenue streams from data collection and analysis including,
but not limited to; Advertising,
Data Licensing,
Footfall Reporting, Attribution
Reporting, Real Estate Planning, Financial Forecasting and Custom Research.
Cost
of revenues was $386,101 or 137.76% of revenues in the second quarter of 2018 as compared to 406,031 or 223.10% of revenues in
the same fiscal period of fiscal 2017. Cost of revenues include web services for storage of our data and web engineers who are
building and maintaining our platforms. The generated savings, on a percentage basis, arise with our increased sales. Our ability
to capture and store data for sales does not translate to increased cost of sales.
Gross
loss was $105,825 or 37.76% of revenues for the second quarter of 2018 as compared to $224,040 in the same fiscal period of 2017
or 123.10% of revenues. As revenues from the use of our technologies increases, it is expected that our margins will increase
significantly.
Selling,
general, and administrative expenses were $1,673,414 for the second quarter of fiscal 2018 compared to $3,024,957 in the comparable
period of the prior year, a decrease of approximately $1,351,543. Such operating cost reductions include professional fees, fee
payments to malls, professional (consulting) and public awareness fees. The corporation has been trimming expenses to shift its
efforts in obtaining a new revenue stream. Our increased efforts in cutting expenses by streamlining staff has fueled the savings
in salaries. The other major savings is in the reduction of our rent expense. With our change in revenue stream we no longer need
access to the mall locations which has reduced our costs by close to two million dollars.
The
net loss from operations for the second quarter of fiscal 2018 was $1,779,239 as compared to $3,248,997 for the comparable period
of the prior year. The continuing operating loss is attributable to the focused effort in creating the infrastructure required
to move forward with our Mobiquity network business.
No
benefit for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets.
Our ability to be profitable in the future is dependent upon the successful introduction and usage of our data collection and
analysis including Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting
and Custom Research services.
Liquidity
and Capital Resources
The Company had cash and cash equivalents
of $121,034 at June 30, 2018. Cash used in operating activities for the six months ended June 30, 2018 was $8,519,292. This resulted
primarily from a net loss of $19,889,535 offset by stock-based compensation of $327,405 amortization of $9,800, increase
in accounts receivable of $203,384 and an initial derivative expense of $559,728 and a change in derivatives of $9,246,435, increase
in accrued interest of $447,608, increase in accrued expenses and other current liabilities of $137,872 and an increase in investment
in other assets of $7,560,000. Cash flow from financing activities of $8,583,856 resulted from the proceeds from the issuance
of notes of $1,273,500 and the loss on sale of company stock of $6,965,000, proceeds form the collection of stock subscription
receivable of $200,000 and the increase in stock subscription receivable of $260,000.
The
Company had cash and cash equivalents of $306,259 at June 30, 2017. Cash used in operating activities for the six months ended
June 30, 2017 was $2,518,559. This resulted primarily from a net loss of $8,103,527 offset by stock-based compensation of
$425,358 depreciation and amortization of $20,956, increase in accounts receivable of $84,676 and a decrease in Inventory of $13,149
and an initial derivative expense of $1,284,707 and a change in derivatives of $1,284,031, gain on settlement of debt $2,706,197,
decrease in prepaid expenses and other assets of $48,461 and an increase of accounts payable and accrued expenses of $198,476.
Cash flow from financing activities of $2,598,587 resulted from the proceeds from the issuance of notes of $1,735,000 and the
issuance of the Company’s common stock for $311,250 and the exercise of warrants and the collection of stock subscription
receivable of $456,503.
Our
company commenced operations in 1998 and was initially funded by our three founders, each of whom has made demand loans to our
company that have been repaid. Since 1999, we have relied on equity financing and borrowings from outside investors to supplement
our cash flow from operations and expect this to continue in 2018 and beyond until cash flow from our proximity marketing operations
become substantial.
Recent
Financings
In
2016 and 2017, we have completed various financings. See Item 5 under “Recent Sales of Unregistered Securities” in
our Form 10-K for the fiscal year ended December 31, 2017.
Acquisition
of Gopher Protocol Common Stock
On
June 21, 2018, the Company entered into a strategic investment transaction with Glen Eagles Acquisitions LP (“GEA”).
As part of the strategic investment, the Company received 4,500,000 shares of Gopher Protocol Inc. common stock (traded in the
OTC Market under the symbol “GOPH”) and cash in exchange for 150,000,000 shares of its restricted common stock. There
was also an origination fee of 15,000,000 shares of its restricted common stock paid to GEA by the Company in connection with
this transaction. There were no commissions or finder’s fees paid by the Company in connection with this transaction. The
acquisition of Gopher Protocol common stock may result in the Company being considered a transient investment company. It is the
Company’s intention to utilize the Gopher Protocol common stock, subject to compliance with all applicable securities laws,
for acquisitions, retiring secured and unsecured debt and/or working capital. There can be no assurances given that the Gopher
Protocol common stock will have sufficient liquidity for our intended purposes or that one or more acquisitions will be completed
on terms satisfactory to the Company, if at all.
2017
Loan Agreements and Certain Transactions
As
of July 24, 2018, the Company has outstanding 377,975,600 shares of common stock, 240,000 of preferred stock and 850,588 shares
of Series AAA preferred stock and $4,759,000 of convertible notes. The convertible notes consist of $4,234,000 of secured notes
and $525,000 of unsecured notes.