UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| 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
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
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.
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).
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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of August 14, 2023, the registrant had shares of common stock, par value $0.001 per share, issued and outstanding.
MOBIVITY HOLDINGS CORP.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mobivity Holdings Corp.
Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts $ | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Right to use lease assets | ||||||||
| Intangible assets and software development costs, net | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued and deferred personnel compensation | ||||||||
| Deferred revenue and customer deposits | ||||||||
| Related party notes payable, net - current maturities | ||||||||
| Notes payable, net - current maturities | ||||||||
| Operating lease liability, current | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Related party notes payable, net - long term | ||||||||
| Notes payable, net - long term | ||||||||
| Operating lease liability | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Common stock, $ par value; shares authorized; and , shares issued and outstanding | ||||||||
| Equity payable | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 1 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | $ | |||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income/(expense) | ||||||||||||||||
| Loss of settlement of debt | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Settlement Losses | ( | ) | ( | ) | ||||||||||||
| Foreign currency gain | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income/(expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive loss, net of income tax | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic and Diluted | ) | ) | ) | ) | ||||||||||||
| Weighted average number of shares: | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 2 |
Mobivity Holdings Corp.
Condensed Consolidated Statement of Stockholders’ Deficit
(Unaudited)
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( | ) | ||||||||||||||||||||||||||
| RSU’s issued - termination of a director’s service | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | $ | ( | ) | |||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | $ | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Fair value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common stock for PIPE financing | ||||||||||||||||||||||||||||
| Fair value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 3 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on Settlement of Debt - related party | ||||||||
| Bad debt expense | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of Debt Discount | ||||||||
| Increase (decrease) in cash resulting from changes in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Operating lease assets/liabilities | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Prepaid Expenses | ( | ) | ||||||
| Accrued interest | ||||||||
| Accrued and deferred personnel compensation | ( | ) | ( | ) | ||||
| Other liabilities - current | ( | ) | ( | ) | ||||
| Deferred revenue and customer deposits | ( | ) | ( | ) | ||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| INVESTING ACTIVITIES | ||||||||
| Purchases of equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Proceeds from Related Party Debt | ||||||||
| Proceeds from conversion of common stock warrants | ||||||||
| Proceeds from conversion of common stock warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of foreign currency translation on cash flow | ( | ) | ||||||
| Net Change in cash | ||||||||
| Cash at beginning of period | $ | $ | ||||||
| Cash at end of period | ||||||||
| Supplemental disclosures: | ||||||||
| Cash paid during period for: | ||||||||
| Interest | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Fair Value of Options issued with related party debt | $ | $ | ||||||
| Shares issued for settlement of debt - related party | $ | $ | ||||||
| Shares issued for stock payable for settlement of debt - related party | $ | |||||||
| Par Value pf RSU’s issued - termiation of director’s service | $ | |||||||
See accompanying notes to consolidated financial statements.
| 4 |
Mobivity Holdings Corp.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and Basis of Presentation
Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets, PCs, and Point of Sale (“POS”) systems, allow resellers, brands, and enterprises to market their products and services to consumers through text messages sent directly to consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. On November 14, 2018, we completed the acquisition of certain operating assets relating to Belly, Inc.’s proprietary digital customer loyalty platform, including client contracts, accounts receivable, and intellectual property. We generate revenue by charging the resellers, brands, and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on April 3, 2023.
In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of June 30, 2023, and for the three and six months ended June 30, 2023 and 2022. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications did not affect previously reported net losses.
Acquisitions
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.
Cash
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.
As
of June 30, 2023, and December 31, 2022, we recorded an allowance for doubtful accounts of $
Goodwill and Intangible Assets
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.
| 5 |
We
conducted our annual impairment tests of goodwill as of December 31, 2022. As a result of these tests, we had a total impairment charge
of $
Intangible
assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade
names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period
of estimated benefit using the straight-line method and estimated useful lives ranging from
The Company’s evaluation of its goodwill and intangible assets resulted in no impairment charges for the six months ended June 30, 2023 and 2022, respectively.
Software Development Costs
Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board (“FASB”) guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. The technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered ‘research and development’ that are not capitalized are immediately charged to engineering, research, and development expense.
Capitalized costs for those products that are canceled or abandoned are charged to product development expenses in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to “Amortization Expense - Development” based on the straight-line method over a period.
The
Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been
released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its
capitalized software development assets resulted in
Impairment of Long-Lived Assets
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.
Revenue Recognition and Concentrations
Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.
We determine revenue recognition under ASC 606 through the following steps:
| ● | identification of the contract, or contracts, with a customer; | |
| ● | identification of the performance obligations in the contract; | |
| ● | identification of the transaction price; | |
| ● | allocation of the transaction price to the performance obligations in the contract; and | |
| ● | recognition of revenue when, or as, we satisfy a performance obligation. |
During
the six months ended June 30, 2023 and 2022, two customers accounted for
| 6 |
Comprehensive Income (Loss)
Comprehensive
loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.
We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are
recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses
on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the three months ended June 30,
2023 and 2022 , the comprehensive loss was $
We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.
Research and Development Expenditures
Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.
Advertising Expense
Direct
advertising costs are expensed as incurred and consist primarily of trade shows, sales enablement, content creation, paid engagement
and other direct costs. Advertising expense was $
Income Taxes
We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.
Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and six months ended June 30, 2023 and 2022, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock based compensation, stock options and warrants were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.
Recent Accounting Pronouncements
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on January 1, 2022.
3. Going Concern
We
had $
As
shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit
of $
| 7 |
4. Goodwill and Purchased Intangibles
Goodwill
The
carrying value of goodwill at each of June 30, 2023 and December 31, 2022 was $
The following table presents details of our purchased intangible assets as of June 30, 2023 and December 31, 2022:
Intangible assets
| Balance at December 31, 2022 | Additions | Impairments | Amortization | Fx and Other | Balance at June 30, 2023 | |||||||||||||||||||
| Patents and trademarks | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Customer and merchant relationships | $ | ( | ) | |||||||||||||||||||||
| Trade names | $ | ( | ) | |||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The
intangible assets are being amortized on a straight-line basis over their estimated useful lives of
Amortization
expense for intangible assets was $
Amortization
expense for intangible assets was $
The estimated future amortization expense of our intangible assets as of June 30, 2023 is as follows:
| Year ending December 31, | Amount | ||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
5. Software Development Costs
The Company has capitalized certain costs for software developed or obtained for internal use during the application development stage as it relates to specific contracts. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities.
The following table presents details of our software development costs as of June 30, 2023 and December 31, 2022:
| Balance at December 31, 2022 | Additions | Amortization | Balance at June 30, 2023 | |||||||||||||
| Software Development Costs | $ | $ | $ | ( | ) | $ | ||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
Software development costs are being amortized on a straight-line basis over their estimated useful life of years.
| 8 |
Amortization
expense for software development costs was $
Amortization
expense for software development costs was $
The estimated future amortization expense of software development costs as of June 30, 2023 is as follows:
| Year ending December 31, | Amount | ||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
6. Operating Lease Assets
The
Company entered into a lease agreement on February 1, 2021, for
The following are additional details related to leases recorded on our balance sheet as of June 30, 2023:
| Leases | Classification | Balance at June 30, 2023 | ||||
| Assets | ||||||
| Current | ||||||
| Operating lease assets | Operating lease assets | $ | ||||
| Noncurrent | ||||||
| Operating lease assets | Noncurrent operating lease assets | $ | ||||
| Total lease assets | $ | |||||
| Liabilities | ||||||
| Current | ||||||
| Operating lease liabilities | Operating lease liabilities | $ | ||||
| Noncurrent | ||||||
| Operating lease liabilities | Noncurrent operating lease liabilities | $ | ||||
| Total lease liabilities | $ | |||||
| 9 |
The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:
| Year ending December 31, | |||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total future lease payments | |||||
| Less: imputed interest | ( | ) | |||
| Total | $ | ||||
| Weighted Average Remaining Lease Term (years) | ||||
| Operating leases | ||||
| Weighted Average Discount Rate | ||||
| Operating leases | % | |||
7. Notes Payable and Interest Expense
The following table presents details of our notes payable as of June 30, 2023 and December 31, 2022:
| Facility | Maturity | Interest Rate | Balance at June 30, 2023 | Balance at December 31, 2022 | ||||||||||||
| ACOA Note | — | |||||||||||||||
| TD Bank | — | |||||||||||||||
| Related Party Note | various | % | ||||||||||||||
| Total Debt | ||||||||||||||||
| Less current portion | ( | ) | ( | ) | ||||||||||||
| Long-term debt, net of current portion | $ | $ | ||||||||||||||
ACOA Note
On
November 6, 2017, Livelenz (a wholly-owned subsidiary of the Company), entered into an amendment of the original agreement dated December
2, 2014, with the Atlantic Canada Opportunities Agency (“ACOA”). Under this agreement, the note will mature, and the commitments
will terminate on February 1, 2024. The monthly principal payment amount of $
During
the six months ended June 30, 2023 we repaid $
TD Bank Loan
On
April 22, 2020, we entered into a commitment loan with TD Bank under the Canadian Emergency Business Account (“CEBA”), in
the principal aggregate amount of $
Related Party Notes
Secured Promissory Notes
On
June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with Thomas Akin, one of the Company’s
directors (the “Lender”). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $
The
Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on
the unpaid balance at the rate of fifteen percent (
| 10 |
Under
the original terms of the Credit Agreement, the Company was to begin repaying the principal
amount, plus accrued interest, in
On January 31, 2023, the Company then entered into Amendment No. 1 (the “Amendment”), which amends our existing Credit Facility Agreement, dated as of November 11, 2022, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the Over-The Counter Venture Market operated by OTC Markets Group Inc. (“OTCQB®”) over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible notes to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the existing Credit Facility Agreement. The Amendment was considered a debt modification as the cash flows under the amended terms do not differ by at least 10% from the cash flows under the original agreement.
During
the six months ended June 30, 2023, a total of $
As
of June 30, 2023, the Company had drawn a total of $
Unsecured Promissory Note
On
July 1, 2021, we entered into UP Notes in the aggregate principal amount of $
On
January 31, 2023, the Lender agreed to postpone the
During
the six months ended June 30, 2023, a total of $
As
of June 30, 2023, the Company had an outstanding principal balance of $
Interest Expense
Interest
expense was $
Interest
expense was $
| 11 |
8. Stockholders’ Equity
Common Stock and Equity Payable
2022
On
February 9, 2022,
On
June 29, 2022, the Company received private investment funds to purchase
On
August 24, 2022, the Company received private investment funds to purchase
On
November 13, 2022 a total of shares of common stock were issued from equity payable to Thomas Akin as settlement of $
On
November 13, 2022 a total of shares of common stock were issued from equity payable to Talkot Fund LP as settlement of $
On
December 31, 2022 a total of $
On
December 31, 2022 a total of $
2023
On January 31, 2023 a total of shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and expense was recognized during the six months ended June 30, 2023.
On
March 27, 2023 a total of shares of common stock were granted from equity payable to Thomas Akin as settlement of $
On
March 27, 2023 a total of shares of common stock were granted from equity payable to Talkot Fund LP as settlement of $
On
March 31, 2023 a total of $
On
March 31, 2023 a total of $
During
March,
On June 30, 2023 a total of $ of interest was accrued and settled to equity payable for the issuance of shares of common stock.
| 12 |
On June 30, 2023 a total of $ of interest was accrued and settled to equity payable for the issuance of shares of common stock.
During the six months ended June 30, 2023 a total of shares were issued from stock payable related to related party accrued interest.
As
of June 30, 2023 we had an equity payable balance of $
Stock-based Plans
Stock Option Activity
| Options | ||||
| Outstanding at December 31, 2021 | ||||
| Granted | ||||
| Exercised | ||||
| Forfeited/canceled | ( | ) | ||
| Expired | ( | ) | ||
| Outstanding at December 31, 2022 | ||||
| Granted | ||||
| Exercised | ||||
| Forfeited/canceled | ( | ) | ||
| Expired | ( | ) | ||
| Outstanding at June 30, 2023 | ||||
2022
On
March 29, 2022, the Company granted
On
May 16, 2022, the Company granted
On
September 22, 2022, the Company granted
2023
During
the six months ended June 30, 2023 the Company granted
| 13 |
Stock-Based Compensation Expense from Stock Options and Warrants
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Valuation Assumptions
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (years) | ||||||||
| Expected dividend yield | % | % | ||||||
| Expected volatility | % | % | ||||||
The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.
The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on the historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of the Company’s stock-based awards.
The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.
The expected volatility in 2023 and 2022 is based on the historical publicly traded price of our common stock.
Restricted stock units
| Shares | ||||
| Outstanding at December 31, 2021 | ||||
| Awarded | ||||
| Released | ||||
| Canceled/forfeited/expired | ||||
| Outstanding at December 31, 2022 | ||||
| Awarded | ||||
| Released | ( | ) | ||
| Canceled/forfeited/expired | ||||
| Outstanding at June 30, 2023 | ||||
| Expected to vest at June 30, 2023 | ||||
| Vested at June 30, 2023 | ||||
| Unvested at June 30, 2023 | ||||
| Unrecognized expense at June 30, 2023 | $ | |||
| 14 |
2022
On
March 29, 2022, the company granted
On
May 16, 2022, the company granted
On
September 30, 2022, the company granted
On
December 31, 2022 the Company granted
During the six months ended June 30, 2022, the Company recorded $ in restricted stock expense as board compensation.
2023
On
March 31, 2023, the company grated granted
On
June 30, 2023, the company granted
In the six months ended June 30, 2023, the Company recorded $ in restricted stock expense as board compensation.
Stock Based Compensation from Restricted Stock
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of June 30, 2023, there was unearned restricted stock unit compensation.
Warrants
The following table summarizes investor warrants as of June 30, 2023 and the years ended December 31, 2022 and 2021:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at December 31, 2021 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | $ | — | — | |||||||||
| Canceled/forfeited/expired | ( | ) | $ | — | — | |||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | ( | ) | $ | — | — | |||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at June 30, 2023 | $ | |||||||||||
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2022
On
February 9, 2022,
On
June 29, 2022, six private investors purchased
On
August 24, 2022, five private investors purchased
2023
During
the six months ended June 30, 2023,
9. Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. This hierarchy requires companies to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value.
The following table presents assets that are measured and recognized at fair value as of June 30, 2023 on a recurring and non-recurring basis:
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||
| Goodwill (non-recurring) | $ | $ | $ | $ | ||||||||||||
| Intangibles, net (non-recurring) | $ | $ | $ | $ | ||||||||||||
The following table presents assets that are measured and recognized at fair value as of December 31, 2022 on a recurring and non-recurring basis:
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||
| Goodwill (non-recurring) | $ | $ | $ | $ | ||||||||||||
| Intangibles, net (non-recurring) | $ | $ | $ | $ | ||||||||||||
10. Commitments and Contingencies
Litigation
The
company had a pending legal proceeding related to a Telephone Consumer Protection Act (“TCPA”) violation. This is a putative
class action complaint alleging that the defendant initiated telephone solicitations through text messages in violation of the Florida
Telephone Solicitation Act, Fla. Stat. §501.059 (“FTSA”). The defense of the matter was tendered to the Company
by its client, Sonic Industries, Inc. During the six months ended June 30, 2023, the Company has settled
Operating Lease
As
described in Note 6, the Company has a lease agreement for
| 16 |
11. Related Party Transactions
Secured Promissory Notes
On
June 30, 2021, we entered into a Credit Facility Agreement with Thomas Akin, one of the Company’s directors (the “Lender”).
The Credit Facility Agreement was amended on November 11, 2022 to allow the Company to borrow up to $
Unsecured Promissory Note
On
July 1, 2021, we entered into UP Notes in the aggregate principal amount of $
For more details regarding the two related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.
Related Party Warrant Exercise
On
March 2, 2023, Thomas Akin exercised his common stock purchase warrant for
On
February 7, 2022, Talkot Fund LP exercised their common stock purchase warrant for
12. Subsequent Events
On July 17, 2023, a total of shares of common stock were issued to Thomas Akin as settlement of interest payable.
On July 17, 2023, a total of shares were issued to Talkot Fund, LP as settlement of interest payable.
2023 Warrants Exercise
During
the quarter ended August 07, 2023,
| 17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made and are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” or “will,” and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption “Risk Factors” included in our 2022 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 3, 2023, and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Overview
Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized data-driven marketing campaigns.
Mobivity’s Recurrency platform enables multi-unit retailers to leverage the power of their own data to yield maximum customer spend, frequency and loyalty while achieving the highest Return on Marketing Spend (ROMS) possible. Mobivity’s customers use Recurrency to:
| ● | Transform messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence. | |
| ● | Measure, predict, and boost guest frequency and spend by channel. | |
| ● | Deploy and manage one-time use offer codes and attribute sales accurately across every channel, promotion, and media program. | |
| ● | Deliver 1:1 promotions and offers with customized Mobile Messaging, Personalized Receipt Promotions, and Integrated Loyalty programs. |
Mobivity’s Recurrency, delivered as a Software-as-a-Service (“SaaS”) platform, is used by leading brands including Subway, Sonic Drive-In, Baskin Robbins, Chick-fil-A and Checkers/Rally’s across more than 40,000 retail locations globally.
We’re living in a data-driven economy. By 2003 — when the concept of “Big Data” became common vernacular in marketing - the amount of data being created every two days was equal to the amount created in all of the time prior to 2003. Today, 90% of the world’s data has been created in just the past two years. Unfortunately, despite there being so much data accumulated, only one percent of data is being utilized today by most businesses.
The challenge for multi-unit retailers isn’t that they don’t have enough data; in fact, national retailers are collecting millions of detailed transactions daily from thousands of points of sale around the world. The challenge is being able to make sense of this transaction data, which is riddled with data entry errors, collected by multiple POS systems, and complicated by a taxonomy compiled by thousands of different franchisee owners. To normalize such an overwhelming amount of data into usable intelligence and then leverage it to optimize media investment and promotion strategy requires numerous teams of data analysts and data scientists that many retailers and restaurant operators simply don’t have. This is why so many technology and data companies, that can help solve these challenges, have been invested in and acquired by brands including, McDonald’s, Starbucks, and Yum Brands.
Mobivity’s Recurrency platform fills this need with a self-service SaaS offering, enabling operators to intelligently optimize their promotions, media, and marketing spend. Recurrency drives system-wide sales producing on average a 13% increase in guest spend and a 26% improvement in frequency, ultimately delivering an average Return on Marketing Spend of 10X. In other words, for every dollar invested in marketing, retailers using Recurrency to manage, optimize and deliver multi-channel consumer promotions generate an average of ten dollars in incremental revenue from their customers.
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The Recurrency Platform
Mobivity’s Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights. Our technology provides transactional data, in real-time, that uncovers market-basket information and attributes both online and traditional promotions. Recurrency is comprised of seven components, described in detail below.
POS Data Capture
Recurrency captures, normalizes, integrates, and stores transaction data and is compatible with most POS systems used by restaurants and retailers today. The result is a clean useful dataset upon which to predict and influence customers’ buying behavior and deliver basket-level insights.
Analytics Powered by Machine Learning
Recurrency uses Machine Learning (“ML”) to uncover patterns in the buying behaviors of consumers and leverages that data to suggest pricing optimizations, and guide marketing campaigns.
Offers and Promotions
Recurrency provides a digital wallet system for creating and managing dynamic offers and promotions, enabling accurate and complete closed-loop attribution across all channels, media, and marketing efforts. Retailers can deploy one-time, limited-use, and multi-use promotions across all online and offline marketing channels that are scannable at the POS or redeemable online, enabling fraud-free, controllable promotion delivery and attribution at scale. Marketing teams can use the comprehensive attribution analysis and insights to optimize media mix and spend for maximum Return on Marketing Spend (“ROMS”).
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Predictive Offers
Recurrency leverages the normalized data captured at the POS and applies Artificial Intelligence (“AI”) to build profiles of both known and anonymous customers, analyzes pre and post-redemption behavior, and then predicts offers that will drive the highest increases in customer spend and frequency at the lowest discount possible. The result is optimized, personalized promotions that produce the highest ROMS possible.
Personalized Receipt Promotions
Recurrency unlocks the power of transactional data to create relevant and timely customer messages printed on the receipts already being generated at the POS. Both clients and agencies are using Recurrency to drive better results and make decisions around offers, promotions, and customer engagement through the medium of the printed receipt. Software integrated with leading POS systems, such as Oracle or MICROS, or installed directly onto receipt printer platforms, such as Epson’s OmniLink product, dynamically controls what is printed on receipts including images, coupons, announcements, or other calls-to-action, such as invitations to participate in a survey. Recurrency offers a Web-based interface where users can design receipt content and implement business rules to dictate what receipt content is printed in particular situations. All receipt content is transmitted to cloud-based Recurrency for storage and analysis.
Customized Mobile Messaging
Recurrency transforms standard short message service (“SMS”), multimedia messaging service (“MMS”), and rich communication services (“RCS”) into a data-driven marketing medium. Recurrency tracks and measures offer effectiveness at a more granular level than other solutions, allowing clients to create smarter offers and drive higher redemption rates. Our proprietary platform connects to all wireless carriers so that any consumer, on any wireless service (for example, Verizon), can join our customer’s SMS/MMS mobile marketing campaign. Our customers use Recurrency’s self-service interface to build, segment, target and optimize mobile messaging campaigns to drive increased guest frequency and spend. Recurrency is an industry leader in RCS messaging and has an industry-leading broadcast reach.
Belly Loyalty
Mobivity’s Belly Loyalty solution drives increased customer engagement and frequency with a customer-facing digital rewards platform via an app and digital pad. Using Belly, customers can customize rewards and leverage pre-built email campaigns and triggers to encourage greater frequency as well as to identify and reactivate lapsed customers.
Company Strategy
Our objective is to build an industry-leading SaaS product that connects consumers to merchants and brands. The key elements of our strategy are:
| ● | Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our proprietary POS Data Capture technology. Several years of development went into designing POS Data Capture such that the process of intercepting POS data and performing actions, such as controlling the receipt printer with receipt is scalable, portable to a wide variety of POS platforms, and does not impact performance factors including the print speed of a typical receipt printer. Furthermore, we believe the transmission of POS data to Mobivity’s cloud-based data stores presents a very competitive and innovative method of enabling POS data access. Additionally, we believe that our Recurrency platform is more advanced than technologies offered by our competitors and provides us with a significant competitive advantage. With more than ten years of development, we believe that our platform operates SMS/MMS text messaging transactions at a “least cost” relative to competitors while also being capable of supporting the SMS/MMS text messaging transactional volume necessary to serve our goal of several thousand end users. Leveraging our Recurrency platform allows for full attribution of SMS/MMS offers, which we believe is a unique combination of both SMS/MMS text messaging and POS data. | |
| ● | Evolve our sales and customer support infrastructure to uniquely serve very large customer implementations such as franchise-based brands that operate a large number of locations. Over the past few years, we have focused our efforts on the development of our technology and solutions with the goal of selling and supporting small and medium-sized businesses. Going forward, we intend to significantly increase our investments in sales and customer support resources tailored to selling to customers that operate franchise brands. Today we support more than 30,000 merchant locations globally. | |
| ● | Acquire complementary businesses and technologies. We will continue to search and identify unique opportunities which we believe will enhance our product features and functionality, revenue goals, and technology. We intend to target companies with some or all of the following characteristics: (1) an established revenue base; (2) strong pipeline and growth prospects; (3) break-even or positive cash flow; (4) opportunities for substantial expense reductions through integration into our platform; (5) strong sales teams; and (6) technology and services that further build out and differentiate our platform. Our acquisitions have historically been consummated through the issuance of a combination of our common stock and cash. | |
| ● | Build our intellectual property portfolio. We currently have nine issued patents that we believe have significant potential applications in the technology industry. We plan to continue our investment in building a strong intellectual property portfolio. |
While these are the key elements of our current strategy, there can be no guarantees that our strategy will not change or that our strategy will be successful.
| 20 |
Recent Events
2023 Warrants Exercise
During the quarter ended March 30, 2023, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders 1,793,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in February 2025.
2023 Related Party Notes Payable
On January 31, 2023, the Company entered into Amendment No. 1 (the “Amendment”) to the Amended and Restated Credit Facility Agreement and Convertible Notes which amends our existing Amended and Restated Credit Facility Agreement, dated as of November 11, 2022, between the Company and Thomas B. Akin, a director of the Company (the “Existing Credit Agreement” and as amended by the Amendment, the “Credit Agreement”) and any convertible notes issued thereunder. The Amendment amends the Existing Credit Agreement to extend the maturity of the Credit Agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the Credit Agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the OTCQB® Venture Market operated by OTC Markets Group Inc. over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible note to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the Existing Credit Agreement.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment, a copy of which was filed with the SEC on the Company’s Current Report on Form 8-Kdated January 31, 2023, and is attached as Exhibit 10.1 to such Current Report on Form 8-K and incorporated herein by reference.
2023 Shares Issued
On January 31, 2023 a total of 545,012 shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation.
On March 27, 2023 a total of 154,106 shares of common stock were issued to Thomas Akin as settlement of interest payable.
On March 27, 2023 a total of 9,651 shares were issued to Talkot Fund LP as settlement of interest payable.
On May 08,2023 a total of 180,715 shares of common stock were issued to Thomas Akin as settlement of interest payable.
On May 08, 2023 a total of 9,441 shares were issued to Talkot Fund LP as settlement of interest payable.
Results of Operations
Revenues
Revenues consist primarily of those generated by a suite of products under the Recurrency platform. The Recurrency platform is comprised of POS Data Capture, Analytics, Offers and Promotions, Predictive Offers, Personalized Receipt Promotions, Customized Mobile Messaging, Belly Loyalty, and other revenues.
Revenues for the three months ended June 30, 2023, were $1,861,171 a decrease of $5,991 compared to the same period in 2022.
Revenues for the six months ended June 30, 2023, were $3,742,653 a decrease of $154,078 or 4% compared to the same period in 2022.
This decrease is primarily due to a decrease of in subscription revenue.
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Cost of Revenues
Cost of revenues consists primarily of cloud-based software licensing fees, short code maintenance expenses, messaging-related expenses, and other expenses.
Cost of revenues for the three months ended June 30, 2023, was $1,371,206, an increase of $168,457, or 14%, compared to $1,202,749 for the same period in 2022.
Cost of revenues for the six months ended June 30, 2023, was $2,437,781, a decrease of $60,084, or 3%, compared to $2,377,697 for the same period in 2022.
This increase is primarily due to an increase of $50,000 in application expense.
General and Administrative
General and administrative expenses consist primarily of salaries and personnel-related expenses, consulting costs, and other expenses.
General and administrative expenses increased $173,169 or 19% to $1,071,153, during the three months ended June 30, 2023, compared to $897,984 for the same period in 2022. The increase in general and administrative expenses was primarily due to an increase in stock related expense for the warrant exercise that occurred during the period.
General and administrative expenses increased $510,099 or 24% to $2,615,259 during the six months ended June 30, 2023, compared to $2,105,160 for the same period in 2022. The increase in general and administrative expenses was primarily due to an increase in stock related expense for the warrant exercise that occurred during the period.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and personnel-related expenses, stock-based compensation expenses, consulting costs, and other expenses.
Sales and marketing expenses increased $36,641, or 6%, to $602,911 during the three months ended June 30, 2023, compared to $566,270 for the same period in 2022. The increase is primarily due to and $24,000 increase in payroll expense.
Sales and marketing expenses increased $130,360, or 11%, to $1,294,131 during the six months ended June 30, 2023, compared to $1,163,771 for the same period in 2022. The increase is primarily due to a $86,000 increase in payroll.
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Engineering, Research & Development
Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.
Engineering, research & development expenses decreased $69,493, or 8%, to $804,343 during the three months ended June 30, 2023, compared to $873,836 for the same period in 2022. This decrease is primarily due to a decrease of $76,000 in payroll expense.
Engineering, research & development expenses decreased $37,341, or 2%, to $1,538,718 during the six months ended June 30, 2023, compared to $1,576,059 for the same period in 2022. This decrease is primarily due to a $62,000 decrease in payroll expenses.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation on our equipment and amortization of our intangible assets.
Depreciation and amortization expense decreased $73,389 or 67%, to $36,582 during the three months ended June 30, 2023 compared to $110,421 for the same period in 2022.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2022.
Depreciation and amortization expenses decreased $134,249 or 57%, to $100,484 during the six months ended June 30, 2023 compared to $234,733 for the same period in 2022. This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2022.
Interest Expense
Interest expense increased $77,317, or 46%, to $244,443 during the three months ended June 30, 2023, compared to $167,126 in the same period in 2022. This increase in interest expense is primarily related to the increased balance on related party notes payable.
Interest expense increased $155,936 or 48%, to $482,889 during the six months ended June 30, 2023, compared to $326,953 in the same period in 2022. This increase in interest expense is primarily related to the increase balance on related party notes payable.
Settlement Losses
Settlement losses consist of legal settlement for TCPA settlements.
Settlement losses for the three and six months ended June 30, 2023 were $2,500 and $12,500, respectively. There were no settlement losses for the three and six months ended June 30, 2022.
Loss on Settlement of Debt
Loss on Settlement of debt consists of the expense from the settlement of notes payable when they are settled into shares.
Loss on settlement of debt for the three and six months ended June 30, 2023 was $0 and $10,857, respectively. There was no loss on settlement of debt for the three and six months ended June 30, 2022.
Foreign Currency
The Company’s financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three and six months ended June 30, 2023, was $1 Canadian equals $0.74 U.S. Dollars. This compares to an average rate of $1 Canadian equals $0.79 during the same period in 2022. The Company’s functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:
| ● | The Company sells products primarily in U.S. Dollars; therefore, reported revenues are not highly impacted by foreign currency volatility. | |
| ● | A portion of the Company’s expenses are incurred in Canadian Dollars and therefore fluctuate in U.S. Dollars as the U.S. Dollar varies. A weaker U.S. Dollar results in an increase in translated expenses, and a stronger U.S. Dollar results in a decrease. | |
| ● | Changes in foreign currency rates also impact the translated value of the Company’s working capital that is held in Canadian Dollars. Foreign exchange rate fluctuations result in foreign exchange gains or losses based upon movement in the translated value of Canadian working capital into U.S. Dollars. |
The change in foreign currency was a loss of $137 and a loss of $12,261 for the three months ended June 30, 2023 and 2022, respectively.
The change in foreign currency was a gain of $31,365 and a loss of $634 for the six months ended June 30, 2023 and 2022, respectively.
Liquidity and Capital Resources
As of June 30, 2023, we had current assets of $1,495,553, including $529,471 in cash, and current liabilities of $6,349,447, resulting in a working capital deficit of $4,853,894.
We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to sufficiently fund our current level of operations through the end of the next 12 months or beyond. We will require additional capital and will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. There can be no assurance we will be able to obtain access to capital as and when needed, or that the terms of any available financing will be commercially reasonable.
| 23 |
Cash Flows
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (3,486,777 | ) | $ | (3,519,680 | ) | ||
| Investing activities | (14,111 | ) | (6,993 | ) | ||||
| Financing activities | 3,570,803 | 3,884,164 | ||||||
| Effect of foreign currency translation on cash flow | 32,816 | (1,895 | ) | |||||
| Net change in cash | $ | 102,731 | $ | 356,036 | ||||
Operating Activities
We used cash in operating activities totaling $3,486,777 during the six months ended June 30, 2023 and used cash in operating activities totaling $3,519,680 during the six months ended June 30, 2022. Key drivers of the cash used in operating activities are the net loss of $4,750,257 and changes to accounts receivable of $539,017, other current assets (notably prepaid expenses) of $228,732, accrued interest of $410,644, accrued and deferred personnel compensation of $272,193, and deferred revenue and customer deposits of $432,977.
Investing activities during the six months ended June 30, 2023, consisted of $14,111 of equipment purchases compared to $6,993 in the six months ended June 30, 2022.
Financing Activities
Financing activities during the six months ended June 30, 2023, consisted of proceeds of $3,587,487 from a warrant conversion to common stock, proceeds of $210,045 from issuance of common stock for conversion of interest payable on related party debt and $16,684 in payments on notes payable. Financing activities during the six months ended June 30, 2022, consisted of $3,400,551 in proceeds from a warrant conversion to common stock and a PIPE funding, $500,000 in proceeds from related party notes payable and $16,684 in payments on notes payable.
Critical Accounting Policies and Estimates
Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. “Disclosure controls and procedures,” as defined in Exchange Act Rule 13a-15(e), are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, , including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that as of June 30, 2023 our disclosure controls and procedures were not effective.
As a small company with limited resources that are mainly focused on the development and sales of software products and services, the Company does not employ a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material misstatement to occur in future periods while it employs the current number of personnel in its finance department.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the six months ended June 30, 2023 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
| 24 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company had a legal proceeding related to TCPA (Telephone Consumer Protection Act) Violation. This is a putative class action complaint alleging that Defendant initiated telephone solicitations through text messages in violation of the Florida Telephone Solicitation Act, Fla. Stat. §501.059 (“FTSA”). The defense of the matter was tendered to the Company by its client, Sonic Industries, Inc. During the six months ended June 30, 2023, the Company has settled four TCPA claims for a total settlement loss of $12,500 and this amount is included within settlement losses on the accompanying unaudited consolidated statements of operations and comprehensive loss.
Item 1A. Risk Factors.
We are a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the six months ended June 30, 2023, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders 1,793,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in February 2025.
For the foregoing warrants, the exercise price of the warrant and the number of the shares issuable upon exercise of the warrant are subject to customary adjustments prior to exercise upon the occurrence of certain events affecting all outstanding shares of common stock.
The foregoing securities were issued in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) to a limited number of persons who were “accredited investors,” as defined in Rule 501 of Regulation D of the Securities Act, without the use of any general solicitations or advertising to market or otherwise offer the securities for sale. None of the shares, warrants or shares of common stock issued upon exercise of the warrants have been registered under the Securities Act or applicable state securities laws and none may be offered or sold in the United States absent registration under the Securities Act, or an exemption from such registration requirements. Neither this quarterly report on Form 10-Q nor any exhibit attached hereto shall constitute an offer to sell or the solicitation of an offer to buy any securities.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
The information set forth below is included herein for purposes of providing the disclosure required under “Item 1.01 Entry Into a Material Definitive Agreement; Item 3.02 Unregistered Sales of Equity Securities.” of Form 8-K.
On August 7, 2023, the Company announced a warrant exercise inducement and warrant offering (the “Offer to Amend and Exercise”), providing the holders of certain warrants (the “Old Warrants”), including Thomas B. Akin, a director of the Company, with an opportunity to exercise their Old Warrants at a reduced exercise price of $0.82 per share and to receive a new warrant (“New Warrant”) to purchase two shares of our common stock, $0.001 par value (“Common Stock”) for every one share of our Common Stock that the holder purchases upon the exercise of an Old Warrant (at the reduced $0.82 per share exercise price). The New Warrants will be exercisable for a period of three years from the date of issuance at an initial exercise price of $0.82 per share. The exercise price of the New Warrants and the number of the shares issuable upon exercise of the New Warrants are subject to customary adjustments prior to exercise upon the occurrence of certain events affecting all outstanding shares of Common Stock. The Offer to Amend and Exercise will expire at 5:00 p.m. Eastern time on September 6, 2023.
The shares of Common Stock issued upon exercise of the Old Warrants (the “Shares”) and the New Warrants are to be issued in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) to a limited number of persons who are “accredited investors,” as defined in Rule 501 of Regulation D of the SEC, without the use of any general solicitations or advertising to market or otherwise offer the securities for sale. None of the Shares, New Warrants or shares of Common Stock issued upon exercise of the New Warrants have been registered under the Securities Act or applicable state securities laws and none may be offered or sold in the United States absent registration under the Securities Act, or an exemption from such registration requirements. Neither this Quarterly Report on Form 10-Q nor any exhibit attached hereto shall constitute an offer to sell or the solicitation of an offer to buy the Shares, the New Warrants or any other securities of the Company.
The foregoing descriptions of the Offer to Amend and Exercise and New Warrants are qualified by reference to the full text of the form of Exercise Notice and form of New Warrant, which are filed as Exhibits 10.6 and 10.7, respectively, to this Quarterly Report on Form 10-Q and are incorporated herein by reference.
| 25 |
Item 6. Exhibits
* Filed electronically herewith
| 26 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
| Mobivity Holdings Corp. | ||
| Date: August 14, 2023 | By: | /s/ Dennis Becker |
| Dennis Becker | ||
| Chairman and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 14, 2023 | By: | /s/ Will Sanchez |
| Will Sanchez | ||
Chief Financial Officer (Principal Accounting Officer) | ||
| 27 |
Exhibit 10.1
AMENDED AND RESTATED CREDIT FACILITY AGREEMENT
This Amended and Restated Credit Facility Agreement (this “Agreement”) is entered into as of November 11, 2022, between Mobivity Holdings Corp., a Nevada corporation (“Borrower”), and Thomas B. Akin, an individual (“Lender”).
R E C I T A L S
A. Borrower is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven marketing campaigns.
B. In order to fund the further development and commercialization of Borrower’s business, Lender and Borrower entered into a Credit Facility Agreement dated as of June 30, 2021 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”), pursuant to which Lender provided certain financial accommodations to Borrower on the terms and conditions set forth in the Existing Credit Agreement.
C. Borrower and Lender now desire to amend and restate the Existing Credit Agreement in its entirety in the form of this Agreement, without constituting any novation of the Existing Credit Agreement or the indebtedness created thereunder.
A G R E E M E N T
NOW THEREFORE, for and in consideration of the loans and advances to be made by Lender to Borrower hereunder, the mutual covenants, promises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender agree as follows:
| 1. | Definitions. |
The following terms when used in this Agreement will have the following meanings both in the singular and plural forms thereof, except where the context requires otherwise:
“Advance” means any advance of funds by Lender under this Agreement.
“Advance Warrant” has the meaning given to it in Section 2.6.
“Agreement” means this Amended and Restated Credit Facility Agreement, as originally executed and as may be amended, restated, modified, supplemented or replaced from time to time by written agreement between Borrower and Lender.
“Business Day” means any day except Saturday, Sunday and any day which shall be a national legal holiday in The United States of America.
“Collateral” has the meaning given to it in Section 5.2.
“Common Stock” means the $0.001 par value common stock of Borrower.
“Credit Line Period” means the period commencing on the date of this Agreement and ending on January 30, 2023.
“Event of Default” means any event of default described in Section 4 hereof. “Existing Credit Agreement” has the meaning given to it in the Recitals. “Note” has the meaning given to it in Section 2.1.
“Obligations” has the meaning given to it in Section 5.2.
“Outstanding Interest” means $151,398 of unpaid interest owed by Borrower to Lender in respect of advances under the Existing Credit Agreement immediately prior to giving effect to this Agreement.
“Trading Day” means any day on which the Common Stock is tradable for any period on the OTCQB ® Venture Market operated by OTC Markets Group Inc. or on the principal securities exchange, market place or other securities market on which the Common Stock is then being traded.
“VWAP” means, with respect to any date, the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the thirty (30) Trading Days immediately preceding such date.
| 2. | The Loan. |
2.1 Advances. From time to time during the Credit Line Period, Borrower may request from Lender, and Lender shall advance to Borrower, up to $6,000,000 of Advances, subject to the terms and upon the conditions set forth in this Agreement, for purposes of funding the further development and commercialization of the Borrower’s business. The Advances shall be evidenced by, and be payable in accordance with, the terms of a convertible promissory note, substantially in the form of Exhibit A attached hereto (the “Note”), executed by Borrower and issued to Lender. Notwithstanding any other provision of this Agreement, Borrower shall not be obligated to make any Advance if the amount of such Advance, plus all other outstanding Advances, would exceed $6,000,000.
2.2 Manner of Borrowing. Each request by Borrower for an Advance shall be in writing and signed by an executive officer of Borrower (“Advance Request”). Each such Advance Request shall (a) state the amount of the Advance requested and (b) state whether the conditions set forth in Section 3.1 are satisfied as of the date of such request. Each Advance shall be fundable in U.S. dollars by wire transfer from Lender within five (5) Business Days of Lender’s receipt of an Advance Request in accordance with this Section 2.2.
| 2.3 | Payments and Interest. |
| (a) | On the date of this Agreement, Borrower agrees to pay all Outstanding Interest in kind in Common Stock of the Borrower at a $1.08 price per share. For the avoidance of doubt, the parties hereto acknowledge and agree that, after giving effect to such payment in kind, there shall be no Advances (as defined in the Existing Credit Agreement) or accrued and unpaid interest outstanding under the Existing Credit Agreement. |
| (b) | Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances, plus accrued interest thereon, in 24 equal monthly installments commencing on January 31, 2023 and continuing thereafter on the last day of each month (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day. Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum. Interest will be calculated on the basis of 365 days in a year. |
2.4 Voluntary Prepayments. Borrower may prepay the Advances and accrued interest, in whole or in part, without notice, penalty or charge. All amounts prepaid will be applied first to accrued and unpaid interest and then to unpaid principal.
2.5 Record of Advances. Lender is hereby authorized (but not required) to record all loans, advances and other extensions of credit by it to Borrower, including the amounts of all Advances payable and paid to Lender from time to time hereunder, all of which shall be evidenced by this Agreement and the Note, in its books and records in accordance with its usual practice, such books and records constituting prima facie evidence of the accuracy of the information contained therein; provided, that the failure of Lender to record such information shall not affect Borrower’s obligations under this Agreement and the Note.
2.6 Warrant Consideration. As additional consideration for Lender’s Advances hereunder, Borrower shall issue to Lender one or more warrants (each an “Advance Warrant”) to purchase Common Stock in connection with each Advance or series of Advances (none of which were previously included in any Advance Warrant calculation hereunder). Each such Advance Warrant shall be in the form of Exhibit B attached hereto and entitle Lender to purchase a number of shares of Common Stock equal to twenty percent (20%) of the amount of the Advance, or the aggregate amount of all Advances combined for purposes of triggering the obligation to issue an Advance Warrant divided by the VWAP. Each Advance Warrant shall have a term of three years from the date of the Advance Request, or last Advance Request, to which the Advance Warrant relates and shall be exercisable at a price per share equal to the VWAP used in calculating the number of shares of Common Stock issuable upon exercise of such Advance Warrant.
| 3. | Conditions of Lending. |
3.1 Conditions Precedent to all Advances. The obligation of Lender to make an Advance hereunder is subject to the satisfaction of each of the following, unless waived in writing by Lender:
| (a) | no Event of Default will have occurred and be continuing; |
| (b) | no Event of Default will result from the making of any such Advance; and |
| (c) | no change, event, or occurrence, individually or when aggregated with other changes, events, or occurrences, will have occurred and be continuing that is materially adverse to the business, properties, financial condition or results of operations of Borrower, individually, or Borrower and its subsidiaries, taken as a whole. |
| 4. | Events of Default and Remedies. |
| 4.1 | Events of Default. The term “Event of Default” will mean any of the following events: |
| (a) | Borrower fails to make any payment when due of any principal or interest under this Agreement or the Note within ten (10) Business Days of its receipt of written notice of non-payment from Lender; or |
| (b) | Borrower applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for itself or any of its property, or makes a general assignment for the benefit of its creditors; or a trustee, receiver or other custodian will otherwise be appointed for Borrower or any of its assets and not be discharged within thirty (30) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding will be commenced by or against Borrower and be consented to or acquiesced in by Borrower or remain undismissed for thirty (30) days; or Borrower will take any corporate action to authorize, or in furtherance of, any of the foregoing; or |
| (c) | Any judgments, writs, warrants of attachment, executions or similar process (not undisputedly covered by insurance) in an aggregate amount in excess of $500,000 will be issued or levied against Borrower or any of its assets and will not be released, vacated or fully bonded prior to any sale and in any event within thirty (30) days after its issue or levy; or |
| (d) | Except to the extent addressed elsewhere in this Section 4.1, Borrower materially breaches any of its representations, warranties, covenants or agreements in this Agreement. |
4.2 Remedies. If an Event of Default described in Section 4.1 occurs, the full unpaid principal balance of the Advances, accrued interest and all other obligations of Borrower to Lender will automatically be due and payable without declaration, notice, presentment, protest or demand of any kind (all of which are hereby expressly waived) and any obligation of Lender hereunder will automatically terminate without any liability to Borrower. Upon any Event of Default, Lender will be entitled to exercise any and all rights and remedies available at law or in equity for the
collection of the unpaid principal balance of the Advances, accrued interest and all other obligations of Borrower to Lender under this Agreement.
5. Security Interest and Collateral.. In consideration of this Agreement, and to secure the performance and payment of the obligations that may become owing to the Lender pursuant hereto or otherwise, Borrower hereby grants to Lender, among other things, a security interest in the Collateral as hereinafter described.
5.1 Definitions. All terms used in this Section 5 which are defined in the Nevada Uniform Commercial Code (the “Code”) shall have the same meanings in this Section as in the Code unless the context in which such terms are used herein indicates otherwise.
5.2 Security Interest. To secure the performance and payment of any and all obligations, liabilities and indebtedness of Borrower to Lender arising under this Agreement, however evidenced (including without limitation by promissory note or other instrument) whether direct, indirect, liquidated, or contingent (collectively, the “Obligations”), Borrower grants to Lender a security interest, which shall be superior and prior to all other liens, in all of Borrower right, title and interest in the following property and property rights (collectively, the “Collateral”), being all of the Borrower’s right, title and interest now or hereafter acquired in and to:
| 5.2.1 | All tangible personal property of every kind and description, whether now existing or later acquired, including without limitation, all inventory, goods, materials, supplies, tools, books, records, chattels, furniture, fixtures, equipment and machinery; |
| 5.2.2 | All rights to the payment of money, accounts, reserves, deferred payments, refunds, savings and deposits, whether now or later to be received from third parties or deposited by Borrower with third parties (including all utility deposits) contract rights, money instruments, documents, and chattel papers; |
| 5.2.3 | All general intangibles and other personal property, including without limitation, contract rights, rights arising under common law, statutes, regulations, choses or things in action, goodwill, registered or unregistered intellectual property rights, patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, moneys due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks board tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims; and |
| 5.2.4 | All substitutions, replacements, additions, ascensions and proceeds for or to any of the foregoing, and all books, records and files relating to any of the foregoing, including without limitation, computer readable memory and data and any computer software or hardware reasonably necessary to access and process such memory and data. |
5.3 Representation, Warranties and Covenants. Borrower hereby represents, warrants and covenants to Lender as follows:
| 5.3.1 | Borrower Owns Collateral. Borrower is the owner of the Collateral, except the portion thereof consisting of after-acquired property and Borrower will be the owner of such after-acquired property, free from any lien, except liens permitted by the Lender. |
| 5.3.2 | Places of Business. The location where the major tangible collateral assets and the books and records of Borrower are kept is 3133 West Frye Road, #215, Chandler, Arizona 85226. Borrower shall not (i) change its location; or (ii) change its legal name without, in each case, giving Lender at least thirty (30) days’ prior written notice of any such change. |
| 5.3.3 | Maintenance of Collateral. Borrower will, at all times, keep the Collateral in good operating condition and repair, operate and maintain the same in compliance with all laws and insurance policies applicable thereto, and pay promptly when due, all taxes, insurance premiums and other governmental charges upon or relating to any of the property, income or receipts of Borrower. |
5.4 Protection of Collateral. In the event of the failure of Borrower to (i) maintain in force and pay for any insurance with respect to the Collateral; (ii) keep the Collateral in good repair and operating condition; (iii) keep the Collateral free from any liens, except liens permitted by Lender; and (iv) pay when due all taxes, levies and assessments on or in respect of the Collateral, Lender, at its option, may (but shall not be required to) procure and pay for such insurance, place the Collateral in good repair and operating condition, or otherwise make good any other aforesaid failure of Borrower and all sums advanced by Lender, with interest thereon at a default interest rate which shall be the maximum interest rate allowable by applicable law and shall be part of Borrower’s obligations to Lender, payable on demand.
5.5 Financing Statements: Further Assurances. Borrower, concurrently with the execution of this Agreement, and from time to time thereafter as requested by Lender, shall execute and deliver to Lender such financing statements, continuation statements, amendments to financing statements and other documents, in form satisfactory to Lender, as Lender may require to perfect and continue in effect the lien of Lender. Borrower irrevocably appoints Lender its attorney-in-fact, in the name of Borrower or Lender, to execute and file from time to time any such financing statements, continuation statements and amendments thereto, which appointment shall be deemed to be a power coupled with an interest.
5.6 Remedies Upon Default. Upon the occurrence of an Event of Default, Lender shall have all the rights and remedies of a secured party under the Code and all other rights and remedies accorded to Lender in equity or law. Upon the request of Lender, Borrower shall assemble and make the Collateral available to Lender at a place designated by Lender. Any notice of sale or
other disposition of the Collateral given not less than ten (10) Business Days prior to such proposed action shall constitute reasonable and fair notice of such action. Borrower shall be liable for any deficiency. Borrower expressly waives any right to have the Collateral marshaled on any foreclosure, sale or other enforcement hereof. Upon the occurrence of an Event of Default, Borrower shall, upon the request of Lender, assemble the Collateral and make it available to Borrower at a time and place reasonably convenient to Borrower.
| 6. | Miscellaneous. |
6.1 Waivers, Amendments. The provisions of this Agreement and the Note may from time to time be amended, modified, or waived, if such amendment, modification or waiver is in writing and signed by Lender (and, to the extent adverse to Borrower, by Borrower). No failure or delay on the part of Lender or the holder of the Note in exercising any power or right under such documents will operate as a waiver thereof, nor will any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on Borrower in any case will entitle it to any notice or demand in similar or other circumstances.
6.2 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via email at the email address set forth in this Section 6.2 prior to 3:00 p.m. (Phoenix time) on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via email at the email address set forth in this Section 6.2 on a day that is not a Business Day or later than 3:00 p.m. (Phoenix time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S. internationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:
| If to Borrower: | Mobivity Holdings Corp. 3133 West Frye Road, # 215 Chandler, Arizona 85226 Attn: Dennis Becker, CEO Email: dennis.becker@mobivity.com |
| If to Lender: | Thomas B. Akin c/o Talkot Capital, LLC 30 Liberty Ship Way, Suite 3110 Sausalito, CA 94965 Attn: Thomas B. Akin Email: takin@talkot.com Attn: Bryce Daniels Email: bryce@talkot.com |
or such other address as may be designated in writing hereafter, in the same manner, by such person.
6.3 Severability. Any provision of this Agreement or the Note executed pursuant hereto which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such portion or unenforceability without invalidating the remaining provisions of this Agreement or the Note or affecting the validity or enforceability of such provisions in any other jurisdiction.
6.4 Governing Law; Venue. This Agreement will be deemed to be a contract made under and governed by the laws of the State of Arizona. Borrower and Lender hereby consent to the personal jurisdiction of the state and federal courts located in the State of Arizona in connection with any controversy related to this Agreement, waive any argument that venue in such forums is not convenient and agrees that any litigation in connection herewith will be venued in the state or federal courts located in the State of Arizona.
6.5 Successors and Assigns. This Agreement will be binding upon and will inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrower may not assign or transfer its rights hereunder without the prior written consent of Lender.
6.6 Multiple Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original and all of which will constitute one and the same instrument.
[Continued on next page]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.
| “Borrower” | ||
| MOBIVITY HOLDINGS CORP., | ||
| a Nevada corporation | ||
| By: | /s/ Lisa Brennan | |
| Lisa Brennan | ||
| Chief Financial Officer | ||
| “Lender” | ||
| /s/ Thomas B. Akin | ||
| Thomas B. Akin | ||
EXHIBIT A
to Credit Facility Agreement
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
[FORM OF] CONVERTIBLE NOTE
$______
, 20_____ Chandler, Arizona
FOR VALUE RECEIVED, the undersigned Mobivity Holdings Corp., a Nevada corporation (“Borrower”), promises to pay Thomas B. Akin, an individual (“Lender”), the principal sum of_____ United States Dollars (US$_____ ) or such lesser amount as shall equal the aggregate unpaid principal amount of the Advances (as defined in the Credit Agreement referred to below), together with interest thereon, in the manner and upon the terms and conditions set forth herein.
1. Payment Terms: Maturity. This Note shall bear interest on the unpaid principal amount at the rate of fifteen percent (15%) per annum. The unpaid principal amount and accrued and unpaid interest thereon shall be paid in 24 equal monthly installments commencing on January 31, 2023 and continuing on the last day of each of the next 23 months thereafter (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day), with a final payment due on December 31, 2024 at which time all principal and interest then unpaid shall be due and payable. All payments of principal and interest under this Note will be made in lawful money of the United States of America in immediately available funds at such place as may be designated by Lender to Borrower in writing.
2. Credit Agreement. This Note is referred to in, and evidences indebtedness incurred under, the Amended and Restated Credit Facility Agreement dated as of November [●], 2022 (referred to herein, as it may be amended, restated, modified, supplemented or replaced from time to time, as the “Credit Agreement”) between Borrower and Lender. The terms and conditions under which Borrower is permitted and required to make prepayments and repayments of principal of such indebtedness or be declared to be immediately due and payable are set forth in the Credit Agreement, the terms and conditions of which are incorporated herein by reference. Terms used herein but not defined shall have the meanings ascribed to them in the Credit Agreement.
3. Conversion.
a) Optional Conversion. At any time prior to the earliest of (i) the maturity date set forth in Section 1, (ii) a mandatory conversion pursuant to Section 3(b), and (iii) the closing date of a Corporate Transaction, all or part of the outstanding principal and/or accrued but unpaid interest under this Note may, upon the written election of the Lender, be converted into shares of Common Stock of the Company at the conversion price equal to 85% of the VWAP on the conversion date. The written election of the Lender must specify the amount of outstanding and/or accrued but unpaid interest to be converted and the intended date of such conversion.
b) Mandatory Conversion. On the date that is five Business Days prior to the date on which the Borrower becomes listed on a national securities exchange (other than the Borrower satisfying any stockholders’ equity requirement to be listed on such national exchange) (the “Event Date”), all of the outstanding principal and accrued but unpaid interest on the Event Date will be automatically converted (the “Mandatory Conversion”) into shares of Common Stock, at a conversion price equal to 85% of the VWAP on the conversion date (the “Conversion Price”).
c) Corporate Transaction Conversion. On the closing date of a Corporate Transaction, the Lender will be entitled to a cash payment equal to the outstanding principal and accrued but unpaid interest under this Note. “Corporate Transaction” means: (1) the closing of the sale, transfer or other disposition, in a single transaction or series of related transactions, of all or substantially all of the Borrower’s assets; (2) the consummation of a merger or consolidation of the Borrower with or into another entity (except a merger or consolidation in which the holders of capital stock of the Borrower immediately prior to such merger or consolidation continue to hold a majority of the outstanding voting securities of the capital stock of the Borrower or the surviving or acquiring entity immediately following the consummation of such transaction); or (3) the closing of the transfer (whether by merger, consolidation or otherwise), in a single transaction or series of related transactions, to a “person” or “group” (within the meaning of Section 13(d) and Section 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of the Borrower’s capital stock if, after such closing, such person or group would become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding voting securities of the Borrower (or the surviving or acquiring entity). For the avoidance of doubt, a transaction will not constitute a “Corporate Transaction” if its sole purpose is to change the state of the Borrower’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Borrower’s securities immediately prior to such transaction. Notwithstanding the foregoing, the sale of securities in a bona fide financing transaction will not be deemed a “Corporate Transaction.” The Borrower will, not less than ten Business Days prior to the closing date of a Corporate Transaction, give written notice to the Lender stating the material terms and conditions of the Corporate Transaction.
d) No Fractional Shares. The number of shares and/or units of Borrower securities issuable pursuant to this Section 3 will be rounded down to the nearest whole share.
4. Acts of Conversion. This Note will be deemed to have been automatically converted on the Event Date, and at such time the rights of the holder of this Note will cease and such holder will be treated for all purposes as the record holder of the Common Stock issuable upon conversion. As promptly as practicable after the Event Date, the Lender will surrender this Note to the Company at its principal office for cancellation. As promptly as practicable after receipt of the Note and the signature pages required by this Section, the Company may at its election either (i) issue a certificate or certificates representing the Common Stock issuable upon conversion, or (ii) not issue any certificate representing the Common Stock and instead document the Lender’s interest in the Common Stock by recording the Common Stock with the Borrower’s transfer agent (or another custodian selected by the Borrower) in book-entry form.
5. All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment, demand, protest and notice of dishonor in connection with this Note.
6. This Note is made under and governed by the internal laws of the State of Arizona, as provided for in the Credit Agreement.
| MOBIVITY HOLDINGS CORP., | ||
| a Nevada corporation | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT B
to Credit Facility Agreement
FORM OF WARRANT
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
MOBIVITY HOLDINGS CORP. WARRANT TO PURCHASE COMMON STOCK
Warrant No. [ ] Original Issue Date: [●], 20______
Mobivity Holdings Corp., a Nevada corporation (the “Company”), hereby certifies that, for value received, Thomas B. Akin or his permitted registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of [ ] shares of common stock, $0.001 par value (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price per share equal to $[●] (as adjusted from time to time as provided in Section 9 herein, the “Exercise Price”), at any time and from time to time from on or after the date hereof (the “Trigger Date”) and through and including 5:00 P.M., prevailing Pacific time, on [●], 20 (the “Expiration Date”), and subject to the following terms and conditions:
This Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain Amended and Restated Credit Facility Agreement (this “Credit Agreement”) dated as of November [●], 2022, between the Company and the Holder. All such warrants are referred to herein, collectively, as the “Warrants.”
1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Credit Agreement.
2. Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon (i) surrender of this Warrant, with the Form of Assignment attached as Schedule 2 hereto duly completed and signed, to the Company’s transfer agent or to the Company at its address specified herein (ii) delivery, at the request of the Company, of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws and (iii) delivery by the transferee of a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making such representations and certifications as the Company may reasonable request. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a Holder of a Warrant.
4. Exercise and Duration of Warrants.
(a) All or any part of this Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Trigger Date and through and including 5:00 P.M. prevailing Pacific time on the Expiration Date. At 5:00 P.M., prevailing Pacific time, on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.
(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), appropriately completed and duly signed, (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to Section 10 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.
5. Delivery of Warrant Shares. Upon exercise of this Warrant, the Company shall promptly issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate for the Warrant Shares issuable upon such exercise, with an appropriate restrictive legends. The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.
8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Shares may be listed.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
(b) Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company effects any merger or consolidation of the Company with or into another Person, in which the Company is not the survivor, (ii) the Company effects any sale of all or substantially all of its assets or a majority of its Common Stock is acquired by a third party, in each case, in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to any limitations on exercise contained herein (the “Alternate Consideration”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other obligations under this Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.
(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.
(d) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the sale or issuance of any such shares shall be considered an issue or sale of Common Stock.
(e) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing
in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.
(f) Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material nonpublic information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Trading Days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds; provided, however, the Holder may, in its sole discretion, commencing on the date that is 18 months from the date of this Warrant, satisfy its obligation to pay the Exercise Price through a “cashless exercise”, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the total number of Warrant Shares with respect to which this Warrant is being exercised.
A = the average of the Closing Sale Prices of the shares of Common Stock (as reported by Bloomberg Financial Markets) for the five Trading Days ending on the date immediately preceding the Exercise Date.
B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
For purposes of this Warrant, “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the principal securities exchange or trading market for such security, as reported by Bloomberg Financial Markets, or, if such exchange or trading market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over- the-counter market on the electronic bulletin board for such security as reported by Bloomberg
Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Company shall, within two Business Days submit via facsimile (a) the disputed determination of the Warrant Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Credit Agreement (provided that the Commission continues to take the position that such treatment is proper at the time of such exercise).
11. No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded up to the next whole number.
12. Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Credit Agreement prior to 5:00 p.m. (prevailing Pacific time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Credit Agreement on a day that is not a Trading Day or later than 5:00 p.m. (prevailing Pacific time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next Business Day delivery, or (iv) upon actual receipt by the party to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set forth in the Credit Agreement unless changed by such party by two Trading Days’ prior notice to the other party in accordance with this Section 12.
13. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.
14. Miscellaneous.
(a) The Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 14(a), the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company, contemporaneously with the giving thereof to the shareholders.
(b) Subject to the restrictions on transfer set forth on the first page hereof, and compliance with applicable securities laws, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.
(c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN ARIZONA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.
(f) Except as otherwise set forth herein, prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.
| MOBIVITY HOLDINGS CORP. | ||
| By: | ||
| Dennis Becker | ||
| Chief Executive Officer |
SCHEDULE 1
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)
Ladies and Gentlemen:
(1) The undersigned is the Holder of Warrant No. [ ] (the “Warrant”) issued by Mobivity Holdings Corp., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The undersigned hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.
| (3) | The Holder intends that payment of the Exercise Price shall be made as (check one): |
| □ | Cash Exercise |
| □ | “Cashless Exercise” under Section 10 of the Warrant |
(4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ in immediately available funds to the Company in accordance with the terms of the Warrant.
(5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares in accordance with the terms of the Warrant.
Dated: ______, _____
Name of Holder:________
By: _______Name: _______Title:
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
SCHEDULE 2
MOBIVITY HOLDINGS CORP. FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (the “Transferee” the right represented by the within Warrant to purchase shares of Common Stock of Mobivity Holdings Corp. (the “Company”) to which the within Warrant relates and appoints attorney to transfer said right on the books of the Company with full power of substitution in the premises. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the Company that:
| (a) | the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(a)(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States; |
| (b) | the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; |
| (c) | the undersigned has read the Transferee’s investment letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and |
| (d) | the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States. |
Dated: ______,
(Signature must conform in all respects to name of holder as specified on the face of the Warrant)
Address of Transferee
In the presence of:
Signature:
Email:
Exhibit 10.2
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
CONVERTIBLE NOTE
| $4,466,043 | November 15, 2022 | |
| Chandler, Arizona |
FOR VALUE RECEIVED, the undersigned Mobivity Holdings Corp., a Nevada corporation (“Borrower”), promises to pay Thomas B. Akin, an individual (“Lender”), the principal sum of $4,466,043 United States Dollars (US$4,466,043) or such lesser amount as shall equal the aggregate unpaid principal amount of the Advances (as defined in the Credit Agreement referred to below), together with interest thereon, in the manner and upon the terms and conditions set forth herein.
1. Payment Terms: Maturity. This Note shall bear interest on the unpaid principal amount at the rate of fifteen percent (15%) per annum. The unpaid principal amount and accrued and unpaid interest thereon shall be paid in 24 equal monthly installments commencing on January 31, 2023 and continuing on the last day of each of the next 23 months thereafter (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day), with a final payment due on December 31, 2024 at which time all principal and interest then unpaid shall be due and payable. All payments of principal and interest under this Note will be made in lawful money of the United States of America in immediately available funds at such place as may be designated by Lender to Borrower in writing.
2. Credit Agreement. This Note is referred to in, and evidences indebtedness incurred under, the Amended and Restated Credit Facility Agreement dated as of November 11, 2022 (referred to herein, as it may be amended, restated, modified, supplemented or replaced from time to time, as the “Credit Agreement”) between Borrower and Lender. The terms and conditions under which Borrower is permitted and required to make prepayments and repayments of principal of such indebtedness or be declared to be immediately due and payable are set forth in the Credit Agreement, the terms and conditions of which are incorporated herein by reference. Terms used herein but not defined shall have the meanings ascribed to them in the Credit Agreement.
3. Conversion.
a) Optional Conversion. At any time prior to the earliest of (i) the maturity date set forth in Section 1, (ii) a mandatory conversion pursuant to Section 3(b), and (iii) the closing date of a Corporate Transaction, all or part of the outstanding principal and/or accrued but unpaid interest under this Note may, upon the written election of the Lender, be converted into shares of Common Stock of the Company at the conversion price equal to 85% of the VWAP on the conversion date. The written election of the Lender must specify the amount of outstanding and/or accrued but unpaid interest to be converted and the intended date of such conversion.
b) Mandatory Conversion. On the date that is five Business Days prior to the date on which the Borrower becomes listed on a national securities exchange (other than the Borrower satisfying any stockholders’ equity requirement to be listed on such national exchange) (the “Event Date”), all of the outstanding principal and accrued but unpaid interest on the Event Date will be automatically converted (the “Mandatory Conversion”) into shares of Common Stock, at a conversion price equal to 85% of the VWAP on the conversion date (the “Conversion Price”).
c) Corporate Transaction Conversion. On the closing date of a Corporate Transaction, the Lender will be entitled to a cash payment equal to the outstanding principal and accrued but unpaid interest under this Note. “Corporate Transaction” means: (1) the closing of the sale, transfer or other disposition, in a single transaction or series of related transactions, of all or substantially all of the Borrower’s assets; (2) the consummation of a merger or consolidation of the Borrower with or into another entity (except a merger or consolidation in which the holders of capital stock of the Borrower immediately prior to such merger or consolidation continue to hold a majority of the outstanding voting securities of the capital stock of the Borrower or the surviving or acquiring entity immediately following the consummation of such transaction); or (3) the closing of the transfer (whether by merger, consolidation or otherwise), in a single transaction or series of related transactions, to a “person” or “group” (within the meaning of Section 13(d) and Section 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of the Borrower’s capital stock if, after such closing, such person or group would become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding voting securities of the Borrower (or the surviving or acquiring entity). For the avoidance of doubt, a transaction will not constitute a “Corporate Transaction” if its sole purpose is to change the state of the Borrower’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Borrower’s securities immediately prior to such transaction. Notwithstanding the foregoing, the sale of securities in a bona fide financing transaction will not be deemed a “Corporate Transaction.” The Borrower will, not less than ten Business Days prior to the closing date of a Corporate Transaction, give written notice to the Lender stating the material terms and conditions of the Corporate Transaction.
d) No Fractional Shares. The number of shares and/or units of Borrower securities issuable pursuant to this Section 3 will be rounded down to the nearest whole share.
4. Acts of Conversion. This Note will be deemed to have been automatically converted on the Event Date, and at such time the rights of the holder of this Note will cease and such holder will be treated for all purposes as the record holder of the Common Stock issuable upon conversion. As promptly as practicable after the Event Date, the Lender will surrender this Note to the Company at its principal office for cancellation. As promptly as practicable after receipt of the Note and the signature pages required by this Section, the Company may at its election either (i) issue a certificate or certificates representing the Common Stock issuable upon conversion, or (ii) not issue any certificate representing the Common Stock and instead document the Lender’s interest in the Common Stock by recording the Common Stock with the Borrower’s transfer agent (or another custodian selected by the Borrower) in book-entry form.
5. All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment, demand, protest and notice of dishonor in connection with this Note.
6. This Note is made under and governed by the internal laws of the State of Arizona, as provided for in the Credit Agreement.
| MOBIVITY HOLDINGS CORP., | ||
| a Nevada corporation | ||
| By: | /s/ Lisa Brennan | |
| Name: | Lisa Brennan | |
| Title: | Chief Financial Officer | |
Exhibit 10.3
AMENDMENT NO. 1 TO
AMENDED AND RESTATED CREDIT FACILITY AGREEMENT AND CONVERTIBLE NOTES
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT FACILITY AND CONVERTIBLE NOTES is dated as of January 31, 2023 (this “Amendment”), between Mobivity Holdings Corp., a Nevada corporation (“Borrower”) and Thomas B. Akin, an individual (“Lender”) (each, a “Party” and together, the “Parties”).
BACKGROUND
A. The Parties entered into that certain Amended and Restated Credit Facility Agreement dated as of November 11, 2022 (the “Existing Credit Agreement”);
B. Advances under the Existing Credit Agreement were evidenced by the terms of one or more convertible notes (the “Existing Notes”), a form of which is attached to the Existing Credit Agreement;
C. The Parties now desire to amend the Existing Credit Agreement and the Existing Notes as provided herein; and
D. Unless otherwise defined herein, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Existing Credit Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, and intending to be legally bound, the Parties hereto agree as follows:
AGREEMENT
1. Amendments to Existing Credit Agreement. Upon satisfaction of the conditions set forth in Section 3 hereof, the Existing Credit Agreement is amended pursuant to this Amendment to:
(a) Amend and restate Section 2.3(b) in its entirety to read as follows:
“Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances in 24 equal monthly installments commencing on January 1, 2024 and continuing thereafter on the first day of each month (or, if such first day is not a Business Day, on the Business Day immediately succeeding such first day). Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum and shall be paid quarterly in kind in Common Stock of the Borrower at a price per share equal to the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the ninety (90) Trading Days immediately preceding such date. Interest will be calculated on the basis of 365 days in a year.”
(b) Amend Section 1 of Exhibit A to Existing Credit Agreement in its entirety to read as follows:
“1. Payment Terms; Maturity. This Note shall bear interest on the unpaid principal amount at the rate of fifteen percent (15%) per annum and shall be paid quarterly in kind in Common Stock of the Borrower at a price per share equal to the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the ninety (90) Trading Days immediately preceding such date. The unpaid principal amount shall be paid in 24 equal monthly installments commencing on January 1, 2024 and continuing on the first day of each of the next 23 months thereafter (or, if such first day is not a Business Day, on the Business Day immediately succeeding such first day), with a final payment due on December 1, 2025 at which time all principal shall be due and payable. All payments of principal under this Note will be made in lawful money of the United States of America in immediately available funds at such place as may be designated by Lender to Borrower in writing.
2. Amendments to Existing Notes. Upon satisfaction of the conditions set forth in Section 3 hereof, each Existing Note is amended pursuant to this Amendment to:
(a) Amend Section 1 in its entirety to read as follows:
“1. Payment Terms; Maturity. This Note shall bear interest on the unpaid principal amount at the rate of fifteen percent (15%) per annum and shall be paid quarterly in kind in Common Stock of the Borrower at a price per share equal to the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the ninety (90) Trading Days immediately preceding such date. The unpaid principal amount shall be paid in 24 equal monthly installments commencing on January 1, 2024 and continuing on the first day of each of the next 23 months thereafter (or, if such first day is not a Business Day, on the Business Day immediately succeeding such last day), with a final payment due on December 1, 2025 at which time all principal shall be due and payable. All payments of principal under this Note will be made in lawful money of the United States of America in immediately available funds at such place as may be designated by Lender to Borrower in writing.
3. Conditions. Notwithstanding any other provision of this Amendment and without affecting in any manner the rights of the Lender hereunder, it is understood and agreed that the effectiveness of Sections 1 and 2 hereof is subject to the execution and delivery of this Amendment by Borrower and Lender.
4. No Modification. Except as expressly set forth herein, nothing contained herein shall be deemed to constitute a waiver of compliance with any term or condition contained in the Existing Credit Agreement, the Existing Notes or constitute a course of conduct or dealing among the parties. Except as amended or consented to hereby, the Existing Credit Agreement and Existing Notes remain unmodified and in full force and effect.
5. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Electronically delivered signature pages (PDFs, facsimile, etc.) shall be deemed to be the functional equivalent of originally executed signature pages for all purposes.
6. Successors and Assigns. This Amendment shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of Lenders. Neither Borrower’s rights or obligations hereunder nor any interest therein may be assigned or delegated without the prior written consent of the Lender.
7. Governing Law. This Amendment and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the law of the State of Arizona.
8. Severability. In case any provision in or obligation under this Amendment or any instrument or agreement required hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9. Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.
10. Reaffirmation. Borrower hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under the Existing Credit Agreement (after giving effect hereto), and (ii) ratifies and reaffirms the grant of security interest in the Collateral. Borrower hereby consents to this Amendment and acknowledges that the Existing Credit Agreement otherwise remains in full force and effect and is hereby ratified and reaffirmed. The execution of this Amendment shall not operate as a waiver of any right, power or remedy of the Lender or constitute a waiver of any provision of any of the Existing Credit Agreement or the Existing Notes, except as expressly set forth herein.
11. Entire Understanding. This Amendment sets forth the entire understanding of the Parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.
[Remainder of Page Intentionally Left Blank; Signature Pages Follow]
IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date set forth above.
| BORROWER: | ||
| MOBIVITY HOLDINGS CORP., | ||
| a Nevada corporation | ||
| By: | /s/ Dennis Becker | |
| Name: | Dennis Becker | |
| Title: | Chief Executive Officer | |
| LENDER: | ||
| /s/ Thomas B. Akin | ||
| Thomas B. Akin | ||
Exhibit 10.4
FORM OF EXERCISE NOTICE
Ladies and Gentlemen:
(1) The undersigned is the Holder of Warrant No. _____ (the “Warrant”) issued by Mobivity Holdings Corp., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The undersigned hereby exercises its right to purchase ________ Warrant Shares pursuant to the Warrant.
(3) The undersigned understands that upon the exercise of the Warrant in accordance with the offer made by way of the Company’s Warrant Offer Letter (“Offer Letter”) dated February 10, 2023 the undersigned shall receive a New Warrant (as defined in the Offer Letter) to purchase one share of the Company’s Common Stock, over a three year period at an exercise price of $2.00 per share, for every two Warrant Share the holder purchases upon the exercise of a Warrant.
(4) The undersigned acknowledges and represents as follows:
(a) The undersigned had the opportunity to review the Company’s Offer Letter and the Company’s reports and registration statements on file with the SEC, including:
| ● | The Company’s Annual Report on Form 10-K (“Form 10-K”) for the period ended December 31, 2021; and | |
| ● | The Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 June 30, 2022 and September 30, 2022. |
(b) The undersigned has been advised that officers and directors of the Company, and their affiliates, intend to exercise approximately ________ Warrants.
(c) That the undersigned recognizes that the Warrant Shares as an investment involves a high degree of risk, including, but not limited to, those risks set forth in the “Risk Factors” section of the Company’s Form 10-K;
(d) That the undersigned realizes that the Warrant Shares are being issued pursuant to an exemption from registration under the U.S. Securities Act of 1933, as amended (“Securities Act”) and, as such, the transferability of the Warrant Shares is restricted and that legends may be placed on any certificate representing the Warrant Shares substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SECURITIES, OR AN OPINION OF THE ISSUER’S COUNSEL TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.
(5) Payment of the exercise price in the amount of $________________ (number of Warrant Shares being exercised x $1.00) is delivered concurrently by check made payable to “Mobivity Holdings Corp.” or by wire pursuant to the following instructions:
[MOBIVITY TO CONFIRM WIRE INSTRUCTIONS]
| Bank Name: | JPMorgan Chase |
| Bank Address: | NY, NY 10004 |
| SWIFT: | CHASUS33 |
| Routing/ABA No.: | 021000021 |
| Account Name: | Mobivity Holdings Corp |
| 3313 West Frye Road, Suite 215 | |
| Chandler, AZ 85225 | |
| Account Number: | 592265786 |
(6) Pursuant to this Exercise Notice, the Company shall deliver to the Holder ________________ Warrant Shares and a New Warrant entitling the Holder to purchase an equal number of shares of Common Stock upon the terms set forth in the New Warrant.
| Dated: | ||
| Name of Holder: | ||
| By: | ||
| Name: | ||
| Title: | ||
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant
Exhibit 10.5
Faegre Draft 2.10.2023
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
MOBIVITY HOLDINGS CORP.
WARRANT TO PURCHASE COMMON STOCK
| Warrant No. [●] | Original Issue Date: February [●], 2023 |
Mobivity Holdings Corp., a Nevada corporation (the “Company”), hereby certifies that, for value received, [Holder Name], or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of [●] shares of common stock, $0.001 par value (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price per share equal to $2.00 (as adjusted from time to time as provided in Section 8 herein, the “Exercise Price”), at any time and from time to time from on or after the date hereof (the “Trigger Date”) and through and including 5:00 P.M., prevailing Pacific time, on February [●], 2026 (the “Expiration Date”), and subject to the following terms and conditions:
1. Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
2. Registration of Transfers. The Company shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon (i) surrender of this Warrant, with the Form of Assignment attached as Schedule 2 hereto duly completed and signed, to the Company’s transfer agent or to the Company at its address specified herein (ii) delivery, at the request of the Company, of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws and (iii) delivery by the transferee of a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making such representations and certifications as the Company may reasonably request. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a Holder of a Warrant.
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3. Exercise and Duration of Warrants.
(a) All or any part of this Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Trigger Date and through and including 5:00 P.M. prevailing Pacific time on the Expiration Date. At 5:00 P.M., prevailing Pacific time, on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.
(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), appropriately completed and duly signed, (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to Section 9 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and the applicable Exercise Price shall be accompanied by the delivery by the Holder of a written statement to the Company certifying that the Holder is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making such representations and certifications as the Company may reasonably request. The Holder shall not be required to deliver the original Warrant in order to affect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.
4. Delivery of Warrant Shares. Upon exercise of this Warrant, the Company shall promptly issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate for the Warrant Shares issuable upon such exercise, with an appropriate restrictive legends. The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.
5. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.
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7. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 8). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Shares may be listed.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time following the original issue date of this Warrant as set forth in this Section 8.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
(b) Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company effects any merger or consolidation of the Company with or into another Person, in which the Company is not the survivor, (ii) the Company effects any sale of all or substantially all of its assets or a majority of its Common Stock is acquired by a third party, in each case, in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 8(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to any limitations on exercise contained herein (the “Alternate Consideration”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other obligations under this Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.
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(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.
(d) Calculations. All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the sale or issuance of any such shares shall be considered an issue or sale of Common Stock.
(e) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 8, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.
(f) Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Trading Days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
9. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds; provided, however, the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
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where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the total number of Warrant Shares with respect to which this Warrant is being exercised.
A = the average of the Closing Sale Prices of the shares of Common Stock (as reported by Bloomberg Financial Markets) for the five Trading Days ending on the date immediately preceding the Exercise Date.
B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
For purposes of this Warrant, “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the principal securities exchange or trading market for such security, as reported by Bloomberg Financial Markets, or, if such exchange or trading market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Company shall, within two business days submit via facsimile (a) the disputed determination of the Warrant Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten business days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued (provided that the Commission continues to take the position that such treatment is proper at the time of such exercise).
10. No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded up to the next whole number.
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11. Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email prior to 5:00 p.m. (prevailing Pacific time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email on a day that is not a Trading Day or later than 5:00 p.m. (prevailing Pacific time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, or (iv) upon actual receipt by the party to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set forth in the records of the Company unless changed by such party by two Trading Days’ prior notice to the other party in accordance with this Section 11.
12. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.
13. Miscellaneous.
(a) The Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 13(a), the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company, contemporaneously with the giving thereof to the shareholders.
(b) Subject to the restrictions on transfer set forth on the first page hereof, and compliance with applicable securities laws, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.
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(c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF PHOENIX, ARIZONA FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.
(f) Except as otherwise set forth herein, prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.
| MOBIVITY HOLDINGS CORP. | ||
| By: | ||
| Lisa Brennan | ||
| Chief Financial Officer | ||
| 8 |
SCHEDULE 1
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)
Ladies and Gentlemen:
(1) The undersigned is the Holder of Warrant No. [•] (the “Warrant”) issued by Mobivity Holdings Corp., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The undersigned hereby exercises its right to purchase __________ Warrant Shares pursuant to the Warrant.
(3) The Holder intends that payment of the Exercise Price shall be made as (check one):
| ● | Cash Exercise | |
| ● | “Cashless Exercise” under Section 9 |
(4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $_______ in immediately available funds to the Company in accordance with the terms of the Warrant.
(5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder _____________ Warrant Shares in accordance with the terms of the Warrant.
Dated:_______________, _____
| Name of Holder: |
| By: | ||
| Name: | ||
| Title: |
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
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SCHEDULE 2
MOBIVITY HOLDINGS CORP.
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (the “Transferee” the right represented by the within Warrant to purchase shares of Common Stock of Mobivity Holdings Corp. (the “Company”) to which the within Warrant relates and appoints attorney to transfer said right on the books of the Company with full power of substitution in the premises. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the Company that:
| (a) | the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(a)(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States; | |
| (b) | the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; | |
| (c) | the undersigned has read the Transferee’s investment letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and | |
| (d) | the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States. |
| Dated: |
| ||
| (Signature must conform in all respects to name of holder as specified on the face of the Warrant) | |||
| |||
| Address of Transferee | |||
| |||
| |||
| In the presence of: | |||
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Exhibit 10.6
FORM OF EXERCISE NOTICE
Ladies and Gentlemen:
(1) The undersigned is the Holder of Warrant No. _________ (the “Warrant”) issued by Mobivity Holdings Corp., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The undersigned hereby exercises its right to purchase ________ Warrant Shares pursuant to the Warrant.
(3) The undersigned understands that upon the exercise of the Warrant in accordance with the offer made by way of the Company’s Warrant Offer Letter (“Offer Letter”) dated August 7, 2023 the undersigned shall receive a New Warrant (as defined in the Offer Letter) to purchase two shares of the Company’s Common Stock, over a three year period at an exercise price of $0.82 per share, for every one Warrant Share the holder purchases upon the exercise of a Warrant.
(4) The undersigned acknowledges and represents as follows:
(a) The undersigned had the opportunity to review the Company’s Offer Letter and the Company’s reports and registration statements on file with the SEC, including:
| ● | The Company’s Annual Report on Form 10-K (“Form 10-K”) for the period ended December 31, 2022; and |
| ● | The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023. |
(b) The undersigned has been advised that officers and directors of the Company, and their affiliates, intend to exercise approximately $700,000 worth of Warrants.
(c) That the undersigned recognizes that the Warrant Shares as an investment involves a high degree of risk, including, but not limited to, those risks set forth in the “Risk Factors” section of the Company’s Form 10-K;
(d) That the undersigned realizes that the Warrant Shares are being issued pursuant to an exemption from registration under the U.S. Securities Act of 1933, as amended (“Securities Act”) and, as such, the transferability of the Warrant Shares is restricted and that legends may be placed on any certificate representing the Warrant Shares substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SECURITIES, OR AN OPINION OF THE ISSUER’S COUNSEL TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.
(5) Payment of the exercise price in the amount of $________________ (number of Warrant Shares being exercised x $0.82) is delivered concurrently by check made payable to “Mobivity Holdings Corp.” or by wire pursuant to the following instructions:
| Bank Name: | JPMorgan Chase |
| Bank Address: | NY, NY 10004 |
| SWIFT: | CHASUS33 |
| Routing/ABA No.: | 021000021 |
| Account Name: | Mobivity Holdings Corp |
| 3313 West Frye Road, Suite 215 | |
| Chandler, AZ 85225 | |
| Account Number: | 592265786 |
(6) Pursuant to this Exercise Notice, the Company shall deliver to the Holder ________________ Warrant Shares and a New Warrant entitling the Holder to purchase two times the number of shares of Common Stock upon the terms set forth in the New Warrant.
| Dated: | ||
| Name of Holder: | ||
| By: | ||
| Name: | ||
| Title: | ||
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant
Exhibit 10.7
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
MOBIVITY HOLDINGS CORP.
WARRANT TO PURCHASE COMMON STOCK
| Warrant No. [●] | Original Issue Date: August [●], 2023 |
Mobivity Holdings Corp., a Nevada corporation (the “Company”), hereby certifies that, for value received, [Holder Name], or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of [●] shares of common stock, $0.001 par value (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price per share equal to $0.82 (as adjusted from time to time as provided in Section 8 herein, the “Exercise Price”), at any time and from time to time from on or after the date hereof (the “Trigger Date”) and through and including 5:00 P.M., prevailing Pacific time, on August [●], 2026 (the “Expiration Date”), and subject to the following terms and conditions:
1. Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
2. Registration of Transfers. The Company shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon (i) surrender of this Warrant, with the Form of Assignment attached as Schedule 2 hereto duly completed and signed, to the Company’s transfer agent or to the Company at its address specified herein (ii) delivery, at the request of the Company, of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws and (iii) delivery by the transferee of a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making such representations and certifications as the Company may reasonably request. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a Holder of a Warrant.
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3. Exercise and Duration of Warrants.
(a) All or any part of this Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Trigger Date and through and including 5:00 P.M. prevailing Pacific time on the Expiration Date. At 5:00 P.M., prevailing Pacific time, on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.
(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), appropriately completed and duly signed, (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to Section 9 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and the applicable Exercise Price shall be accompanied by the delivery by the Holder of a written statement to the Company certifying that the Holder is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making such representations and certifications as the Company may reasonably request. The Holder shall not be required to deliver the original Warrant in order to affect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.
4. Delivery of Warrant Shares. Upon exercise of this Warrant, the Company shall promptly issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate for the Warrant Shares issuable upon such exercise, with an appropriate restrictive legends. The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.
5. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.
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7. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 8). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Shares may be listed.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time following the original issue date of this Warrant as set forth in this Section 8.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
(b) Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company effects any merger or consolidation of the Company with or into another Person, in which the Company is not the survivor, (ii) the Company effects any sale of all or substantially all of its assets or a majority of its Common Stock is acquired by a third party, in each case, in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 8(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to any limitations on exercise contained herein (the “Alternate Consideration”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other obligations under this Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.
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(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.
(d) Calculations. All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the sale or issuance of any such shares shall be considered an issue or sale of Common Stock.
(e) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 8, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.
(f) Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Trading Days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
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9. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds; provided, however, the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the total number of Warrant Shares with respect to which this Warrant is being exercised.
A = the average of the Closing Sale Prices of the shares of Common Stock (as reported by Bloomberg Financial Markets) for the five Trading Days ending on the date immediately preceding the Exercise Date.
B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
For purposes of this Warrant, “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the principal securities exchange or trading market for such security, as reported by Bloomberg Financial Markets, or, if such exchange or trading market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Company shall, within two business days submit via facsimile (a) the disputed determination of the Warrant Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten business days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued (provided that the Commission continues to take the position that such treatment is proper at the time of such exercise).
10. No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded up to the next whole number.
| 5 |
11. Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email prior to 5:00 p.m. (prevailing Pacific time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email on a day that is not a Trading Day or later than 5:00 p.m. (prevailing Pacific time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, or (iv) upon actual receipt by the party to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set forth in the records of the Company unless changed by such party by two Trading Days’ prior notice to the other party in accordance with this Section 11.
12. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.
13. Miscellaneous.
(a) The Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 13(a), the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company, contemporaneously with the giving thereof to the shareholders.
(b) Subject to the restrictions on transfer set forth on the first page hereof, and compliance with applicable securities laws, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.
| 6 |
(c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF PHOENIX, ARIZONA FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.
(f) Except as otherwise set forth herein, prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
| 7 |
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.
| MOBIVITY HOLDINGS CORP. | ||
| By: | ||
| Will Sanchez | ||
| Chief Financial Officer | ||
| 8 |
SCHEDULE 1
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)
Ladies and Gentlemen:
(1) The undersigned is the Holder of Warrant No. [●] (the “Warrant”) issued by Mobivity Holdings Corp., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The undersigned hereby exercises its right to purchase __________ Warrant Shares pursuant to the Warrant.
(3) The Holder intends that payment of the Exercise Price shall be made as (check one):
| ☐ | Cash Exercise | |
| ☐ | “Cashless Exercise” under Section 9 |
(4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $_______ in immediately available funds to the Company in accordance with the terms of the Warrant.
(5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder _____________ Warrant Shares in accordance with the terms of the Warrant.
| Dated:_______________, _____ |
| Name of Holder: ___________________________ |
| By:__________________________________ |
| Name: _______________________________ |
| Title: _______________________________ |
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
| 9 |
SCHEDULE 2
MOBIVITY HOLDINGS CORP.
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (the “Transferee” the right represented by the within Warrant to purchase shares of Common Stock of Mobivity Holdings Corp. (the “Company”) to which the within Warrant relates and appoints attorney to transfer said right on the books of the Company with full power of substitution in the premises. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the Company that:
| (a) | the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(a)(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States; |
| (b) | the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; |
| (c) | the undersigned has read the Transferee’s investment letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and |
| (d) | the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States. |
| Dated: ________ | ||
| (Signature must conform in all respects to name of holder as specified on the face of the Warrant) | ||
| Address of Transferee | ||
| In the presence of: | ||
| 10 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Rule 13a-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Dennis Becker, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobivity Holdings Corp. for the quarter ended June 30, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 14, 2023 | By: | /s/ Dennis Becker |
| Dennis Becker | ||
| Chairman and Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Rule 13a-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Will Sanchez, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobivity Holdings Corp. for the quarter ended June 30, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 14, 2023 | By: | /s/ Will Sanchez |
| Will Sanchez | ||
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Mobivity Holdings Corp., a Nevada corporation (the “Company”), for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Dennis Becker, Chief Executive Officer of the Company, and Lisa Brennan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: August 14, 2023
| /s/ Dennis Becker | |
Dennis Becker Chairman and Chief Executive Officer (Principal Executive Officer) | |
| /s/ Will Sanchez | |
Will Sanchez Chief Financial Officer (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Accounts receivable, allowance for doubtful accounts | $ 9,423 | $ 34,446 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 65,797,567 | 61,311,155 |
| Common stock, shares outstanding | 65,797,567 | 61,311,155 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Revenues | ||||
| Revenues | $ 1,861,171 | $ 1,867,162 | $ 3,742,653 | $ 3,896,731 |
| Cost of revenues | 1,371,206 | 1,202,749 | 2,437,781 | 2,377,697 |
| Gross profit | 489,965 | 664,413 | 1,304,872 | 1,519,034 |
| Operating expenses | ||||
| General and administrative | 1,071,153 | 897,984 | 2,615,259 | 2,105,160 |
| Sales and marketing | 602,911 | 566,270 | 1,294,131 | 1,163,771 |
| Engineering, research, and development | 804,343 | 873,836 | 1,538,718 | 1,576,059 |
| Depreciation and amortization | 36,582 | 110,421 | 100,484 | 234,733 |
| Total operating expenses | 2,514,989 | 2,448,511 | 5,548,592 | 5,079,723 |
| Loss from operations | (2,025,024) | (1,784,098) | (4,243,720) | (3,560,689) |
| Other income/(expense) | ||||
| Loss of settlement of debt | (10,857) | |||
| Interest expense | (244,443) | (167,126) | (482,889) | (326,953) |
| Settlement Losses | (2,500) | (12,500) | ||
| Foreign currency gain | (115) | (510) | (291) | 2,809 |
| Total other income/(expense) | (247,058) | (167,636) | (506,537) | (324,144) |
| Loss before income taxes | (2,272,082) | (1,951,734) | (4,750,257) | (3,884,833) |
| Income tax expense | ||||
| Net loss | (2,272,082) | (1,951,734) | (4,750,257) | (3,884,833) |
| Other comprehensive loss, net of income tax | ||||
| Foreign currency translation adjustments | (137) | 12,261 | 31,365 | (634) |
| Comprehensive loss | $ (2,272,219) | $ (1,939,473) | $ (4,718,892) | $ (3,885,467) |
| Net loss per share: | ||||
| Basic | $ (0.03) | $ (0.03) | $ (0.07) | $ (0.07) |
| Diluted | $ (0.03) | $ (0.03) | $ (0.07) | $ (0.07) |
| Weighted average number of shares: | ||||
| Basic | 65,670,815 | 58,602,319 | 63,884,441 | 57,921,596 |
| Diluted | 65,670,815 | 58,602,319 | 63,884,441 | 57,921,596 |
Nature of Operations and Basis of Presentation |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Nature of Operations and Basis of Presentation | 1. Nature of Operations and Basis of Presentation
Mobivity Holdings Corp. (the “Company” or “we”) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets, PCs, and Point of Sale (“POS”) systems, allow resellers, brands, and enterprises to market their products and services to consumers through text messages sent directly to consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. On November 14, 2018, we completed the acquisition of certain operating assets relating to Belly, Inc.’s proprietary digital customer loyalty platform, including client contracts, accounts receivable, and intellectual property. We generate revenue by charging the resellers, brands, and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on April 3, 2023.
In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of June 30, 2023, and for the three and six months ended June 30, 2023 and 2022. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023.
|
Summary of Significant Accounting Policies |
6 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||
| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications did not affect previously reported net losses.
Acquisitions
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.
Cash
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.
As of June 30, 2023, and December 31, 2022, we recorded an allowance for doubtful accounts of $9,423 and $34,446 respectively.
Goodwill and Intangible Assets
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.
We conducted our annual impairment tests of goodwill as of December 31, 2022. As a result of these tests, we had a total impairment charge of $963,659.
Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one year to twenty years. No significant residual value is estimated for intangible assets.
The Company’s evaluation of its goodwill and intangible assets resulted in no impairment charges for the six months ended June 30, 2023 and 2022, respectively.
Software Development Costs
Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board (“FASB”) guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. The technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered ‘research and development’ that are not capitalized are immediately charged to engineering, research, and development expense.
Capitalized costs for those products that are canceled or abandoned are charged to product development expenses in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to “Amortization Expense - Development” based on the straight-line method over a period.
The Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its capitalized software development assets resulted in no impairment charges for the three months ended June 30, 2023 and 2022, respectively
Impairment of Long-Lived Assets
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.
Revenue Recognition and Concentrations
Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.
We determine revenue recognition under ASC 606 through the following steps:
During the six months ended June 30, 2023 and 2022, two customers accounted for 51% and 49% of our revenues, respectively.
Comprehensive Income (Loss)
Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the three months ended June 30, 2023 and 2022 , the comprehensive loss was $2,272,219, and $1,939,473 respectively. For the six months ended June 30, 2023 and 2022, the comprehensive loss was $4,718,892 and $3,885,467 respectively.
We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.
Research and Development Expenditures
Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.
Advertising Expense
Direct advertising costs are expensed as incurred and consist primarily of trade shows, sales enablement, content creation, paid engagement and other direct costs. Advertising expense was $114,978 and $188,825 for the six months ended June 30, 2023 and 2022, respectively.
Income Taxes
We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.
Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and six months ended June 30, 2023 and 2022, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock based compensation, stock options and warrants were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.
Recent Accounting Pronouncements
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on January 1, 2022.
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Going Concern |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | 3. Going Concern
We had $529,471 of cash as of June 30, 2023. We had a net loss of $4,750,257 for the six months ended June 30, 2023, and we used $3,486,777 of cash in our operating activities during that time. In the six months ended June 30, 2022 we had a net loss of $3,884,833 and used $3,519,680 of cash in our operating expenses. We raised $3.6 million in cash from the exercise of warrants in February of 2023. In addition, we raised $1.1 million in cash from the exercise in August 2023. There is substantial doubt that our additional cash from our warrant conversion along with our expected cash flow from operations, will be sufficient to fund our 12-month plan of operations, there can be no assurance that we will not require significant additional capital within 12 months.
As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $122.6 million as of June 30, 2023. Further losses are anticipated in the development of the Company’s business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next 12 months with proceeds from the sale of securities, and/or revenues from operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
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Goodwill and Purchased Intangibles |
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| Goodwill and Purchased Intangibles | 4. Goodwill and Purchased Intangibles
Goodwill
The carrying value of goodwill at each of June 30, 2023 and December 31, 2022 was $0.
The following table presents details of our purchased intangible assets as of June 30, 2023 and December 31, 2022:
Intangible assets
The intangible assets are being amortized on a straight-line basis over their estimated useful lives of one year to twenty years.
Amortization expense for intangible assets was $17,942 and $71,478 for the six months ended June 30, 2023 and 2022, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.
Amortization expense for intangible assets was $8,972 and $32,590 for the three months ended June 30, 2023 and 2022, respectively.
The estimated future amortization expense of our intangible assets as of June 30, 2023 is as follows:
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Software Development Costs |
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| Software Development Costs | 5. Software Development Costs
The Company has capitalized certain costs for software developed or obtained for internal use during the application development stage as it relates to specific contracts. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities.
The following table presents details of our software development costs as of June 30, 2023 and December 31, 2022:
Software development costs are being amortized on a straight-line basis over their estimated useful life of years.
Amortization expense for software development costs was $35,629 and $71,974 for the three months ended June 30, 2023 and 2022, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.
Amortization expense for software development costs was $77,574 and $145,263 for the six months ended June 30, 2023 and 2022, respectively.
The estimated future amortization expense of software development costs as of June 30, 2023 is as follows:
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Operating Lease Assets |
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| Operating Lease Assets | 6. Operating Lease Assets
The Company entered into a lease agreement on February 1, 2021, for 8,898 square feet, for its office facilities in Chandler, AZ through January 2027. Monthly rental payments, excluding common area maintenance charges, are $25,953 to $28,733. The first twelve months of the lease included a 50% abatement period and a deposit of $110,000 was required. The lessor contributed $110,000 towards the purchase of office furniture as part of the lease agreement. As of June 30, 2023, we have an operating lease asset balance of $878,380 and an operating lease liability balance of $1,065,155 recorded in accordance with ASC 842, Leases (ASC “842”).
The following are additional details related to leases recorded on our balance sheet as of June 30, 2023:
The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:
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Notes Payable and Interest Expense |
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| Notes Payable and Interest Expense | 7. Notes Payable and Interest Expense
The following table presents details of our notes payable as of June 30, 2023 and December 31, 2022:
ACOA Note
On November 6, 2017, Livelenz (a wholly-owned subsidiary of the Company), entered into an amendment of the original agreement dated December 2, 2014, with the Atlantic Canada Opportunities Agency (“ACOA”). Under this agreement, the note will mature, and the commitments will terminate on February 1, 2024. The monthly principal payment amount of $3,000 CAD increased to $3,500 CAD beginning on November 1, 2019, $4,000 CAD on August 1, 2021, $4,500 CAD on August 1, 2022, and $2,215 CAD during the remaining term of the agreement. Payments from April-December of 2020 were voluntarily deferred by ACOA due to COVID-19.
During the six months ended June 30, 2023 we repaid $16,684 USD of principal.
TD Bank Loan
On April 22, 2020, we entered into a commitment loan with TD Bank under the Canadian Emergency Business Account (“CEBA”), in the principal aggregate amount of $40,000 CAD, which is due and payable on December 31, 2023. This note bears interest on the unpaid balance at the rate of zero percent (0%) per annum during the initial term. Under this note, no interest or principal payments are due until December 31, 2023. Under the conditions of the loan, thirty-three percent (33%) of the loan will be forgiven if sixty-seven percent (67%) is repaid prior to the initial term date.
Related Party Notes
Secured Promissory Notes
On June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with Thomas Akin, one of the Company’s directors (the “Lender”). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $6,000,000 under the Credit Agreement (“the “Credit Facility”).
The Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this loan without notice, penalty, or charge. In consideration of the Lender’s agreement to provide the Credit Facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67 per share in connection with the issuance of funds under the Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the corresponding notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the Lender additional warrants entitling the Lender to purchase a number of shares of the Company’s common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume-weighted average price over the 30 trading days preceding the advance (the “VWAP”). Each warrant will be exercisable over a three-year period at an exercise price equal to the VWAP.
Under the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in 24 equal monthly installments commencing on June 30, 2022, and ending on June 30, 2024. On November 11, 2022, an amendment to the Credit Agreement was signed. The amendment updated the payment terms to the following: “Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances, plus accrued interest thereon, in 24 equal monthly installments commencing on January 31, 2023 and continuing thereafter on the last day of each month (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day. Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum. Interest will be calculated on the basis of 365 days in a year.” The amendment raised the maximum amount of the Credit Facility to $6,000,000. In addition, the interest which is accrued monthly between July 1, 2022, and December 31, 2022, will be settled into equity. Common Stock will be issued at the end of each month at a rate of $1.08 per share of common stock in the amount of the interest accrued for each month.
On January 31, 2023, the Company then entered into Amendment No. 1 (the “Amendment”), which amends our existing Credit Facility Agreement, dated as of November 11, 2022, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the Over-The Counter Venture Market operated by OTC Markets Group Inc. (“OTCQB®”) over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible notes to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the existing Credit Facility Agreement. The Amendment was considered a debt modification as the cash flows under the amended terms do not differ by at least 10% from the cash flows under the original agreement.
During the six months ended June 30, 2023, a total of $391,319 of interest was accrued by the company. The interest payable to Thomas Akin was then surrendered to be converted and exchanged for the issuance of shares of restricted common stock. The company recorded a loss of settlement of interest payable of $10,315 and amortized discount expense of $59,983.
As of June 30, 2023, the Company had drawn a total of $5,173,125 and we have accrued interest of $439,968 and a discount balance of $179,948.
Unsecured Promissory Note
On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875 with Talkot Fund, LP and investor in the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest are due and payable no later than December 31, 2023. We may prepay any of the UP Notes without notice, subject to a two percent (2%) pre-payment penalty. The UP Note offer was conducted by our management and there were no commissions paid by us in connection with the solicitation. The Company issued to Talkot Fund LP warrants to purchase an aggregate of 33,017 shares of its common stock at the stated exercise price per share in connection with the issuance of funds under this UP Note.
On January 31, 2023, the Lender agreed to postpone the 24-month repayment period to a later period commencing on January 31, 2024, and further agreed that interest accrued on the loan between July 1, 2022 and December 1, 2025 is to be settled in shares of the Company’s common stock quarterly.
During the six months ended June 30, 2023, a total of $20,504 of interest was accrued by the company. The interest payable to Talkot Fund, LP was then surrendered to be converted and exchanged for the issuance of shares of restricted common stock. The company recorded a loss of settlement of interest payable of $542 and amortized discount costs of $3152.
As of June 30, 2023, the Company had an outstanding principal balance of $271,875, accrued interest of $20,504 and a discount balance of $9,457.
Interest Expense
Interest expense was $244,443 and $167,126 during the three months ended June 30, 2023 and 2022, respectively.
Interest expense was $482,889 and $326,953 during the six months ended June 30, 2023 and 2022, respectively.
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Stockholders’ Equity |
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| Stockholders’ Equity | 8. Stockholders’ Equity
Common Stock and Equity Payable
2022
On February 9, 2022, 17 warrant holders exercised their common stock purchase warrant for shares at the exercise price of $0.80 per share, resulting in additional capital of $. As an inducement for the holders’ exercise of the warrants, we issued the holders new warrants to purchase common stock at $1.50 per share over a -year period expiring in February 2025. We have recorded an additional stock-based expense of $ in 1st quarter of 2022.
On June 29, 2022, the Company received private investment funds to purchase 1,062,500 shares of its common stock at a price of $0.80 per share, resulting in additional capital of $, and issued the holders new warrants to purchase common stock at $1.50 per share over a three-year period expiring in June 2025.
On August 24, 2022, the Company received private investment funds to purchase 1,500,000 shares of its common stock at a price of $0.80 per share, resulting in additional capital of $, and issued the holders new warrants to purchase common stock at $1.50 per share over a three year period expiring in August 2025.
On November 13, 2022 a total of shares of common stock were issued from equity payable to Thomas Akin as settlement of $151,398 of interest payable. The Company recorded a loss on settlement of interest payable of $2,259.
On November 13, 2022 a total of shares of common stock were issued from equity payable to Talkot Fund LP as settlement of $10,352 of interest payable. The Company recorded a loss on settlement of interest payable of $162.
On December 31, 2022 a total of $166,432 of interest was accrued and settled to equity payable for the issuance of shares of common stock. The company recorded a loss of settlement of interest payable of $44,325.
On December 31, 2022 a total of $10,423 of interest was accrued and settled to equity payable for the issuance of shares of common stock. The company recorded a loss of settlement of interest payable of $2,757,
2023
On January 31, 2023 a total of shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and expense was recognized during the six months ended June 30, 2023.
On March 27, 2023 a total of shares of common stock were granted from equity payable to Thomas Akin as settlement of $166,432 of interest payable. The Company recorded a loss on settlement of interest payable of $44,325 on December 31, 2022.
On March 27, 2023 a total of shares of common stock were granted from equity payable to Talkot Fund LP as settlement of $10,423 of interest payable. The Company recorded a loss on settlement of interest payable of $2,757 on December 31, 2022.
On March 31, 2023 a total of $195,171 of interest for 1st quarter and was accrued and settled to equity payable for the issuance of shares of common stock that was issued on May 8, 2023. The company recorded a loss of settlement of interest payable of $10,315.
On March 31, 2023 a total of $10,196 of interest for 1st quarter and was accrued and settled to equity payable for the issuance of shares of common stock that was issued on May 8, 2023. The company recorded a loss of settlement of interest payable of $542.
During March, 15 warrant holders exercised their common stock purchase warrant for shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders’ 1,793,745 new warrants to purchase common stock at $2.00 per share over a three-year period expiring in February 2025. The Company recorded $ of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.
On June 30, 2023 a total of $ of interest was accrued and settled to equity payable for the issuance of shares of common stock.
On June 30, 2023 a total of $ of interest was accrued and settled to equity payable for the issuance of shares of common stock.
During the six months ended June 30, 2023 a total of shares were issued from stock payable related to related party accrued interest.
As of June 30, 2023 we had an equity payable balance of $307,318.
Stock-based Plans
Stock Option Activity
2022
On March 29, 2022, the Company granted one employee options to purchase shares of the Company’s common stock at the closing price as of March 29, 2022, of $ per share. The option shares will vest % on the first anniversary of the grant, then equally in monthly installments thereafter, and are exercisable until March 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of % and an option fair value of $ was $.
On May 16, 2022, the Company granted three employees options to purchase shares of the Company’s common stock at the closing price as of May 16, 2022, of $ per share. The option shares will vest % on the first anniversary of the grant, then equally in monthly installments thereafter, and are exercisable until May 16, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of % and an option fair value of $ was $.
On September 22, 2022, the Company granted one employee options to purchase shares of the Company’s common stock at the closing price as of September 2022, of $ per share. The option shares will vest % on the first anniversary of the grant, then equally in monthly installments thereafter, and are exercisable until September 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of % and an option fair value of $ was $.
2023
During the six months ended June 30, 2023 the Company granted three employees options to purchase shares of the Company’s common stock at the closing price as of May 11, 2023 of $ per share. The option shares will vest % on the first anniversary of the grant, then equally in monthly installments thereafter, and are exercisable until May 16, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of % and an option fair value of $ was $.
Stock-Based Compensation Expense from Stock Options and Warrants
Valuation Assumptions
The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.
The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on the historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of the Company’s stock-based awards.
The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.
The expected volatility in 2023 and 2022 is based on the historical publicly traded price of our common stock.
Restricted stock units
2022
On March 29, 2022, the company granted four independent directors a total of restricted stock units. The units were valued at $ or $ per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.
On May 16, 2022, the company granted four independent directors a total of restricted stock units. The units were valued at $ or $per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.
On September 30, 2022, the company granted four independent directors a total of restricted stock units. The units were valued at $ or $ per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.
On December 31, 2022 the Company granted four independent directors a total of restricted stock units. The units were valued at $ or $ per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 31, 2025, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.
During the six months ended June 30, 2022, the Company recorded $ in restricted stock expense as board compensation.
2023
On March 31, 2023, the company grated granted four independent directors a total of restricted stock units. The units were valued at $ or $ per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.
On June 30, 2023, the company granted four independent directors a total of restricted stock units. The units were valued at $ or $ per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 15, 2024, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.
In the six months ended June 30, 2023, the Company recorded $ in restricted stock expense as board compensation.
Stock Based Compensation from Restricted Stock
As of June 30, 2023, there was unearned restricted stock unit compensation.
Warrants
The following table summarizes investor warrants as of June 30, 2023 and the years ended December 31, 2022 and 2021:
2022
On February 9, 2022, 17 warrant holders exercised their common stock purchase warrant for shares at the exercise price of $0.80 per share, resulting in additional capital of $2,550,553. As an inducement for the holder’s exercise of the warrants, we issued the holders’ new warrants to purchase common stock at $1.50 per share over a -year period expiring in February 2025. The Company recorded $ of stock-based expense related to warrants issued during the warrant conversion offer on February 9, 2022.
On June 29, 2022, six private investors purchased 1,062,500 new warrants to purchase common stock at $1.50 per share over a three-year period expiring in June 2025, and shares at the exercise price of $0.80 per share, resulting in additional capital of $850,000.
On August 24, 2022, five private investors purchased 1,500,000 new warrants to purchase common stock at $1.50 per share over a three-year period expiring in August 2025, and shares at the exercise price of $0.80 per share, resulting in additional capital of $1,200,000.
2023
During the six months ended June 30, 2023, 15 warrant holders exercised their common stock purchase warrant for 3,587,487 shares at the exercise price of $1.00 per share, resulting in additional capital of $3,557,487. As an inducement for the holder’s exercise of the warrants, we issued the holders 1,793,745 new warrants to purchase common stock at $2.00 per share over a period expiring in February 2025. The Company recorded $ of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of % and an option fair value of $.
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | 9. Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. This hierarchy requires companies to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value.
The following table presents assets that are measured and recognized at fair value as of June 30, 2023 on a recurring and non-recurring basis:
The following table presents assets that are measured and recognized at fair value as of December 31, 2022 on a recurring and non-recurring basis:
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 10. Commitments and Contingencies
Litigation
The company had a pending legal proceeding related to a Telephone Consumer Protection Act (“TCPA”) violation. This is a putative class action complaint alleging that the defendant initiated telephone solicitations through text messages in violation of the Florida Telephone Solicitation Act, Fla. Stat. §501.059 (“FTSA”). The defense of the matter was tendered to the Company by its client, Sonic Industries, Inc. During the six months ended June 30, 2023, the Company has settled four TCPA claims for a total settlement loss of $12,500 and this amount is included within settlement losses on the accompanying unaudited consolidated statements of operations and comprehensive loss.
Operating Lease
As described in Note 6, the Company has a lease agreement for 8,898 square feet, for its office facilities in Chandler, AZ through January 2027. Monthly rental payments, excluding common area maintenance charges, are $25,953 to $28,733. The first 12 months of the lease included a 50% abatement period. As of June 30, 2023, we have an operating lease asset balance for this lease of $878,380 and an operating lease liability balance for this lease of $1,065,155 recorded in accordance with ASC 842.
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | 11. Related Party Transactions
Secured Promissory Notes
On June 30, 2021, we entered into a Credit Facility Agreement with Thomas Akin, one of the Company’s directors (the “Lender”). The Credit Facility Agreement was amended on November 11, 2022 to allow the Company to borrow up to $6,000,000. The Credit Facility Agreement was amended again on January 31, 2023 to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025.
Unsecured Promissory Note
On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875 with Talkot Fund, LP and investor in the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest are due and payable no later than December 31, 2023.
For more details regarding the two related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.
Related Party Warrant Exercise
On March 2, 2023, Thomas Akin exercised his common stock purchase warrant for 749,987 shares at the exercise price of $1.00 per share, resulting in additional capital of $749,987. As an inducement for the holder’s exercise of the warrants, we issued the holder 374,994 new warrants to purchase common stock at $2.00 per share over a -year period expiring in March 2026. The Company recorded $ of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of % and an option fair value of $.
On February 7, 2022, Talkot Fund LP exercised their common stock purchase warrant for 750,000 shares at the exercise price of $1.00 per share, resulting in additional capital of $750,000. As an inducement for the holder’s exercise of the warrants, we issued the holder 375,000 new warrants to purchase common stock at $2.00 per share over a period expiring in March 2026. The Company recorded $ of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of% and an option fair value of $.
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Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 12. Subsequent Events
On July 17, 2023, a total of shares of common stock were issued to Thomas Akin as settlement of interest payable.
On July 17, 2023, a total of shares were issued to Talkot Fund, LP as settlement of interest payable.
2023 Warrants Exercise
During the quarter ended August 07, 2023, 5 warrant holders exercised their common stock purchase warrant for shares at the exercise price of $ per share, resulting in additional capital of $ As an inducement for the holder’s exercise of the warrants, we issued the holders 2,607,318 new warrants to purchase common stock at $ per share over a -year period expiring in August 2026. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended | |||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||
| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with GAAP 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 expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.
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| Reclassifications | Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications did not affect previously reported net losses.
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| Acquisitions | Acquisitions
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.
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| Cash | Cash
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.
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| Accounts Receivable, Allowance for Doubtful Accounts and Concentrations | Accounts Receivable, Allowance for Doubtful Accounts and Concentrations
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.
As of June 30, 2023, and December 31, 2022, we recorded an allowance for doubtful accounts of $9,423 and $34,446 respectively.
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| Goodwill and Intangible Assets | Goodwill and Intangible Assets
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.
We conducted our annual impairment tests of goodwill as of December 31, 2022. As a result of these tests, we had a total impairment charge of $963,659.
Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one year to twenty years. No significant residual value is estimated for intangible assets.
The Company’s evaluation of its goodwill and intangible assets resulted in no impairment charges for the six months ended June 30, 2023 and 2022, respectively.
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| Software Development Costs | Software Development Costs
Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board (“FASB”) guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. The technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered ‘research and development’ that are not capitalized are immediately charged to engineering, research, and development expense.
Capitalized costs for those products that are canceled or abandoned are charged to product development expenses in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to “Amortization Expense - Development” based on the straight-line method over a period.
The Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its capitalized software development assets resulted in no impairment charges for the three months ended June 30, 2023 and 2022, respectively
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
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| Foreign Currency Translation | Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.
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| Revenue Recognition and Concentrations | Revenue Recognition and Concentrations
Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.
We determine revenue recognition under ASC 606 through the following steps:
During the six months ended June 30, 2023 and 2022, two customers accounted for 51% and 49% of our revenues, respectively.
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| Comprehensive Income (Loss) | Comprehensive Income (Loss)
Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the three months ended June 30, 2023 and 2022 , the comprehensive loss was $2,272,219, and $1,939,473 respectively. For the six months ended June 30, 2023 and 2022, the comprehensive loss was $4,718,892 and $3,885,467 respectively.
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| Stock-based Compensation |
We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.
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| Research and Development Expenditures | Research and Development Expenditures
Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.
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| Advertising Expense | Advertising Expense
Direct advertising costs are expensed as incurred and consist primarily of trade shows, sales enablement, content creation, paid engagement and other direct costs. Advertising expense was $114,978 and $188,825 for the six months ended June 30, 2023 and 2022, respectively.
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| Income Taxes | Income Taxes
We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.
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| Net Loss Per Common Share |
Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and six months ended June 30, 2023 and 2022, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock based compensation, stock options and warrants were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on January 1, 2022. |
Goodwill and Purchased Intangibles (Tables) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Goodwill and Intangible Assets | The following table presents details of our purchased intangible assets as of June 30, 2023 and December 31, 2022:
Intangible assets
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| Schedule of Finite Lived Intangible Assets Future Amortization Expense | The estimated future amortization expense of our intangible assets as of June 30, 2023 is as follows:
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Software Development Costs (Tables) |
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| Schedule of Software Development Costs | The following table presents details of our software development costs as of June 30, 2023 and December 31, 2022:
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| Schedule of Finite Lived Intangible Assets Future Amortization Expense | The estimated future amortization expense of our intangible assets as of June 30, 2023 is as follows:
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| Software and Software Development Costs [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Finite Lived Intangible Assets Future Amortization Expense | The estimated future amortization expense of software development costs as of June 30, 2023 is as follows:
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Operating Lease Assets (Tables) |
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| Schedule of Additional Details Related to Leases | The following are additional details related to leases recorded on our balance sheet as of June 30, 2023:
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| Schedule of Lessee, Operating Lease Liability | The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:
|
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| Schedule of Lease Cost |
|
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Notes Payable and Interest Expense (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt | The following table presents details of our notes payable as of June 30, 2023 and December 31, 2022:
|
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Stockholders’ Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share Based Payment Arrangement Options Activity |
|
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| Schedule of Stock Options Valuation Assumptions |
|
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| Schedule of Restricted Stock Unit Activity |
|
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| Schedule of Investor Warrants | The following table summarizes investor warrants as of June 30, 2023 and the years ended December 31, 2022 and 2021:
|
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| Share-Based Payment Arrangement, Option [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stock-based Compensation Expense |
|
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| Restricted Stock Units (RSUs) [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stock-based Compensation Expense |
|
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value Measurements Recurring and Nonrecurring |
The following table presents assets that are measured and recognized at fair value as of December 31, 2022 on a recurring and non-recurring basis:
|
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Going Concern (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
Aug. 30, 2023 |
Feb. 28, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Subsequent Event [Line Items] | |||||||||
| Cash, cash equivalents, and federal funds sold | $ 529,471 | $ 529,471 | |||||||
| Net loss | 2,272,082 | $ 2,478,175 | $ 1,951,734 | $ 1,933,099 | 4,750,257 | $ 3,884,833 | |||
| Net cash used in operating activities | 3,486,777 | $ 3,519,680 | |||||||
| Proceeds from warrant exercises | $ 3,600,000 | ||||||||
| Accumulated deficit | $ 122,646,666 | $ 122,646,666 | $ 117,896,409 | ||||||
| Subsequent Event [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Proceeds from warrant exercises | $ 1,100,000 | ||||||||
Schedule of Goodwill and Intangible Assets (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Finite-Lived Intangible Assets [Line Items] | ||||
| Beginning balance | $ 91,438 | |||
| Additions | ||||
| Impairments | ||||
| Amortization | $ (8,972) | $ (32,590) | (17,942) | $ (71,478) |
| Fx and Other | 1 | |||
| Ending balance | 73,497 | 73,497 | ||
| Patents and Trademarks [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Beginning balance | 52,698 | |||
| Additions | ||||
| Impairments | ||||
| Amortization | (2,445) | |||
| Fx and Other | 1 | |||
| Ending balance | 50,254 | 50,254 | ||
| Customer Relationships [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Beginning balance | 30,690 | |||
| Additions | ||||
| Impairments | ||||
| Amortization | (12,276) | |||
| Fx and Other | ||||
| Ending balance | 18,414 | 18,414 | ||
| Trade Names [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Beginning balance | 8,050 | |||
| Additions | ||||
| Impairments | ||||
| Amortization | (3,221) | |||
| Fx and Other | ||||
| Ending balance | $ 4,829 | $ 4,829 | ||
Schedule of Finite Lived Intangible Assets Future Amortization Expense (Details) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| 2023 | $ 17,942 | |
| 2024 | 12,639 | |
| 2025 | 4,891 | |
| 2026 | 4,891 | |
| 2027 | 4,891 | |
| Thereafter | 28,243 | |
| Total | 73,497 | $ 91,438 |
| Total | 73,497 | $ 91,438 |
| Software and Software Development Costs [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| 2023 | 21,254 | |
| 2024 | 4,506 | |
| 2025 | ||
| 2026 | ||
| 2027 | ||
| Thereafter | ||
| Total | 25,760 | |
| Total | $ 25,760 |
Goodwill and Purchased Intangibles (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Finite-Lived Intangible Assets [Line Items] | |||||
| Goodwill | $ 0 | $ 0 | $ 0 | ||
| Finite-lived intangible asset, useful life (year) | 2 years | 2 years | |||
| Amortization of intangible assets | $ 8,972 | $ 32,590 | $ 17,942 | $ 71,478 | |
| Minimum [Member] | |||||
| Finite-Lived Intangible Assets [Line Items] | |||||
| Finite-lived intangible asset, useful life (year) | 1 year | 1 year | |||
| Maximum [Member] | |||||
| Finite-Lived Intangible Assets [Line Items] | |||||
| Finite-lived intangible asset, useful life (year) | 20 years | 20 years | |||
Schedule of Software Development Costs (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Finite-Lived Intangible Assets [Line Items] | ||||
| Capitalized computer software net | $ 103,334 | |||
| Additions | ||||
| Amortization | (77,574) | |||
| Capitalized computer software net | $ 25,760 | 25,760 | ||
| Computer Software, Intangible Asset [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Capitalized computer software net | 103,334 | |||
| Additions | ||||
| Amortization | (35,629) | $ (71,974) | (77,574) | $ (145,263) |
| Capitalized computer software net | $ 25,760 | $ 25,760 | ||
Software Development Costs (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Finite-Lived Intangible Assets [Line Items] | ||||
| Finite-lived intangible asset, useful life | 2 years | 2 years | ||
| Capitalized computer software, amortization | $ 77,574 | |||
| Computer Software, Intangible Asset [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Finite-lived intangible asset, useful life | 24 months | 24 months | ||
| Capitalized computer software, amortization | $ 35,629 | $ 71,974 | $ 77,574 | $ 145,263 |
Schedule of Additional Details Related to Leases (Details) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Operating Lease Assets | ||
| Operating lease assets, Current | ||
| Operating lease assets, Non-current | 878,380 | |
| Operating lease assets | 878,380 | $ 981,896 |
| Operating lease liabilities, Current | 263,663 | 251,665 |
| Operating lease liabilities, Non-current | 801,492 | $ 936,924 |
| Operating lease liabilities | $ 1,065,155 |
Schedule of Lessee, Operating Lease Liability (Details) |
Jun. 30, 2023
USD ($)
|
|---|---|
| Operating Lease Assets | |
| 2023 | $ 162,389 |
| 2024 | 330,894 |
| 2025 | 337,568 |
| 2026 | 344,241 |
| 2027 | 28,733 |
| Thereafter | |
| Total future lease payments | 1,203,825 |
| Less: imputed interest | (138,670) |
| Total | $ 1,065,155 |
Schedule of Lease Cost (Details) |
Jun. 30, 2023 |
|---|---|
| Operating Lease Assets | |
| Weighted average remaining lease term (years) operating leases (year) | 3 years 6 months 29 days |
| Weighted average discount rate, operating leases | 6.75% |
Operating Lease Assets (Details Narrative) |
Feb. 01, 2021
USD ($)
ft²
|
Jun. 30, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
|---|---|---|---|
| Lessee, Lease, Description [Line Items] | |||
| Operating lease assets | $ 878,380 | $ 981,896 | |
| Operating lease liability | 1,065,155 | ||
| Lease Ending January 2027 [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Area of real estate property | ft² | 8,898 | ||
| Represents abatement percentage of operating lease for lessee | 50.00% | ||
| Deposit assets | $ 110,000 | ||
| Fixed assets contributed by lessor | 110,000 | ||
| Operating lease assets | 878,380 | ||
| Operating lease liability | $ 1,065,155 | ||
| Lease Ending January 2027 [Member] | Minimum [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Monthly rental expense | 25,953 | ||
| Lease Ending January 2027 [Member] | Maximum [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Monthly rental expense | $ 28,733 |
Schedule of Debt (Details) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
Apr. 22, 2020 |
|
| Short-Term Debt [Line Items] | |||
| Debt and lease obligation, total | $ 5,032,039 | $ 5,256,170 | |
| Long term debt current | (1,379,346) | (2,743,788) | |
| Long-term debt, net of current portion | $ 3,652,693 | 2,512,382 | |
| ACOA Note [Member] | |||
| Short-Term Debt [Line Items] | |||
| Maturity | Feb. 01, 2024 | ||
| Debt and lease obligation, total | $ 18,096 | 34,231 | |
| TD Bank [Member] | |||
| Short-Term Debt [Line Items] | |||
| Maturity | Dec. 31, 2023 | ||
| Debt and lease obligation, total | $ 30,223 | 29,478 | |
| Interest Rate | 0.00% | ||
| Related Party Note [Member] | |||
| Short-Term Debt [Line Items] | |||
| Debt and lease obligation, total | $ 4,983,720 | $ 5,192,461 | |
| Interest Rate | 15.00% |
Share Based Payment Arrangement Options Activity (Details) - shares |
6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Sep. 22, 2022 |
May 16, 2022 |
Mar. 29, 2022 |
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Options, Granted | 1,000,000 | 45,000 | 150,000 | 295,000 | |
| Share-Based Payment Arrangement, Option [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Options outstanding, Beginning balance | 6,691,216 | 6,246,466 | |||
| Options, Granted | 295,000 | 1,375,000 | |||
| Options, Exercised | |||||
| Options, Forfeited/canceled | (72,916) | (330,623) | |||
| Options, Expired | (1,330,592) | (599,627) | |||
| Options outstanding, Ending balance | 5,582,708 | 6,691,216 |
Schedule of Stock Options Valuation Assumptions (Details) |
6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Feb. 14, 2023 |
Sep. 22, 2022 |
May 16, 2022 |
Mar. 29, 2022 |
Feb. 07, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Equity [Abstract] | |||||||
| Risk-free interest rate | 3.37% | 2.55% | |||||
| Expected life (years) (Year) | 7 years | 6 years | |||||
| Expected dividend yield | |||||||
| Expected volatility | 63.00% | 76.15% | 73.45% | 72.33% | 63.00% | 75.76% | 72.59% |
Schedule of Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Shares outstanding, Beginning balance | 1,929,933 | 1,685,141 |
| Shares, Awarded | 141,484 | 244,792 |
| Shares, Released | (545,012) | |
| Shares, Canceled/forfeited/expired | ||
| Shares outstanding, Ending balance | 1,526,405 | 1,929,933 |
| Shares, Expected to vest at June 30, 2023 | 1,526,405 | |
| Shares, Vested at June 30, 2023 | 1,526,405 | |
| Shares, Unvested at June 30, 2023 | ||
| Unrecognized expense at June 30, 2023 |
Schedule of Investor Warrants (Details) - Investor Warrant [Member] - shares |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
| Class of Warrant or Right [Line Items] | |||
| Shares outstanding, Beginning balance | 6,147,898 | 3,246,690 | |
| Weighted Average Exercise Price, Outstanding, Beginning balance | 1.45 | 2.26 | |
| Outstanding (in shares) | 2 years 1 month 20 days | 2 years 3 months 7 days | 3 years 7 months 2 days |
| Warrants, Granted | 1,793,745 | 6,089,398 | |
| Warrants, Exercised | 3,587,487 | ||
| Warrants, Canceled/forfeited/expired | (3,188,190) | ||
| Shares outstanding, Ending balance | 4,354,156 | 6,147,898 | 3,246,690 |
| Weighted Average Exercise Price, Outstanding, Ending balance | 1.69 | 1.45 | 2.26 |
Commitments and Contingencies (Details Narrative) |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Feb. 01, 2021
USD ($)
ft²
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2023
USD ($)
Integer
|
Jun. 30, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
| Loss Contingencies [Line Items] | ||||||
| Loss contingency claims settled number | Integer | 4 | |||||
| Settlement losses | $ 2,500 | $ 12,500 | ||||
| Operating lease asset | 878,380 | 878,380 | $ 981,896 | |||
| Operating lease liability | 1,065,155 | 1,065,155 | ||||
| Lease Ending January 2027 [Member] | ||||||
| Loss Contingencies [Line Items] | ||||||
| Area of a real estate property | ft² | 8,898 | |||||
| Represents abatement percentage of operating lease for lessee | 50.00% | |||||
| Operating lease asset | 878,380 | 878,380 | ||||
| Operating lease liability | $ 1,065,155 | $ 1,065,155 | ||||
| Lease Ending January 2027 [Member] | Minimum [Member] | ||||||
| Loss Contingencies [Line Items] | ||||||
| Represents monthly rental expense | $ 25,953 | |||||
| Lease Ending January 2027 [Member] | Maximum [Member] | ||||||
| Loss Contingencies [Line Items] | ||||||
| Represents monthly rental expense | $ 28,733 | |||||