0001683168-22-003937.txt : 20220523 0001683168-22-003937.hdr.sgml : 20220523 20220523155550 ACCESSION NUMBER: 0001683168-22-003937 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 69 CONFORMED PERIOD OF REPORT: 20211231 FILED AS OF DATE: 20220523 DATE AS OF CHANGE: 20220523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Mobiquity Technologies, Inc. CENTRAL INDEX KEY: 0001084267 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 113427886 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-41117 FILM NUMBER: 22951449 BUSINESS ADDRESS: STREET 1: 35 TORRINGTON LANE CITY: SHOREHAM STATE: NY ZIP: 11786 BUSINESS PHONE: 516-256-7766 MAIL ADDRESS: STREET 1: 35 TORRINGTON LANE CITY: SHOREHAM STATE: NY ZIP: 11786 FORMER COMPANY: FORMER CONFORMED NAME: ACE MARKETING & PROMOTIONS INC DATE OF NAME CHANGE: 19990414 10-K/A 1 mobiquity_i10ka1-123121.htm FORM 10-K AMENDMENT 1
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Table of Contents

 

MOBIQUITY TECHNOLOGIES, INC.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

(Amendment No. 1)

 

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

 

COMMISSION FILE NUMBER: 001-41117

 

MOBIQUITY TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

 

New York 11-3427886

(State of jurisdiction of

incorporation or organization)

(I.R.S. Employee

Identification Number)

   
35 Torrington Lane Shoreham, NY 11786
(Address of principal executive offices) (Zip Code)
   
Registrant's telephone number, including area code: (516) 246-9422

 

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

 

Title of each class Trading Symbol Name of each exchange on which registered

Common Stock, $.001 par value

MOBQ

The Nasdaq Stock Market LLC

Common Stock Purchase Warrants MOBQW The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

 

Check whether the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐  No

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the Registrant has submitted electronically, every Interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

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

 

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

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of June 30, 2021, the number of shares of Common Stock held by non-affiliates was approximately 2,382,100 shares based upon 3,100,782 post-split shares of Common Stock outstanding. The approximate market value based on the last sale (i.e. $9.50 per share as of June 30, 2021) of the Company’s Common Stock held by non-affiliates was approximately $22,629,950.

 

The number of shares outstanding of the Registrant’s Common Stock as of March 25, 2022, was 6,560,751.

 

On September 9, 2020, the Company effected a one-for-400 reverse stock split. All share and per share amounts set forth herein give retroactive effect to such stock split unless the context indicates otherwise.

 

 

 

   

 

 

FORWARD-LOOKING STATEMENTS

 

We believe this annual report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, based on information currently available to our management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "should," "likely" or similar expressions, we are making forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations set forth under "Business" and/or "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results and stockholder values may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. Stockholders are cautioned not to put undue reliance on any forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under "Risk Factors." In addition to the Risk Factors and other important factors discussed elsewhere in this annual report, you should understand that other risks and uncertainties and our public announcements and filings under the Securities Exchange Act of 1934, as amended could affect our future results and could cause results to differ materially from those suggested by the forward-looking statements.

 

Among others, the forward-looking statements appearing in this Report that may not occur include, but are not limited to, statements regarding plans to remediate the material weakness with respect to the Company’s internal control over financial reporting and the impact of these matters on the outlook of the Company and the restatement on the Company’s previously issued financial statements for the Affected Period.

 

As used in this Form 10-K, the terms “we,” “our,” “us,” “Mobiquity Technologies” or “the Company” refer to Mobiquity Technologies, Inc. and its subsidiaries, taken as a whole, unless the context otherwise requires it.

 

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 i 

 

 

TABLE OF CONTENTS

 

  PAGE
   
PART I 1
Item 1 Business 1
Item 1A Risk Factors 13
Item 1B Unresolved Staff Comments 30
Item 2 Properties 30
Item 3 Legal Proceedings 31
Item 4 Mine Safety Disclosures 31
   
PART II 32
Item 5 Market for Common Equity, related Stockholders Matters, and Issuer 32
Item 6 Selected Financial Data 34
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 34
Item 7A Qualitative and Qualitative Disclosures about Market Risk 39
Item 8 Financial Statements 39
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 74
Item 9A Controls and Procedures 74
Item 9B Other Information 74
   
PART III 75
Item 10 Directors, Executive Officers and Corporate Governance 75
Item 11 Executive Compensation 84
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 94
Item 13 Certain Relationships and Related Transactions and Director Independence 95
Item 14 Principal Accountant Fees and Services 97
   
PART IV 98
Item 15 Exhibits and Financial Statement Schedules 98

 

 

 

 

 

 

 

 

 ii 

 

 

EXPLANATORY NOTE

 

Mobiquity Technologies, Inc. (the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2022 (the “Original Form 10-K”). This Amendment No. 1 on Form 10-K (this "Amendment" or "Form 10-K/A") is being filed to restate the Company's previously issued consolidated financial statements and financial information as of and for the fiscal year ended December 31, 2021, contained in the Original Form 10-K. This Amendment also amends the Company’s conclusions and disclosures included in Item 9A Controls and Procedures of the Original Form 10-K related to disclosure controls and procedures and internal control over financial reporting.

 

Background of Restatement

 

Subsequent to the filing of the Original Form 10-K, management identified certain errors primarily relating to the accounting for share-based payments in connection with raising equity capital, the sale of warrants, certain gains (losses) on debt extinguishment as well as an adjustment to our deferred tax assets and related valuation allowance. In connection with this restatement, management has also elected to reclassify certain presentations within the consolidated balance sheets, statements of operations, equity and cash flows to better reflect the nature of the transactions.

 

Finally, certain grammatical and technical corrections were made. These changes did not affect the restated balances herein.

 

On May 19, 2022, the audit committee of the Company's board of directors concluded, after discussion with the Company’s management, that the previously issued financial statements for December 31, 2021 should no longer be relied upon due to this error and require restatement. This Amendment reflects the changes discussed above for December 31, 2021 and restates the Company’s consolidated financial statements as of and for the year ended December 31, 2021.

 

Items Amended in this Amendment

 

This Amendment sets forth the Original Form 10-K, as modified and superseded where necessary to reflect the restatement and the related internal control considerations. Accordingly, the following items included in the Original Form 10-K have been amended:

 

· Part I, Item 1A, Risk Factors

· Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations

· Part II, Item 8, Financial Statements and Supplementary Data

· Part II, Item 9A, Controls and Procedures

· Part IV, Item 15, Exhibits and Financial Statement Schedules

 

Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer. These certifications are filed or furnished, as applicable, as Exhibits 31.1, 31.2, 32.1 and 32.2.

 

Except as described above, this Amendment does not amend, update or change any other disclosures in the Original Form 10-K. In addition, the information contained in this Amendment does not reflect events occurring after the Original Form 10-K and does not modify or update the disclosures therein, except to reflect the effects of the restatement. This Amendment should be read in conjunction with the Company’s other filings with the SEC.

 

 

 

 iii 

 

 

PART I

 

Item 1. Business

 

Company Background

 

Mobiquity Technologies, Inc. is a next-generation marketing and advertising technology and data intelligence company which operates through our proprietary software platforms in the programmatic advertising space. Our product solutions are comprised of two proprietary software platforms:

 

  ·

Our advertising technology operating system (or ATOS) platform; and

     
  · Our data intelligence platform.

 

Our Products

 

The ATOS Platform

 

Our ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and campaigns. The ATOS platform:

 

  · creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of digital advertising (known as digital real estate) targeted at users while engaged on their internet-connected TV, laptop, tablet, desktop computer, mobile, and over-the-top (or OTT) streaming media devices; and
     
  · gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by using ads in both image and video formats (known as rich media) to increase their awareness, customer base and foot traffic to their e-commerce site, voting site or physical locations.

 

Our ATOS platform engages with approximately 10 billion advertisement opportunities per day, based on our daily logs. Our sales and marketing strategy for our ATOS platform is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for small and medium sized advertisers.

 

Our ATOS technology is proprietary and primarily consists of know-how and trade secrets developed internally, as well as certain open-source software.

 

Users of the ATOS platform get access to benefits including among other things:

 

  · ease of set up;
     
  · targeting features based on audience profiles and location through an in-house data management platform (or DMP);
     
  · Inventory management and yield optimization;

 

 

 

 1 

 

 

  · support for all rich media creators’ ad tags;
     
  · machine learning and AI powered optimization which aids in delivering a higher click through rate on ad links;
     
  · support for third-party trackers and custom scripts for make-the-most-of-your media (or MOAT) analytics, Integral Ad Science (or IAS), and forensics to enable independent verification by advertisers for transparency;
     
  · detailed campaign wrap-up reporting that gives a breakdown on publishers, categories, demonstrations, and devices to better understand advertisement campaign performance;
     
  · access to business intelligence via an analytics dashboard;
     
  · advanced ad targeting;
     
  ·

easy campaign uploading;

     
  · automated performance optimization;
     
  · real time reporting;
     
  · fraud prevention tools; and
     
  · 24x7 support, along with guided managed services to enable users to rapidly harness and operate all the features of the ATOS platform.

 

Our ATOS platform includes:

 

  · Adserver;
     
  · Demand Side Platform;
     
  · Advertisement quality tools;
     
  · Analytics dashboard;
     
  · Avails Engine;

 

 

 

 2 

 

 

  · Advertisement prediction and delivery tools;
     
  · Supply quality tools;
     
  · Private marketplace tools;
     
  · Audience and location targeting;
     
  · Wrap up reports;
     
  · An Advertisement software development kit (or SDK);
     
  · Prebid adaptor;
     
  · contextual targeting;
     
  · identity graph capabilities;
     
  · cookie syncing; and
     
  · the updated version of our quality and security tools, among other things for our ATOS platform.

 

The Data Intelligence Platform

 

Our data intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research. We believe, based on our experience in our industry, that we provide one of the most accurate and scaled solutions for data collection and analysis, utilizing multiple proprietary technologies. Our data intelligence platform technology allows for the ingestion and normalization of various data sources, such as location data, transactional data, contextual data, and search data to reach the right target audience with the right message. Utilizing massively parallel cluster computing and machine learning algorithms and technology, our data intelligence solutions make available actionable data for marketers, researchers and application publishers through an automated platform. We are seeking to generate several revenue streams from our data collection and analysis, including, among other things; advertising, data licensing, attribution reporting, and custom research.

 

We also offer a self-service alternative through our MobiExchange product, which is a SaaS fee model. MobiExchange is a data focused technology solution that enables individuals and companies to rapidly build actionable data and insights for their own use or for resale. MobiExchange’s easy-to-use, self-service tools allow users to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the-box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk among other things.

 

 

 

 3 

 

 

We believe, based on our experience in our industry, that we provide one of the most accurate and scaled solutions for data collection and analysis, utilizing multiple proprietary technologies. MobiExchange is a data focused technology solution that enables individuals and companies to rapidly build actionable data and insights for its own use or for resale. MobiExchange’s easy-to-use, self-service tools allow anyone to reduce the complex technical and financial barriers typically associated with turning offline data, and other business data, into actionable digital products and services. MobiExchange provides out-of-the box private labeling, flexible branding, content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help desk, among other things.

 

Our data intelligence platform is hosted and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Specifically, our data intelligence platform uses the following AWS services: EC2, Lambda, Kafka, Kinesis, S3, Storm, Spark, Machine Learning, RDS, Redshift, Elastic Map Reduction, CloudWatch, DataBricks, and Elastic Search Service with built-in Kibana integration.

 

Our Strategy

 

Our strategy in the programmatic advertising space is to provide small- to medium-sized enterprises with an efficient and effective end-to-end, fully integrated ATOS platform. We believe that our ATOS platform gives users in these markets the capability of running marketing and branding campaigns without the need for an extensive marketing team, which enables them to better compete with their larger competitors who have greater marketing financial and human capital resources. Our sales and marketing approach is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard for small- and medium-sized advertisers. Mobiquity plans to hire several new sales and sales support individuals to help generate additional revenue through the use of our ATOS platform.

 

Our strategy is based on a problem we perceived in the advertising technology industry as it has rapidly grown over the last 10 years. We viewed the technology in the industry to be highly fragmented and thus inefficient. Many advertisers have had to mix multiple vendors’ different technologies, or bolt-on third-party technology to legacy technology, in an effort to create an integrated solution. Often this has resulted in the absence of a central source to address problems with an integrated system that arise. The flaws that this type of stacked technology ecosystem has includes:

 

  · Increased cost -- this results from integration costs, technology management costs and revenue sharing arrangements among vendors providing different components of the system.
     
  · Decreased speed -- the automated buying and selling of digital advertising space happens in micro-seconds and when the technology stack comprising the system has to work through several distinct vendor components, the system is inherently slower than a single vendor all-inclusive platform.
     
  · Lack of transparency – a digital programmatic advertising campaign is comprised of a multitude of metrics each of which can be optimized by the advertiser according to its needs. Lack of transparency occurs when the digital programmatic advertising campaign jumps from its primary platform to the add-on vendors’ platform and the advertiser is unable to see or access certain of the metrics covered by a particular vendor’s component. The user thus loses the ability to optimize that part of the campaign. This is exacerbated as more add-on technologies are added to the system.

 

We believe our products address and solve the flaws of a stacked system.

 

 

 

 4 

 

 

A typical digital advertising campaign requires the following components:

 

  · Data Management Platform (or DMP)
     
  · Demand-Side Platform (or DSP)
     
  · Supply-Side Platform (or DSP)
     
  · Bidder
     
  · Ad Server
     
  · Ad Network
     
  · Supply Quality Tools
     
  · Fraud Detection
     
  · Analytical Tools
     
  · Reporting Dashboard

 

Many of the companies we target have between 50-70% of the above components and outsource the rest to vendors who bolt-on technology to those companies’ legacy technology which often results in the flaws discussed above. We provide a single-vendor end-to-end solution integrating the required components from a single source that work together because they are built together, in an effective and cost-efficient way. Our ATOS platform decreases the effective cost-basis for users by integrating all the necessary capabilities at no additional cost: DSP and bidding technologies, AdCop™ Fraud Protection, rich media and ad serving, attribution, reporting dashboard and DMP are all included.

 

Our Revenue Streams

 

We target brands, advertising agencies and other advertising technology companies as our audience for our ATOS platform products. The ATOS platform creates three revenue streams.

 

  · The first is licensing the ATOS platform as a white-label product for use by advertising agencies, demand-side platforms (or DSP’s), brands and publishers. Under the white-label scenario, the user licenses the ATOS platform from us and is responsible for running its own business operations and is billed a percentage of amounts spent on advertising run through the platform.
     
  · The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through the platform, but all services are managed by us.
     
  · The third revenue model is a seat model in which our customer uses our platform and we provide customer service but the customer does everything else, where the user is billed a percentage of revenue run through the platform and business operations are shared between the user and us.

 

 

 

 5 

 

 

Our data intelligence revenue is driven by managed services for advertising agencies; brands; market researchers; university research departments; healthcare; and financial, sports, pet, civil planning, transportation, and other data and technology companies. Often-times sales to users of our data intelligence platform will lead to them to our ATOS platform as well.

 

Our Intellectual Property

 

Our portfolio of technology consists of various intellectual property including proprietary source code, trade secrets and know-how that we have developed internally. We own our technology, although we use open source software for certain aspects, and we protect it though trade secrets and confidentiality requirements set out in our employee handbook which each employee acknowledges, and assigning any technology creations and improvements to us. We also have two patents that relate to our location-based mobile advertising technology business which we are not operating. These patents and patents pending are not material to, or used in, our ATOS or data intelligence related technology that we use in our current operations.

 

Governmental Regulations

 

Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. As we develop and provide solutions that address new market segments, we may become subject to additional laws and regulations, which could create unexpected liabilities for us, cause us to incur additional costs or restrict our operations. From time to time, we may be notified of or otherwise become aware of additional laws and regulations that governmental organizations or others may claim should be applicable to our business. Our failure to anticipate the application of these laws and regulations accurately, or other failure to comply, could create liability for us, result in adverse publicity or cause us to alter our business practices, which could cause our net revenues to decrease, our costs to increase or our business otherwise to be harmed. See “Item 1A.”

  

We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet, e-commerce and m-commerce in a number of jurisdictions around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. See “Item 1A.”

 

Competition

 

We compete in the data, marketing and research business and in all other facets of our business against small, medium and large companies throughout the United States. Some examples include companies such as Liveramp, Groundtruth and Nielsen. Although we can give no assurance that our business will be able to compete against other companies with greater experience and resources, we believe we have a competitive advantage with our proprietary software and technology platform based on our view that our competitor’s products do not provide the end-to-end solutions that our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions. See “Item 1A.”

 

 

 

 6 

 

 

Employees and Contractors

 

As of December 31, 2021, we have 13 employees, including executive management, technical personnel, salespeople, and support staff employees. We also utilize several additional firms/persons who provide services to us on a non-exclusive basis as independent consultants.

 

Customers

 

During 2020, sales of our products to four customers generated approximately 36% of our revenues. During 2021, sales of our products to four customers generated approximately 31% of our revenues. Our contracts with our customers generally do not obligate them to a specified term and they can generally terminate their relationship with us at any time with a minimal amount of notice.

 

Debt and Receivables Purchase Financing

 

We have the following debt financing in place:

 

Gene Salkind, who is our Chairman of the Board and one of our directors, and his affiliate provided us an aggregate of $2,700,000 in convertible debt financing for convertible promissory notes and common stock purchase warrants. Dr. Salkind’s principal debt was reduced to $2,562,500 in December 2021. See “Item 13.”

 

Business Capital Providers, Inc. purchased certain future receivables from the Company at a 26% discount under the following agreements on the following terms:

 

  · Pursuant to a Merchant Agreement dated July 28, 2021, Business Capital Providers purchased $405,000 of future receivables for a purchase price of $300,000. Under the agreement, the Company agrees to have all receivables collected be deposited into a bank account from which the purchased receivables are remitted to Business Capital Providers daily, at the daily percentage of 9% of the daily banking deposits, or daily amounts of $2,531.25, for the term of 160 days. The Company is responsible for ensuring there are sufficient funds in the account to cover the daily payments. Under the agreement, the Company paid an origination fee of 5% of the purchase price. In the event of a default under the agreement, Business Capital Providers may institute an action to enforce its rights, including recovery of its costs of enforcement. Events of default under the agreement include, among others: the Company’s breach of any provision or representation under the agreement; failure to give 24 hours’ notice there will be insufficient funds to cover a daily remittance; the Company offers for sale or sells a substantial portion of its assets or its business; the Company uses other depository accounts, or closes or changes its depository account from which daily remittances are made; a material change in the Company’s operations; loss of a key employee, customer or supplier of the Company; any change in stock float, voting rights or issuance of voting shares; the Company’s failure to renew a real property lease; any Company default under another agreement with Business Capital Providers; or any form of bankruptcy filing or declaration by or for the Company. The Agreement further provides that in the event of a default, lieu of personal guarantees by any Company principals, or if otherwise mutually agreed, Business Capital Providers may convert any portion of amounts payable to it into shares of common stock of the Company at a price equal to 85% of the lowest volume weighted average price for each of the five trading days preceding the conversion date; provided that Business Capital Providers will not convert into shares that will result in it owning more than 4.99% of the Company’s then outstanding shares of common stock.

 

 

 

 7 

 

 

  · Pursuant to a Merchant Agreement dated April 29, 2021, purchased $405,000 of future receivables for a purchase price of $300,000 on terms which are substantially the same as the July 28, 2021, Merchant Agreement, except that the daily percentage is 13% and the daily payment is $2,700 per day for a term of 150 business days.
     
  · In the fourth quarter of 2021, Business Capital Providers assigned its Merchant Agreement and related debt described in this paragraph to non-affiliated third parties, which subsequently converted $89,100 in outstanding indebtedness into 13,103 common shares pursuant to its terms.
     
  · The Company previously entered into separate Merchant Agreements with Business Capital Providers on eight occasions prior to the April 29, 2021, Merchant Agreement, starting in June 2019, for an aggregate of $1,060,000 in financing, at varying purchase amounts, daily percentages and daily payments, all of which were satisfied in full.

 

19 private lender-investors, who were unaffiliated shareholders of the Company and accredited investors as provided under Regulation D Rule 501 promulgated under the Securities Act of 1933, provided us convertible debt financing during the period May 2021 through September 2021 pursuant to subscription agreements as described below. (Certain of these investors provided us multiple investments in one or more of these convertible debt structures.):

 

  · Nine of the lender-investors provided us an aggregate of $668,000 in convertible debt financing on the following terms:

 

  o The lender-investors were issued shares of Company common stock valued at $6 per share equal to 5% of their investments as original issue discount.

 

  o The debt maturity date is October 31, 2021. If the Company receives debt or equity financing of $200,000 or more, the debt is payable within two business days after the Company receives those funds. The maturity dates of six of these investors’ convertible debt was extended to December 31, 2021.

 

  o The debt is convertible into shares of Company common stock at a conversion price of $6 per share at any time at the investor’s option until the maturity date.

 

  · Three of the lender-investors provided us an aggregate of $200,000 in convertible debt financing on the following terms:

 

  o The lender-investors were issued shares of Company common stock valued at $6 per share equal to 6,000 per $100,000 of principal loan, or on a pro-rata basis if less than $100,000 is loaned (effectively 6% of the amount loaned) as original issue discount.

  

  o The debt is convertible into shares of Company common stock at a conversion price of $6 per share at any time at the investor’s option until the maturity date.

 

  o These investors converted all of this convertible debt into a total of 40,000 shares of common stock.

 

 

 

 8 

 

 

  · Eleven of the lender-investors provided us an aggregate of $819,500 in convertible debt financing on the following terms:

 

  o The investment amounts included a 10% original issue discount. Accordingly, the total net principal proceeds of this debt that we received was $745,000.

 

  o The debt maturity date is June 30, 2022.

 

  o The investors may convert the debt at any time through the maturity date at a 30% discount to the volume weighted average price per share over the 60-day period prior to conversion, with a floor conversion price of $4 per share. The debt will automatically convert on July 1, 2022, at $4 per share if it not repaid, or converted by the investor, prior to then.

 

  o All of these investors converted a total of $819,500 of this convertible debt into a total of 156,761 shares of common stock.

 

  · Four of the lender-investors provided us $130,000 in convertible debt financing on the following terms:

 

  o Interest at the annual rate of 10%.

 

  o The debt maturity date is June 30, 2022.

 

  o The investor may convert the debt at any time through the maturity date at a 30% discount to the volume weighted average price per share over the 60-day period prior to conversion, with a floor conversion price of $4 per share. The debt will automatically convert on July 1, 2022, at $4 per share if it not repaid, or converted by the investor, prior to then.

 

  o One of these investors converted a total of $30,000 of this convertible debt into a total of 5,904 shares of common stock.

 

In May of 2020, the Company received Small Business Administration Cares Act loan of $265,842 due to the COVID-19 pandemic. This loan carried a five-year term, with interests at the annual rate of 1%. During second fiscal quarter of 2021 the Cares Act loan was forgiven in full under the SBA Cares Act loan rules.

 

In June 2020, the Company received a $150,000 Economic Injury Disaster Loan from the SBA which carries a 30-year term, payable in monthly installments of principal plus interest at the annual rate of 3.75%. This loan is secured by all the assets of the Company. The loan proceeds were used for working capital to alleviate economic injury cause by disaster in January 2020 and after that as required by the loan agreement.

 

 

 

 9 

 

 

On September 20, 2021, the Company entered into securities purchase agreements, with two accredited investors, Talos Victory Fund, LLC and Blue Lake Partners LLC, pursuant to which the Company issued 10% promissory notes with a maturity date of September 20, 2022, in the aggregate principal amount of $1,125,000. In addition, the Company issued warrants to purchase an aggregate of 56,250 shares of its common stock to these holders. Spartan Capital Securities LLC and Revere Securities LLC acted as placement agents on this transaction. The promissory notes include the following terms:

 

  · Interest at the annual rate of 10%.
     
  · The notes carry original issue discount of $112,500 in the aggregate. Accordingly, the total net principal of this debt was $1,012,500.
     
  · The Company is required to make interim payments to the holders in the aggregate amount of $225,000, on or before March 18, 2022, towards the repayment of the balance of the notes. The Company may prepay the principal sum under the notes then outstanding plus accrued and unpaid interest in full at any time without any prepayment premium; however, the Company is required to pay a minimum amount of the first 12 months of interest under the notes
     
  · The holders may convert the notes and exercise the warrants into the Company’s common stock (subject to contractual beneficial ownership limitations of 4.99%). The holders have the right to convert the notes at any time into shares of common stock at a conversion price of $5.00 per share; provided, however, if the Company consummates a so-called uplisting offering to a national exchange within 180 days after the closing date, then the Note conversion price shall adjust to equal 70% of the price per share of common stock in that offering. The warrants may also be exercised at any time from date of issuance over a period of five years at the exercise price then in effect. The initial warrant exercise price shall equal $10.00 per share; provided however, if the Company consummates the uplisting offering within the 180-day period noted above, then the exercise price shall adjust to equal 130% of the price per share in that offering. The warrants contain cashless exercise provisions. Both the notes and the warrants contain customary anti-dilution provisions which could cause an adjustment to the conversion price of the notes and the exercise price of the warrants.
     
  · The Company is required to make interim payments to the holders in the aggregate amount of $225,000, on or before March 18, 2022, towards the repayment of the balance of the notes. The Company may prepay the principal sum under the notes then outstanding plus accrued and unpaid interest in full at any time without any prepayment premium; however, the Company is required to pay a minimum amount of the first 12 months of interest under the notes.
       
  · The holders may convert the notes and exercise the warrants into the Company’s common stock (subject to contractual beneficial ownership limitations of 4.99%). The holders have the right to convert the notes at any time into shares of common stock at a conversion price of $5.00 per share; provided, however, if the Company consummates a so-called uplisting offering to a national exchange within 180 days after the closing date, then the Note conversion price shall adjust to equal 70% of the price per share of common stock in that offering. The warrants may also be exercised at any time from date of issuance over a period of five years at the exercise price then in effect. The initial warrant exercise price shall equal $10.00 per share; provided however, if the Company consummates the uplisting offering within the 180-day period noted above, then the exercise price shall adjust to equal 130% of the price per share in that offering. The warrants contain cashless exercise provisions. Both the notes and the warrants contain customary anti-dilution provisions which could cause an adjustment to the conversion price of the notes and the exercise price of the warrants.

 

 

 

 10 

 

 

·The notes provide that so long as the Company has any obligations under the Notes, the Company will not, among other things:
oIncur or guarantee any indebtedness which is senior or equal to the notes.
oRedeem or repurchase any shares of stock, warrants, rights or options without the holders’ consent.
oSell, lease or otherwise dispose of a significant portion of its assets without the holders’ consent.

 

  · The notes contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the notes or security purchase agreements.
     
  · In an event of default under the notes, which has not been cured within any applicable cure period, if any, the notes shall become immediately due and payable and the Company shall pay to the holders an amount equal to the principal sum then outstanding plus accrued interest, multiplied by 125%. Additionally, upon the occurrence of an event of default, additional interest will accrue from the date of the event of default at the rate equal to the lower of 16% per annum or the highest rate permitted by law.

 

On the closing date of this financing, the holders delivered the net amount of $910,000 of the purchase price to the Company in exchange for the notes (which was net of the original issue discount and other fees and expenses relate to this financing).

 

On October 19, 2021, the Company filed a Form S-1 Registration Statement (File no. 333-260364) with the Securities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NASDAQ Capital Market under the symbol “MOBQ.” This offering was completed on December 13, 2021, and the Company retired the loans of, Talos Victory Fund, LLC and Blue Lake Partners LLC out of the gross proceeds it received of approximately $10.3 million. Also, Talos Victory Fund, LLC and Blue Lake Partners, LLC converted all of their warrants on a cashless basis into 24,692 common shares and 24,692 common shares, respectively.

 

Corporate Structure

 

We operate our business through two wholly owned subsidiaries, Advangelists, LLC and Mobiquity Networks, Inc. Our corporate structure is as follows:

 

Diagram

Description automatically generated

  

 

 

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Subsidiaries

 

Advangelists, LLC

 

Advangelists LLC operates our ATOS platform business.

 

We originally acquired a 48% membership interest and Glen Eagles Acquisition LP acquired a 52% membership interest in Advangelists in a merger transaction in December 2018 for consideration valued at $20 Million. At the time Glen Eagles was a shareholder of the Company, owning 412,500 shares of our common stock. The Company became, and remains, the sole manager of Advangelists following the merger with sole management power. In consideration for the merger:

 

  · Mobiquity issued warrants for 269,384 shares of common stock at an exercise price of $56 per share to the pre-merger Advangelsts’ members, and, in February 2019, upon the attainment of the vesting threshold of Advangelists’ combined revenues for the months of December 2018 and January 2019 being at least $250,000, the Company transferred 9,209,722 shares of Gopher Protocol, Inc. common stock to the pre-merger Advangelists members. The Mobiquity warrants were valued at a total of $3,844,444, and the Gopher shares of common stock were valued at a total of $6,155,556.
     
  · Glen Eagles paid the pre-merger Advangelists members $10 million. $500,000 was paid at closing in cash (which the Company advanced on behalf of Glen Eagles without any agreement regarding repayment of the advance), and $9,500,000 was paid by Glen Eagles’ promissory note to Deepanker Katyal, as representative of pre-merger Advangelists members, payable in 19 monthly installments of $500,000 each.

 

The Company acquired 3% of the Advangelists’ membership interests from Glen Eagles in April 2019 in satisfaction of the Company’s $500,000 closing payment advance to Glen Eagles, resulting in Mobiquity owning 51% and Glen Eagles owning 49% of Advangelists.

 

In May 2019 the Company acquired the remaining 49% of Advangelists’ membership interests from Glen Eagles, becoming the 100% owner of Advangelists, in a transaction involving the Company, Glen Eagles, and Gopher Protocol, Inc. In that transaction, Gopher acquired the 49% Advangelists membership interest from Glen Eagles and assumed Glen Eagles’ promissory note to Deepanker Katyal, as representative of the pre-merger Advangelists owners, which had a remaining balance of $7,512,500, in satisfaction of indebtedness owed by Glen Eagles to Gopher. Concurrently with that transaction, the Company acquired the 49% of Advangelists membership interest from Gopher and assumed the promissory note in consideration. Additionally, warrants for 300,000 shares of Company common stock which are issuable upon the conversion of Mobiquity Class AAA preferred stock owned by Gopher were amended to provide for a cashless exercise. In September 2019, the assumed note, which then had a principal balance of $6,780,000, was amended and restated to provide that:

 

  · $5,250,000 of the principal was payable in 65,625 shares of the Company’s Class E Preferred Stock, which is convertible into 164,062.50 shares the Company’s common stock, plus warrants to purchase 82,031.25 Company shares of common stock, at an exercise price of $48 per share; and
     
  · $1,530,000 of the principal balance, plus all accrued and unpaid interest under the promissory note was payable in three monthly installments of $510,000 each.

 

The promissory note was paid in full in November 2019.

 

 

 

 12 

 

 

Mobiquity Networks, Inc.

 

We have established Mobiquity Networks, Inc and have operated it since January 2011. Mobiquity Networks started and developed as a mobile advertising technology company focused on driving foot-traffic throughout its indoor network and has evolved and grown into a next generation data intelligence company. Mobiquity Networks operates our data intelligence platform business.

 

Reports to Securities Holders

 

We provide an annual report that includes audited financial information to our shareholders. We make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Exchange Act. We are subject to disclosure filing requirements including filing Annual Reports on Form 10-K annually and Quarterly Reports on Form 10-Q quarterly. In addition, we will file Current Reports on Form 8-K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K and registration statements and proxy and information statements, at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549, or you can read our SEC filings over the Internet at the SEC’s website at http://www.sec.gov.

 

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

 

Item 1A. Risk Factors

 

An investment in our securities is highly speculative, involves a high degree of risk and should be made only by investors who can afford a complete loss. You should carefully consider the following risk factors, together with the other information in this Form 10-K, including our financial statements and the related notes, before you decide to buy our securities. If any of the following risks actually occurs, then our business, financial condition or results of operations could be materially adversely affected, the trading of our common stock and warrants could decline, and you may lose all or part of your investment therein. In addition to the risks outlined below, risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. Potential risks and uncertainties that could affect our operating results and financial condition include, without limitation, the following:

 

In this Amendment, we reached a determination to restate our previously issued December 31, 2021 financial statements and related disclosures as filed on Form 10-K. The restatement primarily related to the following:

 

·The recording of compensation expense for warrants issued in an equity financing. The warrants were a direct offering cost and should have been recorded as a reduction in additional paid-in capital,
·The recording of the sale of warrants for cash that should have increased additional paid-in capital and not other income,
·The recording of a mark to market adjustment for stock sold to a third party. The Company recognized a gain as a part of other income and a decrease to additional paid-in capital, this entry was made in error as the Company was not a holder of an investment of its own stock,
·The reduction of our net operating loss carryforward and related deferred tax assets; and
·Various reclassifications throughout our balance sheet, statement of operations, stockholders’ equity and cash flows to better reflect the nature or classification of each transaction.

 

 

 

 13 

 

 

The restatement of the financial statements does not affect the Company’s previously reported total assets, total liabilities or revenues. Additionally, there are no compliance matters with any lender or other third parties as a result of the restatement.

 

In addition, management has concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2021 and that the Company’s internal control over financial reporting was not effective as of December 31, 2021 solely as a result of a material weakness in controls related to the aforementioned.

 

As described elsewhere in this Amendment, we have identified a material weakness in our internal control over financial reporting for the items mentioned above. As a result of this material weakness, our management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2021.

 

Also see Part II, Item 9A: Controls and Procedures included in this Report.

 

As a result, we have incurred unanticipated costs for accounting and legal fees in connection with or related to the restatement and may become subject to additional risks and uncertainties related to the restatement, such as a negative impact on investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business.

 

Risks Relating to our Business Operations

 

We have a history of operating losses, and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2021, and 2020.

 

To date, we have not been profitable and have incurred significant losses and cash flow deficits. For the fiscal years ended December 31, 2021, and 2020, we reported net losses of $19,365,777 and $15,029,395, respectively, and cash flow from operating activities of $(6,717,324) and $(4,750,442). As of December 31, 2021, we had an aggregate accumulated deficit of $205,534,703. Our operating losses for the past several years are primarily attributable to the transformation of our company into an advertising technology corporation. We can provide no assurances that our operations will generate consistent or predictable revenue or be profitable in the foreseeable future. Our management has concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on private equity and other financings raise substantial doubt about our ability to continue as a going concern, and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal year ended December 31, 2021, and 2020.

 

 

 

 

 14 
 

 

Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments. In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired. Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing, including funds to be raised in this offering. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering is successful. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Item 7.”

 

We cannot predict our future capital needs and we may not be able to secure additional financing.

 

From January 2013 through December 2021, we raised a total of over $60 million in private equity and debt financing to support our transformation from an integrated marketing company to a technology company. Since we might be unable to generate recurring or predictable revenue or cash flow to fund our operations, we will likely need to seek additional (perhaps substantial) equity or debt financing even following this offering to provide the capital required to maintain or expand our operations. We expect that we will also need additional funding for developing products and services, increasing our sales and marketing capabilities, and acquiring complementary companies, technologies and assets (there being no such acquisitions which we have identified or are pursuing as of the date of this Form 10-K), as well as for working capital requirements and other operating and general corporate purposes. We cannot predict our future capital needs with precision, and we may not be able to secure additional financing on terms satisfactory to us, if at all, which could lead to termination of our business.

 

If we elect to raise additional funds or additional funds are required, we may seek to raise funds from time to time through public or private equity offerings, debt financings or other financing alternatives. Additional equity or debt financing may not be available on acceptable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing operational development and commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed.

 

If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected, and we may be unable to continue our operations. Failure to secure additional financing on favorable terms could have severe adverse consequences to us.

 

The Company’s financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic.

 

Since March 2020, COVID -19 has caused a material and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will likely continue to experience a reduction in projects, longer sales and collection cycles, deferral or delay of purchase commitments for our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially adversely affect revenue and our ability to remain a going concern.

 

 

 

 15 
 

 

In the event we remain a going concern, the impacts of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and the general economy, are currently not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing events, among other modifications. We lost a purchase order in excess of one million dollars with a major US sports organization. We have observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, although we do anticipate it to continue to negatively impact our financial results during fiscal years 2022 and 2023.

 

Forecasts of our revenue are difficult.

 

When purchasing our products and services, our clients and prospects are often faced with a significant commitment of capital, the need to integrate new software and/or hardware platforms and other changes in company-wide operational procedures, all of which result in cautious deliberation and evaluation by prospective clients, longer sales cycles and delays in completing transactions. Additional delays result from the significant up-front expenses and substantial time, effort and other resources necessary for our clients to implement our solutions. For example, depending on the size of a prospective client’s business and its needs, a sales cycle can range from two weeks to 12 months. Because of these longer sales cycles, revenues and operating results may vary significantly from period to period. As a result, it is often difficult to accurately forecast our revenues for any fiscal period as it is not always possible for us to predict the fiscal period in which sales will actually be completed. This difficulty in predicting revenue, combined with the revenue fluctuations we may experience from period to period, can adversely affect and cause substantial fluctuations in our stock price.

 

The reliability of our product solutions is dependent on data from third parties and the integrity and quality of that data.

 

Much of the data that we use is licensed from third-party data suppliers, and we are dependent upon our ability to obtain necessary data licenses on commercially reasonable terms. We could suffer material adverse consequences if our data suppliers were to withhold their data from us. For example, data suppliers could withhold their data from us if there is a competitive reason to do so; if we breach our contract with a supplier; if they are acquired by one of our competitors; if legislation is passed restricting the use or dissemination of the data they provide; or if judicial interpretations are issued restricting use of such data. Additionally, we could terminate relationships with our data suppliers if they fail to adhere to our data quality standards. If a substantial number of data suppliers were to withdraw or withhold their data from us, or if we sever ties with our data suppliers based on their inability to meet our data standards, our ability to provide products and services to our clients could be materially adversely impacted, which could result in decreased revenues.

 

The reliability of our solutions depends upon the integrity and quality of the data in our database. A failure in the integrity or a reduction in the quality of our data could cause a loss of customer confidence in our solutions, resulting in harm to our brand, loss of revenue and exposure to legal claims. We may experience an increase in risks to the integrity of our database and quality of our data as we move toward real-time, non-identifiable, consumer-powered data through our products. We must continue to invest in our database to improve and maintain the quality, timeliness and coverage of the data if we are to maintain our competitive position. Failure to do so could result in a material adverse effect on our business, growth and revenue prospects.

 

 

 

 

 

 16 
 

 

Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection.

 

Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot assure you that our practices have complied, comply, or will comply fully with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by us to comply with federal, state or international laws or regulations, including laws and regulations regulating privacy, data security, marketing communications or consumer protection, or other policies, self-regulatory requirements or legal obligations could result in harm to our reputation, a loss in business, and proceedings or actions against us by governmental entities, consumers, retailers or others. We may also be contractually liable to indemnify and hold harmless performance marketing networks or other third parties from the costs or consequences of noncompliance with any laws, regulations, self-regulatory requirements or other legal obligations relating to privacy, data protection and consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. Any such proceeding or action, and any related indemnification obligation, could hurt our reputation, force us to incur significant expenses in defense of these proceedings, distract our management, increase our costs of doing business and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition of monetary liability. Furthermore, the costs of compliance with, and other burdens imposed by, the data and privacy laws, regulations, standards and policies that are applicable to the businesses of our clients may limit the use and adoption of, and reduce the overall demand for, our products.

 

A significant breach of the confidentiality of the information we hold or of the security of our or our customers’, suppliers’, or other partners’ computer systems could be detrimental to our business, reputation and results of operations. Our business requires the storage, transmission and utilization of data. Although we have security and associated procedures, our databases may be subject to unauthorized access by third parties. Such third parties could attempt to gain entry to our systems for the purpose of stealing data or disrupting the systems. We believe we have taken appropriate measures to protect our systems from intrusion, but we cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities in our systems and attempts to exploit those vulnerabilities, physical system or facility break-ins and data thefts or other developments will not compromise or breach the technology protecting our systems and the information we possess. Furthermore, we face increasing cyber security risks as we receive and collect data from new sources, and as we and our customers continue to develop and operate in cloud-based information technology environments. In the event that our protection efforts are unsuccessful, and we experience an unauthorized disclosure of confidential information or the security of such information or our systems are compromised, we could suffer substantial harm. Any breach could result in one or more third parties obtaining unauthorized access to our customers’ data or our data, including personally identifiable information, intellectual property and other confidential business information. Such a security breach could result in operational disruptions that impair our ability to meet our clients’ requirements, which could result in decreased revenues. Also, whether there is an actual or a perceived breach of our security, our reputation could suffer irreparable harm, causing our current and prospective clients to reject our products and services in the future and deterring data suppliers from supplying us data. Further, we could be forced to expend significant resources in response to a security breach, including repairing system damage, increasing cyber security protection costs by deploying additional personnel and protection technologies, and litigating and resolving legal claims, all of which could divert the attention of our management and key personnel away from our business operations. In any event, a significant security breach could materially harm our business, financial condition and operating results.

 

Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business and results of operations.

 

Our product platforms are hosted and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business, results of operations and financial condition. Our business is heavily dependent upon highly complex data processing capability. The ability of our platform hosts and managers to protect these data centers against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure or other disasters is beyond our control and is critical to our ability to succeed.

 

 

 

 

 17 
 

 

We rely on information technology to operate our business and maintain competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.

 

We depend on the use of information technologies and systems. As our operations grow in size and scope, we will be required to continuously improve and upgrade our systems and infrastructure while maintaining or improving the reliability and integrity of our infrastructure. Our future success also depends on our ability to adapt our systems and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance, features and reliability of our solutions in response to competitive services and product offerings. The emergence of alternative platforms will require new investment in technology. New developments in other areas, such as cloud computing, could also make it easier for competition to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner.

 

Our technology and associated business processes may contain undetected errors, which could limit our ability to provide our services and diminish the attractiveness of our offerings.

 

Our technology may contain undetected errors, defects or bugs. As a result, our customers or end users may discover errors or defects in our technology or the systems incorporating our technology may not operate as expected. We may discover significant errors or defects in the future that we may not be able to fix. Our inability to fix any of those errors could limit our ability to provide our solution, impair the reputation of our brand and diminish the attractiveness of our product offerings to our customers.  In addition, we may utilize third party technology or components in our products, and we rely on those third parties to provide support services to us. Failure of those third parties to provide necessary support services could materially adversely impact our business.

 

We need to protect our intellectual property, or our operating results may suffer.

 

Third parties may infringe our intellectual property and we may suffer competitive injury or expend significant resources enforcing our rights. As our business is focused on data-driven results and analytics, we rely heavily on proprietary information technology. Our proprietary portfolio consists of various intellectual property including source code, trade secrets, and know-how. The extent to which such rights can be protected is substantially based on federal, state and common law rights as well as contractual restrictions. The steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. If we do not enforce our intellectual property rights vigorously and successfully, our competitive position may suffer which could harm our operating results.

 

We could incur substantial costs and disruption to our business as a result of any claim of infringement of another party’s intellectual property rights, which could harm our business and operating results.

 

From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights. We analyze and take action in response to such claims on a case-by-case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and the uncertainty of intellectual property litigation, which could divert the attention of our management and key personnel away from our business operations. A claim of intellectual property infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, or could subject us to significant damages or to an injunction against development and sale of certain of our products or services.

 

 

 

 18 

 

 

We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share.

 

We compete in the data, marketing and research business and in all other facets of our business against small, medium and large companies throughout the United States. Some examples include companies such as LiveRamp, Beeswax and TradeDesk. If we are unable to successfully compete for new business our revenue growth and operating margins may decline. The market for our advertising and marketing technology operating system platform is competitive. We believe that our competitors’ product offerings do not provide the end-to-end solutions our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions. However, barriers to entry in our markets are relatively low. With the introduction of new technologies and market entrants, we expect competition to intensify in the future. Some of these competitors may be in a better position to develop new products and strategies that more quickly and effectively respond to changes in customer requirements in our markets. The introduction of competent, competitive products, pricing strategies or other technologies by our competitors that are superior to or that achieve greater market acceptance than our products and services could adversely affect our business. Our failure to meet a client’s expectations in any type of contract may result in an unprofitable engagement, which could adversely affect our operating results and result in future rejection of our products and services by current and prospective clients. Some of our principal competitors offer their products at a lower price, which may result in pricing pressures. These pricing pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our product and service offerings to achieve or maintain more widespread market acceptance.

 

Many of our competitors are substantially larger than we are and have significantly greater financial, technical and marketing resources, and established direct and indirect channels of distribution. As a result, they are able to devote greater resources to the development, promotion and sale of their products than we can.

 

We can provide no assurance that our business will be able to maintain a competitive technology advantage in the future.

 

Our ability to generate revenues is substantially based upon our proprietary intellectual property that we own and protect through trade secrets and agreements with our employees to maintain ownership of any improvements to our intellectual property. Our ability to generate revenues now and in the future is based upon maintaining a competitive technology advantage over our competition. We can provide no assurances that we will be able to maintain a competitive technology advantage in the future over our competitors, many of whom have significantly more experience, more extensive infrastructure and are better capitalized than us.

 

No assurances can be given that we will be able to keep up with a rapidly changing business information market.

 

Consumer needs and the business information industry as a whole are in a constant state of change. Our ability to continually improve our current processes and products in response to these changes and to develop new products and services to meet those needs are essential in maintaining our competitive position and meeting the increasingly sophisticated requirements of our customers. If we fail to enhance our current products and services or fail to develop new products in light of emerging industry standards and information requirements, we could lose customers to current or future competitors, which could result in impairment of our growth prospects and revenues.

 

 

 

 19 

 

 

The market for programmatic advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected.

 

A substantial portion of our revenue has been derived from customers that programmatically purchase and sell advertising inventory through our platform. We expect that spending on programmatic ad buying and selling will continue to be a significant source of revenue for the foreseeable future, and that our revenue growth will largely depend on increasing spend through our platform. The market for programmatic ad buying is an emerging market, and our current and potential customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing our growth potential. Because our industry is relatively new, we will encounter risks and difficulties frequently encountered by early-stage companies in similarly rapidly evolving industries, including the need to:

 

  · Maintain our reputation and build trust with advertisers and digital media property owners;
     
  · Offer competitive pricing to publishers, advertisers, and digital media agencies;
     
  · Maintain quality and expand quantity of our advertising inventory;
     
  · Continue to develop, launch and upgrade the technologies that enable us to provide our solutions;
     
  · Respond to evolving government regulations relating to the internet, telecommunications, mobile, privacy, marketing and advertising aspects of our business;
     
  · Identify, attract, retain and motivate qualified personnel; and
     
  · Cost-effectively manage our operations, including our international operations.

 

If the market for programmatic ad buying deteriorates or develops more slowly than we expect, it could reduce demand for our platform, and our business, growth prospects and financial condition would be adversely affected.

 

Our failure to maintain and grow the customer base on our platform may negatively impact our revenue and business.

 

To sustain or increase our revenue, we must regularly add both new advertiser customers and publishers, while simultaneously keeping existing customers to maintain or increase the amount of advertising inventory purchased through our platform and adopt new features and functionalities that we add to our platform. If our competitors introduce lower cost or differentiated offerings that compete with or are perceived to compete with ours, our ability to sell access to our platform to new or existing customers could be impaired. Our agreements with our customers allow them to change the amount of spending on our platform or terminate our services with limited notice. Our customers typically have relationships with different providers and there is limited cost to moving budgets to our competitors. As a result, we may have limited visibility as to our future advertising revenue streams. We cannot assure you that our customers will continue to use our platform or that we will be able to replace, in a timely or effective manner, departing customers with new customers that generate comparable revenue. If a major customer representing a significant portion of our business decides to materially reduce its use of our platform or to cease using our platform altogether, it is possible that our revenue could be significantly reduced.

 

 

 

 20 

 

 

We rely substantially on a limited number of customers for a significant percentage of our sales.

 

During the year ended December 31, 2021, sales of our products to four customers generated 31% of our revenues. Our contracts with our customers generally do not obligate them to a specified term and they can generally terminate their relationship with us at any time with a minimal amount of notice. If we lose any of our customers, or any of them decide to scale back on purchases of our products, it will have a material adverse effect on our financial condition and prospects. Therefore, we must engage in continual sales efforts to maintain revenue, sustain our customer relationships and expand our client base or our operating results will suffer. If a significant client fails to renew a contract or renews the contract on terms less favorable to us than before, our business could be negatively impacted if additional business is not obtained to replace or supplement that which was lost. We may require additional financial resources to expand our internal and external sales capabilities, although we plan to use a portion of the net proceeds from our December 2021 public offering for this purpose. We cannot assure that we will be able to sustain our customer relationships and expand our client base. The loss of any of our current customers or our inability to expand our customer base will have a material adverse effect on our business plans and prospects.

 

If we fail to innovate and make the right investment decisions in our offerings and platform, we may not attract and retain advertisers and publishers and our revenue and results of operations may decline.

 

Our industry is subject to rapid and frequent changes in technology, evolving customer needs and the frequent introduction by our competitors of new and enhanced offerings. We must constantly make investment decisions regarding our offerings and technology to meet customer demand and evolving industry standards. We may make wrong decisions regarding these investments. If new or existing competitors have more attractive offerings or functionalities, we may lose customers or customers may decrease their use of our platform. New customer demands, superior competitive offerings or new industry standards could require us to make unanticipated and costly changes to our platform or business model. If we fail to adapt to our rapidly changing industry or to evolving customer needs, demand for our platform could decrease and our business, financial condition and operating results may be adversely affected.

 

We may not be able to integrate, maintain and enhance our advertising solutions to keep pace with technological and market developments. 

 

The market for digital video advertising solutions is characterized by rapid technological change, evolving industry standards and frequent introductions of new products and services. To keep pace with technological developments, satisfy increasing publisher and advertiser requirements, maintain the attractiveness and competitiveness of our advertising solutions and ensure compatibility with evolving industry standards and protocols, we will need to anticipate and respond to varying product lifecycles, regularly enhance our current advertising solutions and develop and introduce new solutions and functionality on a timely basis. This requires significant investment of financial and other resources. For example, we will need to invest significant resources into expanding and developing our platforms in order to maintain a comprehensive solution. Ad exchanges and other technological developments may displace us or introduce an additional intermediate layer between us and our customers and digital media properties that could impair our relationships with those customers.

 

If we fail to detect advertising fraud, we could harm our reputation and hurt our ability to execute our business plan.

 

As we are in the business of providing services to publishers, advertisers and agencies, we must deliver effective digital advertising campaigns. Despite our efforts to implement fraud protection techniques in our platforms, some of our advertising and agency campaigns may experience fraudulent and other invalid impressions, clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by computers designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given digital advertising campaign and could harm our reputation. It may be difficult for us to detect fraudulent or malicious activity because we do not own content and rely in part on our digital media properties to control such activity. Industry self-regulatory bodies, the U.S. Federal Trade Commission and certain influential members of Congress have increased their scrutiny and awareness of, and have taken recent actions to address, advertising fraud and other malicious activity. If we fail to detect or prevent fraudulent or other malicious activity, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund or future credit demands or withdrawal of future business.

 

 

 

 21 
 

 

The loss of advertisers and publishers as customers could significantly harm our business, operating results and financial condition. 

 

Our customer base consists primarily of advertisers and publishers. We do not have exclusive relationships with advertising agencies, companies that are advertisers, or publishers, such that we largely depend on agencies to work with us as they embark on advertising campaigns for advertisers. The loss of agencies as customers and referral sources could significantly harm our business, operating results and financial condition. If we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the advertisers represented by that agency.

 

Furthermore, advertisers and publishers may change advertising agencies. If an advertiser switches from an agency that utilizes our platform to one that does not, we will lose revenue from that advertiser. In addition, some advertising agencies have their own relationships with publishers that are different than our relationships, such that they might directly connect advertisers with such publishers. Our business may suffer to the extent that advertising agencies and inventory suppliers purchase and sell advertising inventory directly from one another or through intermediaries other than us.

 

Our sales efforts with advertisers and publishers require significant time and expense.

 

Attracting new advertisers and publishers requires substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships.

 

Our solutions, including our programmatic solutions, and our business model often requires us to spend substantial time and effort educating our own sales force and potential advertisers, advertising agencies, supply side platforms and digital media properties about our offerings, including providing demonstrations and comparisons against other available solutions. This process is costly and time-consuming. If we are not successful in targeting, supporting and streamlining our sales processes, our ability to grow our business may be adversely affected.

 

Changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect data on consumer shopping behavior.

 

The collection and use of electronic information about users is an important element of our data intelligence technology and solutions. However, consumers may become increasingly resistant to the collection, use and sharing of information, including information used to deliver advertising and to attribute credit to publishers in performance marketing programs, and take steps to prevent such collection, use and sharing of information. For example, consumer complaints and/or lawsuits regarding advertising or other tracking technologies in general and our practices specifically could adversely impact our business. In addition to this change in consumer preferences, if retailers or brands perceive significant negative consumer reaction to targeted advertising or the tracking of consumers’ activities, they may determine that such advertising or tracking has the potential to negatively impact their brand. In that case, advertisers may limit or stop the use of our solutions, and our operating results and financial condition would be adversely affected.

 

Government regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by us to comply with these laws and regulations could substantially harm our business and results of operations.

 

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet, e-commerce and m-commerce in a number of jurisdictions around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot assure you that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business, and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant resources in defense of these proceedings, distract our management, increase our costs of doing business, and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of noncompliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek to censor content available on our websites and mobile applications or may even attempt to completely block access to our marketplace. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected and we may not be able to maintain or grow our net revenues as anticipated.

 

 

 22 

 

 

We may be required to invest significant monies upfront in capital intensive project(s) which we may be unable to recover.

 

Failure to recover significant, up-front capital investments required by certain client contracts could be harmful to the Company’s financial condition and operating results. Certain of our client contracts require significant investment in the early stages, which we expect to recover through billings over the life of the contract. These contracts may involve the construction of new computer systems and communications networks or the development and deployment of new technologies. Substantial performance risk exists in each contract with these characteristics, and some or all elements of service delivery under these contracts are dependent upon successful completion of the development, construction and deployment phases. Failure to successfully meet our contractual requirements under these contracts over their life increases the possibility that we may not recover our capital investments in these contracts. Failure to recover our capital investments could be detrimental to the particular engagement as well as our operating results.

 

We are subject to payment-related risks and, if our customers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.

 

We may be involved in disputes with agencies and their advertisers over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform. If we are unable to collect or make adjustments to bills to customers, we could incur write-offs for bad debt, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on our business, financial condition and operating results. Even if we are not paid by our customers on time or at all, we are still obligated to pay for the advertising inventory we have purchased for the advertising campaign, and as a consequence, our results of operations and financial condition would be adversely impacted.

 

If we default on our credit obligations, our operations may be interrupted, and our business and financial results could be adversely affected.

 

Publishers extend us credit terms for the purchase of advertising inventory. We currently have outstanding payables to existing publishers. If we are unable to pay our publishers in a timely fashion, they may elect to no longer sell us inventory to provide for sale to advertisers. Also, it may be necessary for us to incur additional indebtedness to maintain operations of the Company. If we default on our credit obligations, our lenders and debt financing holders may, among other things:

 

  · require repayment of any outstanding obligations or amounts drawn on our credit facilities;
     
  · terminate our credit;
     
  · stop delivery of ordered equipment;
     
  · discontinue our ability to acquire inventory that is sold to advertisers;
     
  · require us to accrue interest at higher rates; or
     
  · require us to pay significant damages.

 

If some or all of these events were to occur, our operations may be interrupted and our ability to fund our operations or obligations, as well as our business, financial results, and financial condition, could be adversely affected.

 

 

 

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Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our operations.

 

Our future success depends in large part on our current senior management team and our ability to attract and retain additional high-quality management and operating personnel. Our senior management team’s in-depth knowledge of and deep relationships with the participants in our industry are extremely valuable to us. Our business also requires skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. Our failure to recruit and retain qualified personnel could hinder our ability to successfully develop and operate our business, which could have a material adverse effect on our financial position and operating results.

 

The complexity of our data products, processing functionality, software systems and services require highly trained professionals to operate, maintain, improve and repair them. While we presently have a sophisticated, dedicated and experienced team of associates who have a deep understanding of our business, some of whom have been with Mobiquity for years, the labor market for these individuals has historically been, and is currently, very competitive due to the limited number of people available with the necessary technical skills and understanding, compensation strategies, general economic conditions and various other factors. As the business information and marketing industries continue to become more technologically advanced, we anticipate increased competition for qualified personnel. The loss of the services of highly trained personnel like the Company’s current team of associates, or the inability to recruit and retain additional, qualified associates, could have a material adverse effect on our business, financial position or operating results.

 

Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.

 

Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due with respect to our indebtedness. Our indebtedness could have other important consequences to you as a shareholder. For example, it could:

 

  · make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments could result in an event of default under our debt financing agreements;
     
  · make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
     
  · require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
     
  · limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
     
  · place us at a competitive disadvantage compared to our competitors that have less debt; and
     
  · limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes.

 

Any of the above listed factors could materially adversely affect our business, financial condition and results of operations.

 

 

 

 24 

 

 

Risks Relating to An Investment in Our Securities

 

Our common stock and warrants are listed on the Nasdaq Capital Market. There can be no assurance that we will be able to comply with Nasdaq Capital Market’s continued listing standards.

 

Our common stock in the past has been thinly traded on the over -the- counter OTCQB market. As a condition to consummating our December 2021 public offering of over $10 million, our common stock and warrants have become listed on the Nasdaq Capital Market. There can be no assurance any broker will be interested in trading our stock and warrants. Therefore, it may be difficult to sell your shares of common stock or warrants if you desire or need to sell them. Our underwriters of our December 2021 offering in which we raised over $10 million in gross proceeds are not obligated to make a market in our common stock or warrants, and even if it makes a market, it can discontinue market making at any time without notice. We can provide no assurance that an active and liquid trading market in our common stock and/or warrants will develop or, if developed, that such market will continue.

 

Our common stock and warrants are listed on the Nasdaq Capital Market. However, there is no guarantee that we will be able to maintain such listing for any period of time by perpetually satisfying Nasdaq Capital Market’s continued listing requirements. Our failure to continue to meet these requirements may result in our common stock and warrants being delisted from Nasdaq Capital Market.

 

The market price of our common stock and warrants is likely to be highly volatile because of several factors, including a limited public float.

 

The market price of our common stock has been volatile in the past and the market price of our common stock and our warrants is likely to be highly volatile in the future. You may not be able to resell shares of our common stock or our warrants following periods of volatility because of the market’s adverse reaction to volatility.

 

Other factors that could cause such volatility may include, among other things:

 

  · actual or anticipated fluctuations in our operating results;
  · the absence of securities analysts covering us and distributing research and recommendations about us;
  · we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held;
  · overall stock market fluctuations;
  · announcements concerning our business or those of our competitors;
  · actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms;

  · conditions or trends in the industry;
  · litigation;
  · changes in market valuations of other similar companies;
  · future sales of common stock;
  · departure of key personnel or failure to hire key personnel; and
  · general market conditions.

 

Any of these factors could have a significant and adverse impact on the market price of our common stock and/or warrants. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and/or warrants, regardless of our actual operating performance.

 

 

 

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Our future sales of common stock by management and other stockholders may have an adverse effect on the then prevailing market price of our common stock.

 

In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a fully reporting company under the Securities Exchange Act of 1934, as amended, may, sell their restricted common stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for there to be adequate common public information. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their common stock without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock.

 

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common shares to drop significantly, even if our business is doing well.

 

We currently have approximately 4.2 million shares of common stock free trading out of a total of 6.5 million outstanding common shares. Any increase in freely trading shares or the perception that such securities will or could come onto the market could have an adverse effect on the trading price of the securities. No prediction can be made as to the effect, if any, that sales of these securities, or the availability of such securities for sale, will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of common stock and warrants may be sold in the public market may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities or impair our shareholders’ ability to sell on the open market. Additionally, any substantial increase of our shares that are eligible to be sold into the market in the near future could cause the market price of our common shares to drop significantly, even if our business is doing well.

 

Our common stock and our warrants (forming part of the units offered hereby) may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”

 

Our common stock and warrants may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future. While our common stock and warrants are currently not considered “penny stock” since they are listed on the Nasdaq Capital Market, if we are unable to maintain that listing and our common stock and warrants are no longer listed on the Nasdaq Capital Market, unless we maintain a per-share price above $5.00, our common stock and warrants will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

 

Legal remedies available to an investor in “penny stocks” may include the following:

 

  · If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.
     
  · If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.

 

 

 

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These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock or our warrants and may affect your ability to resell our common stock and our warrants.

 

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

 

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock or our warrants will not be classified as a “penny stock” in the future.

 

We do not intend to pay dividends for the foreseeable future and thus you must rely on stock appreciation for any return on your investment.

 

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. As a result, you must rely on stock appreciation and a liquid trading market for any return on your investment. If an active and liquid trading market does not develop, you may be unable to sell your shares of common stock at or above the price in this offering at the time you would like to sell.

 

Our principal stockholders, directors and executive officers have a material level of control over us, which could delay or prevent a change in our corporate control favored by our other stockholders.

 

As of the date of this Form 10-K, our principal stockholders, directors and executive officers beneficially own, in the aggregate, approximately 37% of our outstanding common stock. The interests of our current directors and executive officers may differ from the interests of other stockholders. As a result, these current directors and officers could have the ability to exercise material influence over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:

 

  · approval of certain mergers and other significant corporate transactions, including a sale of substantially all of our assets and material financing transactions;
     
  · election of directors;
     
  · adoption of or amendments to stock option plans;
     
  · amendment of charter documents; or
     
  · issuance of “blank check” preferred stock.

 

 

 

 27 

 

 

Our certificate of incorporation grants our board of directors the authority to issue a new series of preferred stock without further approval by our shareholders, which could adversely affect the rights of the holders of our common shares.

 

Our board of directors has the power to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the power to issue preferred stock without further shareholder approval, subject to applicable listing regulations. As a result, our board of directors could authorize the issuance of new series of preferred stock that would grant to holders thereof certain rights in preference to the rights of our common stockholders to:

 

  · our assets upon liquidation;
     
  · receive dividend payments ahead of holders of common shares;
     
  · the redemption of the shares, together with a premium, prior to the redemption of our common shares;
     
  · vote to approve matters as a separate class or have more votes per share relative to shares of common stock.

 

In addition, our board of directors could authorize the issuance of new series of preferred stock that is convertible into our common shares, or may also authorize the sale of additional shares of authorized common stock, which could decrease the relative voting power of our common shares or result in dilution to our existing shareholders.

 

As a public company, we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance.

 

As a public company, we are subject to numerous legal and accounting requirements, and the maintenance listing requirements if we become listed on NASDAQ, that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our management team is relatively inexperienced in complying with these requirements, and our management resources are limited, which may lead to errors in our accounting and financial statements, and which may impair our operations. This inexperience and lack of resources may also increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis or comply with NASDAQ listing requirements, resulting in loss of market confidence and/or governmental or private actions against us, or delisting from NASDAQ. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.

 

We could become subject to shareholder litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations.

 

The market for our securities may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price may continue to be more volatile than a seasoned issuer for the indefinite future.  In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.

 

 

 

 28 

 

 

We have had to restate our previously issued consolidated financial statements and as part of that process have identified a material weakness in our internal control over financial reporting as of December 31, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

 

On May 19, 2022, our Audit Committee concluded, after discussion with the Company’s management and independent registered public accounting firm BF Borgers, CPA PC, that the previously issued financial statements during the Affected Period (1) should no longer be relied upon due to:

 

·The recording of compensation expense for warrants issued in an equity financing. The warrants were a direct offering cost and should have been recorded as a reduction in additional paid-in capital,
·The recording of the sale of warrants for cash that should have increased additional paid-in capital and not other income,
·The recording of a mark to market adjustment for stock sold to a third party. The Company recognized a gain as a part of other income and a decrease to additional paid-in capital, this entry was made in error as the Company was not a holder of an investment of its own stock,
·The reduction of our net operating loss carryforward and related deferred tax assets; and
·Various reclassifications throughout our balance sheet, statement of operations, stockholders’ equity and cash flows to better reflect the nature or classification of each transaction.

 

As part of the restatement process, we have identified a material weakness in our internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

 

Any failure to maintain effective internal controls could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our ordinary shares and other securities are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information which could have a negative effect on the trading price of our stock.

 

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

 

We may face litigation and other risks as a result of the restatement and material weakness in our internal control over financial reporting.

 

As part of the Restatement, we identified material weaknesses in our internal controls over financial reporting. As a result of such material weakness and the restatement, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.

 

 29 

 

 

We in the past identified significant deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements.

 

We have concluded that we have not maintained effective internal control over financial reporting through the years ended December 31, 2021, and December 31, 2020. The Company determined that it has deficiencies over financial statements recording in areas of recording revenue and expenses in proper cut off as well as proper classification of accounts. Significant deficiencies and material weaknesses in our internal control could have a material adverse effect on us. Due to these deficiencies, there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We are working to remediate these deficiencies and material weaknesses. We are taking steps to enhance our internal control environment to establish and maintain effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance. In this regard, the Company in December 2021 adopted several corporate governance policies, and it has established various committees of the Board of Directors, including an Audit Committee comprised of three independent directors in accordance with Nasdaq Rule 5605(c)(2). One of the Audit Committee’s priorities will be to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this process, the Company plans to implement the following initiatives under the oversight of the Audit committee.

 

  · Hire additional staff both internally and externally to the Finance department with sufficient GAAP and public company financial reporting experience.
     
  · Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel.
     
  · Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis as described in “Item 9A”.
     
  · Initiate a preliminary assessment of management’s internal controls over financial reporting.
     
  · Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed.

  

We have hired Refidential One - SOX Consultants who have set up a time table to review testing procedures and analysis as follows:

 

Phase 1, which shall be completed on or about the Company filing its form 10-K for December 31, 2021, will be to identify the gaps and suggested remediations in 2021.

 

Phase 2, to be completed on or about June 30,2022, (contingent upon the Company implementing remediation plan) will have all the narratives updated and risk control matrixes (“RCM”) created and available for testing.

 

Phase 3, to commence on or about July 15th, 2021 and to be completed for the third quarter ending September 30,2022, will include the testing of all the key controls identified, implemented in Phases 1 and 2 above.

 

Phase 4, if necessary, will be to retest the failures in Phase 3. Phase 4 testing enables MOBI to rectify any fails from Phase 3 testing, thus reducing the likelihood of significant deficiencies.

 

Although we plan to undertake and complete this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not be successful in remediating the deficiencies or material weaknesses.

 

A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information, and to timely or accurately report our financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures. If we are unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business prospects.

 

 

 

 30 

 

 

If an active, liquid trading market for our publicly held warrants does not develop, you may not be able to sell your warrants quickly or at a desirable price.

 

Our publicly held warrants are immediately exercisable and expire on December 13, 2026. The warrants will have an initial exercise price per share equal to $4.98. In the event that the stock price of our common stock does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value.

 

There is no established trading market for the warrants sold in this offering, and the market for the warrants may be highly volatile or may decline regardless of our operating performance. Our warrants trade on the Nasdaq Capital Market under the symbol “MOBQW”. However, an active public market for our warrants may not develop or be sustained. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our warrants or how liquid that market might become. If a market does not develop or is not sustained, it may be difficult for you to sell your warrants at the time you wish to sell them, at a price that is attractive to you, or at all.

 

Holders of our publicly held warrants will have no rights as a common stockholder until they acquire our common stock.

 

Until you acquire shares of our common stock upon exercise of your publicly held warrants, you will have no rights with respect to the common stock issuable upon exercise of such warrants. Upon exercise of your warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

 

General Risk Factors

 

Certain provisions of our certificate of incorporation, bylaws and New York law make it more difficult for a third party to acquire us and make a takeover more difficult to complete, even if such a transaction were in the stockholders’ interest.

 

Our restated certificate of incorporation, as amended, and by-laws and New York law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. In addition, provisions of our restated certificate of incorporation, as amended, by-laws and New York law impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. These provisions include, among others:

 

  · the inability of our shareholders to call a special meeting;
     
  · rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;
     
  · the right of our Board to issue preferred stock without shareholder approval; and
     
  · the ability of our directors, and not shareholders, to fill vacancies on our Board.

 

 

 

 

 31 

 

 

We believe these provisions may help protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make our Company immune from takeovers. In addition, although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board, they would apply even if the offer may be considered beneficial by some shareholders. These provisions may also frustrate or prevent any attempts by our shareholders to replace or remove our current management team by making it more difficult for shareholders to replace members of our Board, which is responsible for appointing the members of our management.

 

Our bylaws provide for limitations of director liability and indemnification of directors and officers and employees.

 

Our bylaws provide that we will indemnify our directors, officers and employees to the fullest extent permitted by law. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding. We believe that these provisions are necessary to attract and retain qualified persons as directors and officers.

 

Section 402(b) of the BCL permits a New York corporation to include in its certificate of incorporation a provision eliminating the potential monetary liability of a director to the corporation or its shareholders for breach of fiduciary duty as a director; provided that this provision may not eliminate the liability of a director (i) for acts or omissions in bad faith or which involve intentional misconduct or a knowing violation of law, (ii) for any transaction from which the director receives an improper personal benefit or (iii) for any acts in violation of Section 719 of the BCL. Section 719 provides that a director who votes or concurs in a corporate action will be liable to the corporation for the benefit of its creditors and shareholders for any damages suffered as a result of an action approving (i) an improper payment of a dividend, (ii) an improper redemption or purchase by the corporation of shares of the corporation, (iii) an improper distribution of assets to shareholders after dissolution of the corporation without adequately providing for all known liabilities of the corporation or (iv) the making of an improper loan to a director of the corporation.

 

The limitation of liability in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

The Company is presently utilizing the office space of its Chief Financial Officer as its principal executive office located at 35 Torrington Lane, Shoreham, NY 11786. The Company was leasing on a month-to-month basis a fully furnished executive suite in Manhattan at a monthly cost of approximately $9,000. The executive suite was located at 61 Broadway, 11th Floor, Suite 1105, New York, NY 10006. Since COVID-19 we have not been able to use the space nor been responsible to pay rent for the period April 2020 through January 2021 when we terminated this office lease.

 

 

 

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Item 3. Legal Proceedings

 

We are not a party to any pending material legal proceedings. The following matters were settled in the past two fiscal years.

 

Washington Prime Group, Inc. (“WPG”), a successor in interest to Simon Property Group, L.P., commenced an action in the Marion Superior Court, County of Marion, State of Indiana against the Company in February 2020 alleging default on 36 commercial leases which the Company had entered into in 36 separate shopping mall locations across the United States for the placement of Mobiquity’s Bluetooth messaging system equipment in the shopping malls to send advertisements through to shoppers’ phones as they walked through mall common areas. WPG alleged damages from unpaid rent of $892,332. WPG sought a judgment from the court to collect the claimed unpaid rent plus attorneys’ fees and other costs of collection. The Company disputed the claim. On September 18, 2020, the parties entered into a settlement agreement with respect to this lawsuit. Under the settlement agreement, Mobiquity paid WPG $100,000.00 in five $20,000 monthly installments ending in January 2021 and mutual general releases were exchanged.

 

In December 2019, Carter, Deluca & Farrell LP, a law firm, commenced an action in the Supreme Court of New York, County of Nassau, against the Company seeking $113,654 in past due legal fees allegedly owed. The Company disputed the amount owed to that firm. On March 13, 2021 the Company entered into a settlement agreement with the law firm and paid them $60,000 to settle the lawsuit.

 

In July 2020, Fyber Monetization, an Israeli company in the business of digital advertising, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in the Magistrate’s Court in Tel Aviv, Israel. In its statement of claim, Fyber alleged that Advangelists owes Fyber license fees of $584,945 invoiced in June through November 3, of 2019 under a February 1, 2017 license agreement for the use of Fyber’s RTB technology and e-commerce platform with connects digital advertising media buyers and media sellers. In March 2022, this lawsuit was settled with the Company paying $120,000 to Plaintiff.

 

In October 2020, FunCorp Limited, a Cypriot company which owns and operates social networking websites and mobile applications, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in Superior Court, State of Washington, County of King alleging Advangelists owed FunCorp for unpaid amounts due under an insertion order for placement of Advangelists’ advertisements on FunCorp’s iFunny website totaling $42,464 plus legal fees. Advangelists disputed the claim. In September, 2021 the action was settled in payment of $44,000 and the exchange of general releases, without Advangelists admitting any liability. The settlement agreement provides that the terms of the settlement agreement and FunCorp’s allegations are confidential, and may not be disclosed except as required by law, court order or subpoena with certain limitations.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

  

 

 

 

 

 

 

 

 

 

 

 

 

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PART II

 

Item 5. Market for Common Equity, Related Stockholder Matters, and Issuer

 

Common Stock

 

In the past, our Common Stock traded on the OTCQB under the symbol "MOBQ" on a limited basis. In October 2021, our Board of Directors approved the filing, and we submitted an application in compliance with the NASDAQ rules and regulations to list and trade our Company’s securities on the NASDAQ Capital Market. Trading commenced for our common stock and warrants on December 9, 2021. The following table sets forth the range of high and low sales prices of our Common Stock for the last two fiscal years. On September 9, 2020, the Company effected a one-for-400 reverse stock split. All share and per share amounts set forth herein give retroactive effect to the stock split unless the context indicates otherwise.

 

Quarters Ended  High  Low
March 31, 2020  $48.00   $8.00 
June 30, 2020   16.00    8.00 
June 30, 2020   16.00    4.00 
December 31, 2020   11.00    5.50 
March 31, 2021   10.95    6.15 
June 30, 2021   9.50    5.50 
September 30, 2021   10.25    6.45 
December 31, 2021   9.50    2.01 

 

The closing sales price on December 31, 2021, was $2.13 per share. All quotations provided herein reflect inter-dealer prices, without retail mark-up, markdown or commissions.

 

In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a fully reporting company under the Securities Exchange Act of 1934 may, sell their restricted Common Stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for there to be adequate public information disclosed. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their shares without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock. See “Item 1A.”

 

Publicly Held Warrants

 

Our publicly held warrants commenced trading on the NASDAQ Capital Market on December 9, 2021, under the symbol “MOBQW.” The high and low sales price of our warrants was $0.915 and $0.50, respectively, for the period December 9, 2021, through December 31, 2021. The closing sales price of on December 31, 2021, was $0.55 per warrant. All quotations provided herein reflect inter-dealer prices, without retail mark-up, markdown or commissions.

 

 

 

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Holders of Record

 

As of March 11, 2022, there were 257 active holders of record of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. As of March 1, 2022, the Company has a list consisting of 1,211 beneficial (“NOBO”) holders who do not object to having their names provided to the Company. The transfer agent of our common stock is Continental Stock Transfer & Trust Company, New York NY.

 

DIVIDEND POLICY

 

The Company has not paid any cash dividends to date and does not anticipate or contemplate paying cash dividends on our capital stock in the foreseeable future. It is the present intention of management to utilize all available funds and future earnings for the development of the Company’s business. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant. Our future ability to pay cash dividends on our capital stock may be limited by any future debt instruments or preferred securities.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

(a) In fiscal 2020 and 2021, we made sales or issuances of unregistered securities listed in the table below:

 

 

Date of Sale   Title of Security   Number Sold   Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers   Exemption from
Registration Claimed
  If Option, Warrant or Convertible Security, terms of exercise or conversion
                     
2020   Common Stock   340,786 shares  

Cash consideration

$3,600,424

  Rule 506; Section 4(2)  

N/A

 

                     
2020   Common stock  

38,125 shares

  Services rendered; no commissions paid   Services rendered, valued at $547,451   N/A
                     
2020   Common stock   9,843 shares and 4,921 warrants   Preferred stock Series E conversion resulting in transfer from preferred stock to common stock of $324,802   Section 3(a)(9)   Converted 3,937 Series E preferred shares
                     
2020   Warrant conversion   warrants converted to 77,220 common shares  

Cash consideration $873,473

 

  Section 4(2)   Warrants exercised at $13.00 to $16.00 per share including some cashless exercise

 

 

 

 35 

 

 

2020

 

$50,000 Convertible note

 

1,919 common shares

 

Paid $20,000 cash; converted $30,000 balance to common stock

 

Section 4(2)/Section 3(a)(9)

 

Conversion of notes into common stock at an effective price of $26.05 per share

 

2021

 

Common stock

 

265,000 shares

 

Services rendered

 

Rule 506; Section 4(2)

 

Not applicable

 

2021

 

Common Stock

 

236,768 shares

 

Note conversion

 

Section 3(a)(9)

 

Not applicable

 

2021

 

Common Stock

 

49,384 shares

 

Warrant conversions cashless exercise

 

Section 3(a)(9)

 

Each warrant exercise

Price$5.395, expiration

Date 9/17/2026

 

2021

 

Common Stock

 

375,000 shares

 

Series C Preferred Stock conversion

 

Section 3(a)(9)

 

(1)

 

2021

 

Common Stock

 

2,631,764 shares

 

Shares sold for cash

 

Rule 506; Section 4(2)

 

Not applicable

 

2021

 

Common Stock

 

92,900 shares

 

Original issue discount

 

Rule 506;Section 4(2)

 

Not applicable

 

2021

 

Common Stock

 

6,250 shares

 

Series AAA Preferred Stock conversion

 

Rule 506;Section 4(2)

 

Not applicable

  

(1)1,500 Series C Warrants were converted into 375,000 common shares and a like number of warrants, exercisable at $48.00 per share through September 2023.

 

RECENT PURCHASES OF SECURITIES

 

In 2021 and 2020, we had no repurchases of our Common Stock, except as described above.

 

Item 6. Selected Financial Data

 

The information required by Item 6 is not required by issuers that satisfy the definition of “smaller reporting company” under SEC rules.

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this Form 10-K. All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future capital requirements, our future plan of operations, our ability to obtain debt, equity or other financing, and our ability to generate cash from operations, are based on current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results.

 

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect to the restatement of our financial statements, as more fully described in Note 3 to our financial statements entitled “Restatement of Financial Statements”. For further detail regarding the restatement, see “Explanatory Note” and “Item 9A. Controls and Procedures.”

 

 

 

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Company Overview

 

Mobiquity Technologies, Inc. is a next-generation marketing and advertising technology and data intelligence company which operates through our proprietary software platforms in the programmatic advertising space.

 

Our product solutions are comprised of two proprietary software platforms:

 

  · Our advertising technology operating system (or ATOS) platform; and
     
  · Our data intelligence platform.

 

Our ATOS platform blends artificial intelligence (or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and campaigns. Our data intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research.

 

We operate our business through two wholly-owned subsidiaries. Advangelists LLC operates our ATOS platform business, and Mobiquity Networks, Inc. operates our data intelligence platform business.

 

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

 

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

 

 

 

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

 

There are also certain considerations related to accounting policies, business processes and internal control over financial reporting that are associated with implementing Topic 606. The Company has evaluated its policies, processes, and control framework for revenue recognition, and identified and implemented the changes needed in response to the new guidance.

 

Lastly, disclosure requirements under the new guidance in Topic 606 have been significantly expanded in comparison to the disclosure requirements under the current guidance, including disclosures related to disaggregation of revenue into appropriate categories, performance obligations, the judgments made in revenue recognition determinations, adjustments to revenue which relate to activities from previous quarters or years, any significant reversals of revenue, and costs to obtain or fulfill contract.

 

The Company generates revenue from service contracts with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized in proportion to the value provided to the customer for each project as of each reporting date. We recognize revenues in the period in which the data transmission is provided to the licensee.

 

Allowance for Doubtful Accounts

 

We are required to make judgments as to the realizability of our accounts receivable. We make these assessments based on the following factors: (a) historical experience, (b) customer concentrations, (c) 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.

 

Goodwill and Intangible Assets

 

Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships and non-compete agreements. Their useful lives range from 1.5 to 10 years. The Company’s indefinite-lived intangible assets consist of trade names.

 

 

 

 

 38 
 

 

Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess.

 

Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform impairment testing prior to scheduled annual impairment tests.

 

The Company performed its annual fair value assessment at December 31, 2021, there was a $3,600,000 impairment during the year. For the year ended December 31, 2020, there was a $4,000,000 impairment.

 

Plan of Operation

 

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

 

 

 

 39 
 

 

Results of Operations

 

Year Ended December 31, 2021, versus Year Ended December 31, 2020

 

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.

 

   Year Ended
   December 31,
2021
  December 31,
2020
Revenue  $2,672,615   $6,184,010 
Cost of Revenues   1,954,383    4,360,645 
Gross Profit   718,232    1,823,365 
Operating Expenses   13,982,877    9,204,465 
(Loss) from operations   (13,264,645)   (7,381,100)

 

We generated revenues of $2,672,615 in 2021 as compared to $6,184,010 in the same period for 2020, a change in revenues of $3,511,395. The nationwide economic shutdown due to COVID-19 during 2021 severely reduced current operations.

 

Cost of revenues was $1,954,383 or 71% of revenues in 2021 as compared to $4,360,645 or 71% of revenues in the same fiscal period of fiscal 2020. Cost of revenues include web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability to capture and store data for sales does not translate to increased cost of sales.

 

Gross Profit was $718,232 or 27% of revenues for 2021 as compared to $1,823,365 in the same fiscal period of 2020 or 29% of revenues. When the country comes out of COVID-19 and the economy begins to turn around we anticipate income to increase.

 

Operating expenses were $13,982,877 for 2021 compared to $9,204,465 in the comparable period of the prior year, an increase of $4,778,412. Increased operating costs include cash and non-cash expenses for professional fees of $1,141,848, non-cash operating costs also include stock and share-based compensation of $6,168,367, and amortization of debt discount and issue costs of $780,081.

 

The net loss from operations for 2021 was $13,264,645 as compared to $7,381,100 for the comparable period of the prior year, an increase of $5,883,545. The loss from operations primarily includes stock-based compensation of $5,010,342, stock issued for services of $1,158,025, bad debt expense of $434,390, amortization of intangible assets of $800,735, amortization of debt discount/issue costs of $780,081, warrants issued for interest expense of $320,188, and loss on conversion of debt to common stock of $655,832. The continuing operating loss is attributable to the focused effort in creating the infrastructure required to move forward with our Mobiquity and Advangelists network business.

 

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.

 

 

 

 

 40 
 

 

Liquidity and Capital Resources

 

We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2021, and 2020

 

We had cash and cash equivalents of $5,385,245 at December 31, 2021. Cash used by operating activities for the year ended December 31, 2021, was $6,717,324. This resulted from a net loss of $19,365,777, partially offset by non-cash expenses, including depreciation and amortization of $808,300, stock-based compensation of $5,010,342, stock issued for service of $1,158,025, warrants issued for interest expense of $320,188 and impairment expense of $3,600,000.

 

For the year ended December 31, 2021, cash used in investing activities was $6,472 related to the purchase of property and equipment.

 

Cash provided by financing activities of $11,506,860 was the result of issuance of notes totaling $4,143,000 and repayments of notes totaling $2,840,337,as well as stock and warrants issued for cash net of direct offering costs of $10,204,197.

 

We had cash and cash equivalents of $602,182 at December 31, 2020. Cash used by operating activities for the year ended December 31, 2020 was $4,716,739. This primarily resulted from a net loss of $15,032,404, partially offset by non-cash expenses, including depreciation and amortization of $1,807,007, stock-based compensation of $1,347,048, warrant expense of $1,472,367 and impairment expense of $4,000,000. Cash provided by financing activities of $485,033 was the result of issuance of notes and cash payments on notes outstanding.

 

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 2022 and beyond until cash flow from our proximity marketing operations become substantial.

 

Recent Financings

 

On October 19, 2021, the Company filed a Form S-1 Registration Statement (File no. 333-260364) with the Securities and Exchange Commission to raise over $10 million dollars in an underwritten public offering. The next day the Company filed an application to list our common stock on the NASDAQ Capital Market under the symbol “MOBQ.” This offering was completed on December 13, 2021, and the Company retired the loans of Talos Victory Fund, LLC and Blue Lake Partners LLC out of the gross proceeds it received of approximately $10.3 million. Also, Talos Victory Fund, LLC and Blue Lake Partners, LLC converted all of their warrants on a cashless basis into 24,692 common shares and 24,692 common shares, respectively.

 

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

 

Off-Balance Sheet Arrangements

 

As of December 31, 2021, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

  

Item 7A. Qualitative and Qualitative Disclosures about Market Risk

 

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

 

Item 8. Financial Statements

 

Financial Statements and Supplementary Data

 

The report of the Independent Registered Public Accounting Firm, Financial Statements and Schedules are set forth herein.

 

 

 

 41 

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Mobiquity Technologies, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Mobiquity Technologies, Inc. as of December 31, 2021, and 2020, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Restatement of December 31, 2021 Financial Statements

 

As discussed in Note 3 to the financial statements, the financial statements have been restated to correct certain misstatements.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Critical Audit Matter

 

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

 

 

 

 42 

 

 

Revenue recognition — identification of contractual terms in certain customer arrangements

 

As described in Note 2 to the consolidated financial statements, management assesses relevant contractual terms in its customer arrangements to determine the transaction price and recognizes revenue upon transfer of control of the promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Management applies judgment in determining the transaction price which is dependent on the contractual terms. In order to determine the transaction price, management may be required to estimate variable consideration when determining the amount and timing of revenue recognition.

 

The principal considerations for our determination that performing procedures relating to the identification of contractual terms in customer arrangements to determine the transaction price is a critical audit matter are there was significant judgment by management in identifying contractual terms due to the volume and customized nature of the Company’s customer arrangements. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms used in the determination of the transaction price and the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness of management’s estimates.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including those related to the identification of contractual terms in customer arrangements that impact the determination of the transaction price and revenue recognition. These procedures also included, among others, (i) testing the completeness and accuracy of management’s identification of the contractual terms by examining customer arrangements on a test basis, and (ii) testing management’s process for determining the appropriate amount and timing of revenue recognition based on the contractual terms identified in the customer arrangements.

 

 

 

/S/ BF Borgers CPA PC

 

We have served as the Company's auditor since 2018

 

Lakewood, CO

 

March 29, 2022 except for the effects of the restatement disclosed in Notes 2, and 3, as to which the date is May 23, 2022

 

PCAOB ID Number 5041

 

 

 

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Mobiquity Technologies, Inc.

Consolidated Balance Sheets

(As Restated)

         
  

December 31, 2021

   December 31, 2020 
   (As Restated)     
Assets          
Current Assets          
Cash  $5,385,245   $602,182 
Accounts receivable, net   388,112    1,698,719 
Prepaid expenses and other current assets   11,700    46,396 
Total Current Assets   5,785,057    2,347,297 
           
Property and equipment (net of accumulated depreciation of $20,200 and $12,635, respectively)   20,335    21,428 
Goodwill   1,352,865    1,352,865 
Intangible assets (net of accumulated amortization of $4,156,657 and $3,355,922, respectively)   1,247,019    5,647,754 
           
Other assets          
Security deposits       9,000 
Investment in corporate stock       91 
           
Total Assets  $8,405,276   $9,378,435 
           
Liabilities and Stockholders' Equity          
Current Liabilities          
Accounts payable and accrued expenses  $2,367,600   $3,140,467 
Notes payable   656,504    901,283 
Total Current Liabilities   3,024,104    4,041,750 
           
Long term portion convertible notes, net   2,462,500    2,450,000 
           
Total Liabilities   5,486,604    6,491,750 
           
Stockholders' Deficit          
AAA Preferred stock; 4,930,000 and 5,000,000 authorized; $0.0001 par value 31,413 and 56,413 shares issued and outstanding at December 31, 2021 and December 31, 2020   493,869    868,869 
Preferred stock Series C; $.0001 par value; 1,500 shares authorized 0 and 1,500 shares issued and outstanding at December 31, 2021 and December 31, 2020       15,000 
Preferred stock Series E; 70,000 authorized; $80 par value 61,688 and 61,688 shares issued and outstanding at December 31, 2021 and December 31, 2020   4,935,040    4,935,040 
Common stock: 100,000,000 authorized; $0.0001 par value 6,460,751 and 2,803,685 shares issued and outstanding at December 31, 2021 and December 31, 2020   650    282 
Treasury stock $0.0001 par value 37,500 and 37,500 shares outstanding at December 31, 2021 and December 31, 2020   (1,350,000)   (1,350,000)
Additional paid in capital   204,373,816    184,586,420 
Accumulated deficit   (205,534,703)   (186,168,926)
Total Stockholders' Equity   2,918,672    2,886,685 
Total Liabilities and Stockholders' Equity  $8,405,276   $9,378,435 

 

See notes to consolidated financial statements

 

 44 

 

 

Mobiquity Technologies, Inc.

Consolidated Statements of Operations of Comprehensive Loss

(As Restated)

         
   Year Ended 
   December 31, 
  

2021

   2020 
   (As Restated)     
Revenue  $2,672,615   $6,184,010 
           
Cost of Revenues   1,954,383    4,360,645 
           
Gross Profit   718,232    1,823,365 
General and administrative expenses   13,982,877    9,204,465 
           
Loss from operations   (13,264,645)   (7,381,100)
           
Other Income (Expenses)          
Impairment expense   (3,600,000)   (4,000,000)
Interest Expense   (1,417,268)   (715,262)
Amortization of debt discount/issue costs   (692,430)    
Forgiveness of SBA – PPP loan   265,842     
Proceeds from the sale of warrants       662,758 
Warrant expense       (598,894)
Loss on debt extinguishment   (657,276)   (2,996,897)
Total Other Income (Expense)   (6,101,132)   (7,648,295)
           
Loss from continuing operations  $(19,365,777)  $(15,029,395)
           
Other Comprehensive Income (loss)          
Unrealized holding gain (loss) arising during period       (3,009)
 Total other Comprehensive Income (loss)   $   $(3,009)
           
Net Comprehensive Loss  $(19,365,777)  $(15,032,404)
           
Net Comprehensive Loss Per Common Share:          
For continued operations, basic and diluted   (5.78)   (5.92)
           
Weighted Average Common Shares Outstanding, basic and diluted   3,351,335    2,537,811 

 

See notes to consolidated financial statements

 

 45 

 

 

Mobiquity Technologies, Inc.

Consolidated Statement of Stockholders' Equity

(As Restated)

 

                                                              
    Series AAA Preferred Stock                   Series C Preferred Stock   Series E Preferred Stock   Common Stock   Additional Paid-in 
    Shares   Amount                   Shares   Amount   Shares   Amount   Shares   Amount   Capital 
December 31, 2020    56,413   $868,869             868,869    1,500   $15,000    61,688   $4,935,040    2,803,685   $282   $184,586,420 
Stock issued for services                                            265,000    24    1,158,001 
Stock issued for cash and warrants - net of offering costs of $974,000 (as restated)                                           2,631,764    264    10,203,933 
Stock based compensation (as restated)                                                    5,010,342 
Conversion of convertible debt to common stock                                            236,768    23    2,004,408 
Stock issued with debt recorded as a debt discount                                            92,900    14    700,567 
Warrants issued for interest expense (as restated)                                                    320,188 
Exercise of warrants for common stock (as restated)                                            49,384    4    (4)
Conversion of Series AAA, preferred stock    (25,000)   (375,000 )                                 6,250    1    374,999 
Conversion of Series C, preferred stock                            (1,500)   (15,000)           375,000    38    14,962 
Net loss (as restated)                                                     
December 31, 2021 (as restated)    31,413   $493,869                      $    61,688   $4,935,040    6,460,751   $650   $204,373,816 

 

 

                                                              
                   Mezzanine   Series C Preferred Stock   Series E Preferred Stock           Additional 
                   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-in 
                   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital 
Balance, at January 1, 2020             –      46,413   $714,869    1,500   $15,000    65,625   $52,50,000    2,335,792   $234   $177,427,524 
Common stock issued for services                                           38,125    3    547,448 
Common stock issued for note conversion                                           1,919        30,694 
Common stock issued for cash                                           340,786    40    3,600,384 
Preferred stock series E                 10,000    154,000          (3,937   (314,960   9,843    1    160,959 
Warrant conversions                                           77,220    4    873,469 
Warrants issued                                                   598,894 
Stock based compensation                                                   1,347,048 
Net Loss                                                    
Balance, at December 31, 2020                 56,413   $868,869    1,500   $15,000    61,688   $49,35,040    2,803,685   $282   $184,586,420 

 

 

 

 46 

 

 

                     
               Total 
   Treasury Stock   Accumulated   Stockholders' 
   Shares   Amount   Deficit   Deficit 
December 31, 2020   37,500   $(1,350,000)  $(186,168,926)   2,886,685 
Stock issued for services               1,158,025 
Stock issued for cash and warrants - net of offering costs of $974,000 (as restated)               10,204,197 
Stock based compensation (as restated)               5,010,342 
Conversion of debt               2,004,431 
Stock issued with debt recorded as a debt discount               700,581 
Warrants issued for interest expense (as restated)               320,188 
Exercise of warrants for common stock (as restated)                
Conversion of Series AAA, preferred stock                
Conversion of Series C, preferred stock                
Net loss (as restated)           (19,365,777)   (19,365,777)
December 31, 2021 (as restated)   37,500   $(1,350,000)  $(205,534,703)   2,918,672 

 

 

   Treasury Shares   Accumulated   Total Stockholders’ 
   Shares   Amount   Deficit   Deficit 
Balance, at January 1, 2020   37,500    (1,350,000)  $(171,136,522)  $10,921,105 
Common stock issued for services               547,451 
Common stock issued for note conversion               30,694 
Common stock issued for cash               3,600,424 
Preferred stock series E                
Warrant conversions               873,473 
Warrants issued                598,894 
Stock based compensation               1,347,048 
Net Loss           (15,032,404)   (15,032,404)
Balance, at December 31, 2020   37,500   $(1,350,000)  $(186,168,926)  $2,886,685 

 

 

See notes to consolidated financial statements

 

 47 

 

 

Mobiquity Technologies, Inc.

Consolidated Statements of Cash Flows

(As Restated)

 

         
  

Year Ended

December 31,

 
   2021  2020 
   (As Restated)     
Operating activities        
Net loss  $(19,365,777)   (15,032,404)
Adjustments to reconcile net loss to net cash used in operations          
Bad debt expense   434,390    306,000 
Depreciation   7,565    6,271 
Amortization of intangibles   800,735    1,800,736 
Amortization of debt discount/issue costs   780,081     
Recognition of share based compensation   5,010,342    1,347,048 
Stock issued for services   1,158,025    547,451 
Warrants issued for interest expense   320,188    1,472,368 
Impairment of intangibles   3,600,000    4,000,000 
Loss on conversion of debt to common stock   655,832    30,694 
Gain on forgiveness of PPP loan   (265,842)    
Change in fair value of marketable securities       3,009 
Changes in operating assets and liabilities          
(Increase) decrease in          
Accounts receivable   876,217    1,606,659 
Prepaids and other   43,788    (26,196)
Increase (decrease) in          
Accounts payable and accrued expenses   (772,868)   (778,375)
Net cash used in operating activities   (6,717,324)   (4,716,739)
           
Investing activities          
Purchase of property and equipment   (6,472)   (6,599)
Net cash used in investing activities   (6,472)   (6,599)
           
Financing activities          
Proceeds from issuance of notes payable - net   4,143,000    1,005,842 
Repayments on notes payable   (2,840,337)   (520,809)
Proceeds from stock and warrants issued for cash - net of offering costs   10,204,197    3,600,423 
Net cash provided by financing activities   11,506,860    4,085,456 
           
Net increase (decrease) in cash   4,783,063    (637,882)
           
Cash - beginning of year   602,182    1,240,064 
           
Cash - end of year  $5,385,245    602,182 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $424,616    442,326 
Cash paid for income tax  $2,065    7,272 
           
Supplemental disclosure of non-cash investing and financing activities          
Conversion of Series AAA preferred stock to common stock  $375,000     
Conversion of Series C, preferred stock into common stock  $15,000     
Exercise of warrants for common stock  $4     
Conversion of convertible debt into common stock  $2,004,432     

 

See notes to consolidated financial statements

 

 48 

 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

NOTE 1: ORGANIZATION AND GOING CONCERN

 

We operate our business through two wholly owned subsidiaries, Advangelists, LLC and Mobiquity Networks, Inc. Our corporate structure is as follows:

 

Diagram

Description automatically generated

 

Subsidiaries

 

Advangelists, LLC

 

Advangelists LLC operates our ATOS platform business.

 

We originally acquired a 48% membership interest and Glen Eagles Acquisition LP acquired a 52% membership interest in Advangelists in a merger transaction in December 2018 for consideration valued at $20 Million. At the time Glen Eagles was a shareholder of the Company, owning 412,500 shares of our common stock. The Company became, and remains, the sole manager of Advangelists following the merger with sole management power. In consideration for the merger:

 

  · Mobiquity issued warrants for 269,384 shares of common stock at an exercise price of $56 per share to the pre-merger Advangelists’ members, and, in February 2019, upon the attainment of the vesting threshold of Advangelists’ combined revenues for the months of December 2018 and January 2019 being at least $250,000, the Company transferred 9,209,722 shares of Gopher Protocol, Inc. common stock to the pre-merger Advangelists members. The Mobiquity warrants were valued at a total of $3,844,444, and the Gopher shares of common stock were valued at a total of $6,155,556.

 

  · Glen Eagles paid the pre-merger Advangelists members $10 million. $500,000 was paid at closing in cash (which the Company advanced on behalf of Glen Eagles without any agreement regarding repayment of the advance), and $9,500,000 was paid by Glen Eagles’ promissory note to Deepankar Katyal, as representative of pre-merger Advangelists members, payable in 19 monthly installments of $500,000 each.

 

 

 49 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

The Company acquired 3% of the Advangelists’ membership interests from Glen Eagles in April 2019 in satisfaction of the Company’s $500,000 closing payment advance to Glen Eagles, resulting in Mobiquity owning 51% and Glen Eagles owning 49% of Advangelists.

 

In May 2019 the Company acquired the remaining 49% of Advangelists’ membership interests from Glen Eagles, becoming the 100% owner of Advangelists, in a transaction involving the Company, Glen Eagles, and Gopher Protocol, Inc. In that transaction, Gopher acquired the 49% Advangelists membership interest from Glen Eagles and assumed Glen Eagles’ promissory note to Deepankar Katyal, as representative of the pre-merger Advangelists owners, which had a remaining balance of $7,512,500, in satisfaction of indebtedness owed by Glen Eagles to Gopher. Concurrently with that transaction, the Company acquired the 49% of Advangelists membership interest from Gopher and assumed the promissory note in consideration. Additionally, warrants for 300,000 shares of Company common stock which are issuable upon the conversion of Mobiquity Class AAA preferred stock owned by Gopher were amended to provide for a cashless exercise. In September 2019, the assumed note, which then had a principal balance of $6,780,000, was amended and restated to provide that:

 

  · $5,250,000 of the principal was payable in 65,625 shares of the Company’s Class E Preferred Stock, which is convertible into 164,062.50 shares the Company’s common stock, plus warrants to purchase 82,031.25 Company shares of common stock, at an exercise price of $48 per share: and
     
  · $1,530,000 of the principal balance, plus all accrued and unpaid interest under the promissory note was payable in three monthly installments of $510,000 each.

 

The promissory note was paid in full in November 2019.

 

Mobiquity Networks, Inc.

 

We have established Mobiquity Networks, Inc and have operated it since January 2011. Mobiquity Networks started and developed as a mobile advertising technology company focused on driving foot-traffic throughout its indoor network and has evolved and grown into a next generation data intelligence company. Mobiquity Networks operates our data intelligence platform business.

 

Going Concern

 

These condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. We have a history of losses and may continue to incur losses in the future, which could negatively impact the trading value of our common stock. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of December 31, 2021, and December 31, 2020, the Company had an accumulated deficit of $205,534,703 and $186,168,926. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. We may continue to incur operating and net losses in future periods. These losses may increase, and we may never achieve profitability for a variety of reasons, including increased competition, decreased growth in the unified advertising industry and other factors described elsewhere in this “Risk Factors” section. If we cannot achieve sustained profitability, our stockholders may lose all or a portion of their investment in our company.

 

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

 

 

 50 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

Reverse Stock Split

 

In September 2020, the Company filed a Certificate of Amendment the Articles of Incorporation with the Secretary of State of the state of New York to implement a 1 for 400 reverse stock-split of its common stock effective September 9, 2020. The reverse stock split did not cause an adjustment to the par value of common stock. As a result of the reverse stock split, the Company adjusted the share amounts under its employee incentive plans, outstanding options and common stock warrant agreements, treasury shares and preferred shares.

 

Impacts of COVID-19 to Business and the general economy

 

The Company’s financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic. Since March 2020, COVID -19 has caused a material and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will likely continue to experience a reduction in projects, longer sales and collection cycles, deferral or delay of purchase commitments for our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially adversely affect revenue and our ability to remain a going concern. In the event we remain a going concern, the impacts of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and then general economy, are currently not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing events, among other modifications. We lost a purchase order of more than one million dollars with major US sports organization. We have observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, although we do anticipate it to continue to negatively impact our financial results during fiscal years 2022 and 2023.

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES 

 

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

 

 

 51 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

The ATOS platform:

 

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

 

Advangelists’ marketplace engages with approximately 10 billion advertisement opportunities per day. Our sales and marketing strategy is focused on creating a de-fragmented operating system that makes it considerably more efficient and effective for advertisers and publishers to transact with each other. Our goal is to create a standardized and transparent medium.

 

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

 

Risks Related to Our Financial Results and Financing Plans

 

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

 

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

 

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

 

Related Parties

 

Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. We consider the following individuals / companies to be related parties as of December 31, 2021:

 

Dean Julia - Principal Executive Officer President and Director

 

Sean McDonnell - Chief Financial Officer

 

Deepanker Katyal, Chief Executive Officer of Advangelists

 

Sean Trepeta – President of Mobiquity Networks and Secretary of the Company

 

Dr. Gene Salkind – Chairman of the Board of Directors

 

Michael Wright – Board of Directors

 

Anthony Iacovone – Board of Directors

 

Peter Zurkow – Board of Directors

 

 

 52 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

PRINCIPLES OF CONSOLIDATION – The accompanying condensed consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing& Promotions, Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc. and its wholly- owned subsidiary, Advangelists, LLC. 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.

 

CASH AND CASH EQUIVALENTS – The Company considers all highly liquid debt instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

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

 

Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, consequently, believes that its receivable credit risk exposure is limited. Our current receivables at December 31, 2021 consist of 55% held by six of our largest customers. Our current receivables at December 31, 2020 consist of 58% held by six of our largest customers.

 

The Company places its temporary cash investments with high credit quality financial institutions. At times, the Company maintains bank account balances which exceed FDIC limits. As of December 31, 2021, and December 31, 2020, the Company exceeded FDIC limits by $5,103,273, and $114,986, respectively.

 

REVENUE RECOGNITION

 

The Company accounts for revenue recognition in accordance with accounting guidance codified as FASB ASC 606 “Revenue from Contracts with Customers” (“ASC 606”), as amended, regarding revenue from contracts with customers. Under the standard an entity is required to recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods.

 

Under ASC 606, revenue is recognized at the same point in time, upon delivery of services, under both ASC Topic 605 and Topic 606, as applicable under the terms of the contract (i.e., performance obligations). In evaluating our contracts with our customers under ASC 606, we have determined that there is no future performance obligation once delivery has occurred.


The Company’s revenues are primarily derived from consideration paid by customers. There are no material upfront costs for operations that are incurred from contracts with customers.

 

The Company’s rights to payments for services transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days.

 

ALLOWANCE FOR DOUBTFUL ACCOUNTS – Management must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of December 31, 2021, and December 31, 2020, allowance for doubtful accounts were $820,990, and $386,600, respectively.

 

 

 53 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

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

 

LONG LIVED ASSETS – In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. The Company recognized an impairment charge of $3,600,000 and $4,000,000 for the periods ended December 31, 2021, and December 31, 2020, respectively.

 

Transactions with major customers

 

During the year ended December 31, 2021, four customers accounted for approximately 31% of revenues. During the year ended December 31, 2020, five customers accounted for approximately 42% of revenues.

 

During the year ended December 31, 2021, five customers accounted for approximately 55% of receivables. During the year ended December 31, 2020, six customers accounted for approximately 58% of receivables.

 

ADVERTISING COSTS – Advertising costs are expensed as incurred. For the year ended December 31, 2021, and for the year ended December 31, 2020, there were advertising costs of $1,454 and $1,400 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 9 “Stock Option Plans” in the Notes to Consolidated Financial Statements in this report for a more detailed discussion.

 

OFFERING COSTS (RESTATED) – Offering costs consist of legal, accounting, underwriting fees and other costs incurred in connection with the sale of the Company’s common stock. These costs are deducted from the total proceeds raised with a charge to additional paid-in capital.

 

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.

 

 

 54 

 

 

MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

We adopted the lease standard ACS 842 effective January 1, 2019, and have elected to use January 1, 2019, as our date of initial application. Consequently, financial information will not be updated, and disclosures required under the new standard will not be provided for periods presented before January 1, 2019, as these prior periods conform to the Accounting Standards Codification 840. We elected the package of practical expedients permitted under the transition guidance within the new standard. By adopting these practical expedients, we were not required to reassess (1) whether an existing contract meets the definition of a lease; (2) the lease classification for existing leases; or (3) costs previously capitalized as initial direct costs. As of December 31, 2021, we are not a lessor or lessee under any lease arrangements.

 

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

 

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

 

NET LOSS PER SHARE

 

Basic net loss per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants. The number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted loss per common share calculation was approximately 4,925,000 common stock equivalents since these are anti-dilutive, as a result of a net loss for the year ended December 31, 2021.

 

RECLASSIFICATIONS (RESTATED)

 

Certain prior year amounts have been reclassified for consistency with the current year presentation due to the restatement.

 

NOTE 3: RESTATEMENT

 

The Company concluded it should restate its previously issued financial statements by amending its Annual Report on Form 10-K, filed with the SEC on March 30, 2022.

 

The restated financial statements are indicated as “Restated” in the financial statements and accompanying notes, as applicable.

 

The Company is presenting below a reconciliation from the December 31, 2021 year end, as previously reported, to the restated values. The values as previously reported were derived from the Company’s Form 10-K which presented the audited financial statements for the year ended December 31, 2021

 

 

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MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

Balance Sheet

December 31, 2021

(As Restated)

                 
   As Previously Reported   Adjustment   As Restated   
               
Assets  
               
Current Assets                 
Cash  $5,385,245   $   $5,385,245   
Accounts receivable  - net   388,112        388,112   
Prepaids and other   11,700        11,700   
Total Current Assets   5,785,057        5,785,057   
                  
Property and equipment - net   20,335        20,335   
                  
Other Assets                 
Intangibles - net   1,247,019        1,247,019   
Goodwill   1,352,865        1,352,865   
Total Other Assets   2,599,884        2,599,884   
                  
Total Assets  $8,405,276   $   $8,405,276   
                  
Liabilities and Stockholders' Equity   
                  
Current Liabilities                 
Accounts payable and accrued expenses  $2,367,600   $   $2,367,600   
Notes payable - net   519,004    137,500    656,504  1
Total Current Liabilities   2,886,604    137,500    3,024,104   
                  
Long Term Liabilities                 
Convertible notes payable - net   2,600,000    (137,500)   2,462,500  1
Total Long Term Liabilities   2,600,000    (137,500)   2,462,500   
                  
Total Liabilities   5,486,604        5,486,604   
                  
Stockholders' Equity                 
Series AAA, Preferred stock, $0.0001 par value, 4,930,000 shares authorized, 31,413 shares issued and outstanding   493,869        493,869   
Series C, Preferred stock, $0.0001 par value, 1,500 shares authorized, 0 shares issued and outstanding              
Series E, Preferred stock, $80 par value, 70,000 shares authorized, 61,688 shares issued and outstanding   4,935,040        4,935,040   
Common stock, $0.0001 par value, 100,000,000 shares authorized 6,460,751 shares issued and outstanding   650        650   
Additional paid-in capital   219,955,738    251,453    204,373,816  2
         (17,918,961)      3
         2,109,639       4
         (24,053)      5
Treasury stock, $0.0001 par value, 37,500 shares outstanding   (1,350,000)       (1,350,000)  
Accumulated deficit   (221,116,625)   15,581,922    (205,534,703) 6
Total Stockholders' Equity   2,918,672        2,918,672   
                  
Total Liabilities and Stockholders' Equity  $8,405,276   $   $8,405,276   

 

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MOBIQUITY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 (AS RESTATED) AND 2020

 

1   To reclassify the allocation of the Company's actual balances at December 31, 2021. There is no impact to total liabilities.

 

2   Previously recorded as a part of proceeds from the sale of warrants. The Company sold warrants for cash and should have increased additional paid-in capital, accordingly there is no gain on the sale. The net loss and loss per share are both increased for this adjustment. Also see consolidated statement of operations for related adjustment #4.

 

3   In connection with the Company's capital raise, warrants were given to the broker for services rendered. The services directly related to the raising of equity capital and should have been recorded as a direct offering cost, with an offset to additional paid-in capital and not expensed. The net loss and loss per share are both reduced for this adjustment. Also see consolidated statement of operations for related adjustment #5.

 

4   The Company originally marked to market stock it had previously sold to third party investors. There should not have been any adjustment after the stock was sold as these shares were held by others. The adjustment results in an increase to the net loss and loss per share as well as an increase to additional paid-in capital. Also see consolidated statement of operations for related adjustment #6.

 

5   Previously recorded as a part of income (loss) on settlement of debt with sale of Company stock, the account title was changed to gain (loss) on debt extinguishment. Represents a correction of the valuation for stock issuances based upon the quoted closing trading prices on the date the transactions occurred. The adjustment results in an increase of net loss and loss per share as well as a decrease to additional paid-in capital. Also see consolidated statement of operations for related adjustment #8.

 

6   See all related adjustments on statement of operations.    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Statement of Operations

For the Year Ended December 31, 2021

(As Restated)

                 
   As Previously Reported   Adjustment   As Restated   
               
Revenues  $2,672,615   $   $2,672,615   
                  
Cost of revenue   1,954,383        1,954,383   
                  
Gross profit   718,232        718,232   
                  
General and administrative expenses   16,707,231    (3,600,000)   13,982,877  1
         875,646       9
                  
Loss from operations   (15,988,999)   2,724,354    (13,264,645)  
                  
Other income (expense)                 
Impairment expense       (3,600,000)   (3,600,000) 1
Interest expense   (817,430)   (200,150)   (1,417,268) 2
         (320,188)      7
         (79,500)      10
Amortization of debt discount/issue costs   (692,430)       (692,430) 3
Forgiveness of SBA - PPP loan   265,842        265,842   
Proceeds from the sale of warrants   251,453    (251,453)     4
Warrant expense   (18,794,607)   17,918,961      5
         875,646       9
Gain (loss) on debt extinguishment   828,472    320,188    (657,276) 7
         200,150       2
         (2,109,639)      6
         24,053       8
         79,500       10
Total other income (expense) - net   (18,958,700)   12,857,568    (6,101,132)  
                  
Net loss  $(34,947,699)  $15,581,922   $(19,365,777)  
                  
Loss per share - basic and diluted  $(10.43)  $4.65   $(5.78)  
                  
Weighted average number of shares - basic and diluted   3,351,335    3,351,335    3,351,335   

 

 

 

 58 

 

 

1   Previously included as a component of general and administrative expenses, this changes presentation to an other expense account. There is no impact to net loss or loss per share.

 

2   Previously recorded as a part of income (loss) on settlement of debt with sale of Company stock, the account title was changed to gain (loss) on debt extinguishment and represented the issuance of additional shares of common stock to debt holders as additional interest expense. There is no impact to net loss or loss per share.

 

3   Account title was changed from original issue discount to amortization of debt discount to better reflect the nature of this balance. There is no impact to net loss or loss per share.

 

4   Previously recorded as a part of proceeds from the sale of warrants. The Company sold warrants for cash and should have increased additional paid-in capital, accordingly there is no gain on the sale. The net loss and loss per share are both increased for this adjustment. Also see consolidated balance sheet for related adjustment #2.

 

5   In connection with the Company's capital raise, warrants were given to the broker for services rendered. The services directly related to the raising of equity capital and should have been recorded as a direct offering cost, with an offset to additional paid-in capital and not expensed. The net loss and loss per share are both reduced for this adjustment. Also see consolidated balance sheet for related adjustment #3.

 

6   The Company originally marked to market stock it had previously sold to third party investors. There should not have been any adjustment after the stock was sold as these shares were held by others. The adjustment results in an increase to the net loss and loss per share as well as an increase to additional paid-in capital. Also see consolidated balance sheet for related adjustment #4.

 

7   Previously recorded as a part of income (loss) on settlement of debt with sale of Company stock. Represents warrants that were issued as additional interest expense to lenders. There is no impact to net loss or loss per share.

 

8   Previously recorded as a part of income (loss) on settlement of debt with sale of Company stock, the account title was changed to gain (loss) on debt extinguishment. Represents a correction of the valuation for stock issuances based upon the quoted closing trading prices on the date the transactions occurred. The adjustment results in an increase of net loss and loss per share as well as a decrease to additional paid-in capital. Also see consolidated balance sheet for related adjustment #5.

 

9   Represents warrants issued for services rendered. Amount should have been included as a component of general and administrative expenses. There is no impact to net loss or loss per share.

 

10   The Company had a non-cash increase to already existing debt by $79,500 as additional debt issue costs. This amount should have been reflected as additional interest expense. There is no impact to net loss or loss per share.

 

 

 

 

 

 

 

 

 

 

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Statement of Comprehensive Loss

For the Year Ended December 31, 2021

(As Restated)

 

              
   As Previously Reported   Adjustment   As Restated   
               
               
Net loss  $(34,947,699)  $15,581,922   $(19,365,777) 1
                  
Other comprehensive income (loss)                 
Unrealized loss on marketable securities              
Other comprehensive income (loss)              
                  
Comprehensive income (loss)  $(34,947,699)  $15,581,922   $(19,365,777)  

 

  1 See consolidated statement of operations for explanation of changes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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For adjustments effecting the statement of stockholders’ equity, see discussions above on the balance sheet and statement of operations. The items listed below are marked for the specific lines that have been restated as compared to the originally filed statement of equity.

 

                                             
   Series AAA Preferred Stock   Series C Preferred Stock   Series E Preferred Stock   Common Stock   Additional Paid-in 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital 
December 31, 2020   56,413   $868,869    1,500   $15,000    61,688   $4,935,040    2,803,685   $282   $184,586,420 
Stock issued for services                           265,000    24    1,158,001 
Stock issued for cash and warrants - net of offering costs of $974,000 (as restated)                           2,631,764    264    10,203,933 
Stock based compensation (as restated)                                   5,010,342 
Conversion of debt                           236,768    23    2,004,408 
Stock issued with debt recorded as a debt discount                           92,900    14    700,567 
Warrants issued for interest expense (as restated)                                   320,188 
Exercise of warrants for common stock (as restated)                           49,384    4    (4)
Conversion of Series AAA, preferred stock   (25,000)   (375,000)                   6,250    1    374,999 
Conversion of Series C, preferred stock           (1,500)   (15,000)           375,000    38    14,962 
Net loss (as restated)                                    
December 31, 2021   31,413   $493,869       $    61,688   $4,935,040    6,460,751   $650   $204,373,816 

 

 

                 
               Total 
   Treasury Stock   Accumulated   Stockholders' 
   Shares   Amount   Deficit   Deficit 
December 31, 2020   37,500   $(1,350,000)  $(186,168,926)   2,886,685 
Stock issued for services               1,158,025 
Stock issued for cash and warrants - net of offering costs of $974,000 (as restated)               10,204,197 
Stock based compensation (as restated)               5,010,342