UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| 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 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 incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
(Former name, former address, and former fiscal year, if changed since last report)
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 and posted 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 and post 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.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☐
|
||
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
Securities registered pursuant to Section 12(b) of the Act: None
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: As of November 14, 2024, there were outstanding shares of the registrant’s Common Stock, $ par value.
INDEX
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our consolidated financial statements included in this Form 10-Q are as follows:
These unaudited consolidated financial statements are condensed and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2024, are not necessarily indicative of the results that can be expected for the full year ending December 31, 2024.
| 3 |
BUBBLR INC.
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
| F-1 |
BUBBLR INC.
Unaudited Consolidated Balance Sheets
(Unaudited) September 30, | (Unaudited) December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Non-current Assets: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Loans payable, current | ||||||||
| Loans payable to related parties, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Loans payable to related parties, non-current | ||||||||
| Warrant derivative liability | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Series C Convertible Preferred Stock, $ par value, authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
BUBBLR INC.
Unaudited Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| Sales | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Professional fees | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expense | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Disposal of fixed assets | ( | ) | ( | ) | ||||||||||||
| Gain (loss) on change in fair value of warrant derivative liability | ( | ) | ( | ) | ||||||||||||
| Foreign currency transaction (loss) gain | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net loss before income tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Provision for income tax | ||||||||||||||||
| Net loss after income tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation gain (loss) | ||||||||||||||||
| Total other comprehensive income (loss) | ||||||||||||||||
| Net comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share, basic and diluted | $ | $ | ) | $ | ) | $ | ) | |||||||||
| Weighted average number of common shares outstanding, basic, and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
BUBBLR INC.
Unaudited Consolidated Statement of Changes in Stockholders’ Deficit
(Unaudited)
Series C Preferred Stock | Common Stock | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Income (Loss) | Equity (Deficit) | |||||||||||||||||||||||||
| Balance -December 31, 2022 | | $ | $ | $ | $ | ( | ) | $ | $ | | ||||||||||||||||||||||
| Issuance of common shares for investor relations | ||||||||||||||||||||||||||||||||
| Issuance of common shares for consultancy | ||||||||||||||||||||||||||||||||
| Issuance of common shares for professional services | ||||||||||||||||||||||||||||||||
| Issuance of common shares for Series C preferred shares dividend | ||||||||||||||||||||||||||||||||
| Loan resolution | ||||||||||||||||||||||||||||||||
| Forfeit of restricted stock units | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Vesting of share options | ||||||||||||||||||||||||||||||||
| Series C preferred shares dividend | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance -December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Vesting of Share Options | ||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
BUBBLR INC.
Unaudited Consolidated Statement of Cashflows
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Forfeit of restricted stock units | ( | ) | ||||||
| Vesting of stock-based compensation | ||||||||
| Change in fair value of warrant derivative liability | ( | ) | ||||||
| Disposal of fixed assets | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of intangible asset | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in other receivables | ||||||||
| Increase in accounts payable | ||||||||
| Increase in accrued liabilities. | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Repayment of loans payable - related party | ( | ) | ( | ) | ||||
| Proceeds from loans payable - related party | ||||||||
| Proceeds on the sale of fixed assets | ||||||||
| Net cash provided by financing activities | ||||||||
| Effects of exchange rate changes on cash | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Declared dividends | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-5 |
BUBBLR INC.
Notes to the Unaudited Consolidated Financial Statements
NOTE 1 - ORGANIZATION, BUSINESS AND LIQUIDITY
Organization and Operations
On
March 26, 2020, Bubblr Holdings Ltd. (a UK company formed on February 18, 2016) merged into U.S. Wireless Online, Inc. (“UWRL”),
a Wyoming corporation formed on
Bubblr, Inc. is an application software company that is currently developing its disruptive Ethical Web platform. This WEB.Ɛ platform will provide a holistic view of progress in creating digital products, services, and teams. It is designed to inform our ability to use our in-house code and that of our partners, lead advances in development criteria, and respond quickly to shifts in trends and applications.
Going Concern Matters
The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the
United States of America (“GAAP”), which contemplates the Company’s continuation as a going concern. The Company incurred
a net comprehensive loss of $
Management intends to raise additional operating funds through equity or debt offerings. However, the management’s success is not guaranteed.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations or (2) obtain additional financing through either private placement, public offerings, or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings, or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is unavailable to the Company, it may be required to curtail or cease its operations.
Due to uncertainties related to these matters, substantial doubt exists about the company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated interim financial statements have been prepared in accordance with GAAP. The Company’s fiscal year-end is December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Bubblr Holdings Ltd., Bubblr Ltd., and Bubblr CLN Ltd. Consolidation has eliminated all significant inter-company balances and transactions.
| F-6 |
Use of Estimates
Preparing consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclose contingent assets and liabilities at the date of the financial statements, and report the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex; consequently, results may differ from these estimates.
Intangible Assets - Capitalized Product Development Costs
Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by Bubblr, which is an integral part of these products because it allows the various components of the products to communicate with each other, and the products are clearly unable to function without this coding.
The costs of product development that are capitalized once technological feasibility is determined (noted as Technology in progress in the Intangible Assets table, in Note 5 to Notes to Unaudited Consolidated Financial Statements) include sub-contractor expenses, payroll, employee benefits, and other headcount-related expenses associated with product development. The Company determines that technological feasibility for products is reached after all high-risk development issues have been resolved. Once the products are available for general release to the Company’s customers, the Company ceases capitalizing the product development costs, and any additional costs, if any, are incurred. The capitalized product development costs are amortized on a straight-line amortization basis. The amortization begins in the year following capitalization.
Segment Reporting
Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies operating segments based on how our chief operating decision-maker internally evaluates separate financial information, business activities, and management responsibility. Accordingly, the Company has one reportable segment, consisting of fees for App usage.
| Nine Months Ended | Three Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| Net sales: | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| Europe | ||||||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||||
| Long-lived assets, net (property and equipment and intangible assets): | September 30, 2024 | December 31, 2023 | ||||||
| North America | $ | $ | ||||||
| Europe | ||||||||
| Totals | $ | $ | ||||||
| F-7 |
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line basis over the estimated periods benefited. Patents, technology, and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.
Long-Lived Assets
Long-lived
assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets
may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on comparing
the undiscounted future cash flows to the recorded value of the asset. The asset is written down to its estimated fair value if an impairment
is indicated. The Company did
Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed conventional, as that term is described under applicable GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Quoted prices in non-active or active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.
Level 3 - Prices or valuations that require inputs that are significant to the fair value measurement and unobservable.
The
carrying value of the Company’s current assets and liabilities is deemed to be their fair value due to their short-term maturity
and realization. During the year ended December 31, 2022, the Company acquired warrant derivative liabilities, which are Level 3 financial
instruments adjusted to fair market value on reporting dates. On September 30, 2024, and December 31, 2023, the warrant liabilities balances
were $
The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation-Stock Compensation,” which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenses in the financial statements based on the fair values of the stock awards on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
| F-8 |
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Pursuant to ASC 260, “Earnings Per Share,” basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share are the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| (Shares) | (Shares) | |||||||
| Series C Preferred Stock | ||||||||
| Warrants | ||||||||
| Total | ||||||||
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great Britain Pounds (GBP). Local currency assets and liabilities are translated at the exchange rates on the balance sheet date, and local currency revenues and expenses are translated at weighted average exchange rates during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
Aggregate
translation gains or losses, including gains or losses related to foreign-denominated cash and cash equivalents and the re-measurement
of certain inter-company balances, are included in the statement of operations as other income and expense. Gains on foreign exchange
translation totaling $
| September 30, | December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Period-end GBP£: U.S.$ exchange rate | ||||||||||||
| Weighted average GBP£: U.S.$ exchange rate | ||||||||||||
| F-9 |
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount believed more likely than not to be realized.
As of September 30, 2024, and December 31, 2023, the Company did not record any amounts about uncertain tax positions.
UK Taxes
We do not consider ourselves engaged in a trade or business in the UK and, as such, do not expect to be subject to UK corporate income taxation. We have subsidiaries based in the UK that are subject to the tax laws of that country. Under current law, those subsidiaries are taxed at the applicable corporate income tax rates. Should any UK subsidiaries be deemed to undertake business activities in the US, they would be subject to US corporate income tax only for their US activities. Relief would then be available against the UK tax liabilities with respect to the overseas taxes arising from US activities. At present, this is not applicable as our UK subsidiaries only undertake activities in the UK. Our UK subsidiaries file separate UK income tax returns.
UK Tax Risk
Companies that are incorporated outside the UK may become subject to UK taxes in a number of circumstances, including circumstances in which (1) they are deemed resident in the UK for tax purposes by reason of their central management and control being exercised from the UK or (2) they are treated as carrying on a trade, investing or carrying on any other business activity in the UK, whether or not through a UK Permanent Establishment (“PE”).
In addition, the Finance Act 2015 introduced a new tax known as the diverted profits tax (“DPT”), which is charged at 25% of any “taxable diverted profit.”. The DPT has had an effect since April 1, 2015, and may apply in circumstances including (1) where arrangements are designed to ensure that a non-UK resident company does not carry on a trade in the UK through a PE and (2) where a tax reduction is obtained through the involvement of entities or transactions lacking economic substance. We intend to operate in such a manner that none of our companies should be subject to the UK DPT and that none of our companies (other than those companies incorporated in the UK) should: (1) be treated as residents in the UK for tax purposes; (2) carry on a trade, invest or carry on any other business activity in the UK (whether or not through a UK PE).
However, this result is based on certain legal and factual determinations. The scope and the basis upon which the DPT will be applied by HM Revenue & Customs (“HMRC”) in the UK remains uncertain. Since applicable laws and regulations do not conclusively define the activities that constitute conducting a trade, investment, or business activity in the UK (whether or not through a UK PE), and since we cannot exclude the possibility that there will be a change in the law that adversely affects the analysis, HMRC might successfully assert a contrary position. The terms of an income tax treaty between the UK and the home country of the relevant Bubblr subsidiary, if any, could contain additional protections against UK tax.
Any arrangements between UK-resident entities of Bubblr and other entities of Bubblr are subject to the UK transfer pricing regime. Consequently, if any agreement between a UK resident entity of Bubblr and any other Bubblr entity (whether that entity is resident in or outside of the UK) is found not to be on arm’s length terms and, as a result, a UK tax advantage is being obtained, an adjustment will be required to compute UK taxable profits as if such an agreement were on arm’s length terms. Any transfer pricing adjustment could adversely impact the tax charge incurred by the relevant UK resident entities of Bubblr.
Recent Accounting Pronouncements
The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to have a material impact on our financial statements.
| F-10 |
Reclassifications
Certain accounts have been reclassified in prior periods to conform to the current period presentation. Compensation expenses that were previously reported separately have been combined with general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented.
NOTE 3 – OTHER RECEIVABLES
Other receivables consisted of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Deposit | $ | $ | ||||||
| UK R&D credit | ||||||||
| UK VAT receivable | ||||||||
| Total other receivables | $ | $ | ||||||
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Motor vehicles | $ | $ | ||||||
| Computer equipment | ||||||||
| Total property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
During
the nine months ended September 30, 2024, and September 30, 2023, the Company recorded depreciation expenses of $4,905 and $
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consisted of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Intellectual properties | $ | $ | ||||||
| Trademarks | ||||||||
| Patents | ||||||||
| Capitalized acquisition costs | ||||||||
| Total intellectual properties | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intellectual properties, net | $ | $ | ||||||
| ● | Patents |
A Patent on the Internet-Search Mechanism (“IBSM”) has been granted in the United States, South Africa, New Zealand, Canada, and Australia. The patent is pending in the European Union and the United Kingdom.
Patents on Contextual Enveloping of Dynamic Hypertext Links and Real-Time Data Processing are pending in the United States
Patents
are reported at cost, less accumulated amortization and accumulated impairment loss. Costs include expenditures directly attributable
to the acquisition of the asset. Once a patent provides economic benefit to the Company, amortization is provided on a straight-line
basis on all patents over their expected useful lives of
| F-11 |
| ● | Intellectual Property |
Intellectual
Property capitalizes the Company’s qualifying internal research and development costs. It is amortized over its useful life of
| ● | Trademarks |
The Company has the following trademarks.
| Mark | Category | Proprietor | Country | Class(es) | Status | Reg. Date. | File No. | |||||||
 |
Words | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206382.EM.01 | |||||||
|
Word | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206382.GB.01 | |||||||
|
Words | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206382.GB.02 | |||||||
|
Word | Bubblr Limited | United States | 9 38 41 42 | REGD-DEC USE | 08-Feb-2022 | 206382.US.01 | |||||||
|
|
Words and Color Device | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206383.EM.01 | |||||||
|
|
Series of Logos | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206383.GB.01 | |||||||
|
|
Words and Color Device | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206383.GB.02 | |||||||
|
|
Words and Device | Bubblr Limited | United States | 9 38 41 42 | ACCEPTED | 206383.US.01 | ||||||||
BAU NOT OK/BAU Not OK
|
Series of Marks | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 11-Oct-2019 | 208674.GB.01 | |||||||
| NEWZMINE/NewzMine | Series of Marks | Bubblr Limited | United Kingdom | 9 38 42 | REGISTERED | 25-Dec-2020 | 227753.GB.01 |
The Company capitalizes trademark costs where the likelihood of acceptance is expected. Each trademark has been determined to have an infinite useful life and is assessed for impairment each reporting period. If the trademark’s value has been reduced or if it is not successfully registered, the assets will be impaired and charged to expense in the period of impairment.
Amortization
expenses were $
NOTE 6 – ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Director fees | $ | $ | ||||||
| Dividends payable | ||||||||
| Other accruals | ||||||||
| Settlement and severance | ||||||||
| Wages and Salaries | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
| F-12 |
NOTE 7 – LOANS PAYABLE TO RELATED PARTIES
The Company had the following loans payable to related parties:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Beginning balance Loan 1 - payable to Stephen Morris | $ | $ | ||||||
| Loan resolution – convert principal into shares of common stock | ( | ) | ||||||
| Fourth amendment (December 27, 2023) – additions | ||||||||
| Fifth amendment (June 30, 2024) – additions | ||||||||
| Sixth amendment (September 30, 2024) – additions | ||||||||
| Ending balance Loan 1 - payable to Stephen Morris | ||||||||
| Loan - payable to Stephen Morris | ||||||||
| Related party loan - payable to director | ||||||||
| Total loan payable to related parties | ||||||||
| Less – current portion | ||||||||
| Total – non-current | $ | $ | ||||||
| ● | Loan 1 (January 16, 2016) - Stephen Morris, Founder, CTO and Chair. |
On January 16, 2016, our wholly owned subsidiary, Bubblr Limited, entered into a Loan Agreement (the “Loan Agreement”) with Mr. Stephen Morris. The Loan Agreement is unsecured and carries no interest, is payable on demand, and is for working capital or as the Company deems appropriate. The Loan is available for drawing by the Company in multiple tranches.
On
December 20, 2022, the Company entered into a third amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to reduce
the outstanding principal amount of the loan by $
On
December 27, 2023, Stephen Morris converted $
On
December 27, 2023, the parties entered into a fourth amendment with Mr. Morris to add $
On
June 30, 2024, the parties entered into a fifth amendment with Mr. Morris to add $
On
September 30, 2024, the parties desired to amend the loan such that the principal amount of the loan shall be due and payable by Borrower
to Lender on the earlier of (i) the completion of an equity offering by Bubblr, Inc., for no less than $
On
September 30, 2024, the parties entered into a sixth amendment with Mr. Morris to add $
| ● | Loan 2 (September 7, 2022) - Stephen Morris, Founder, CTO and Chair. |
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for $
On September 30, 2024, the parties desired to amend the loan such that the maturity date, which is three years from the date of the Loan Agreement to three years from the date of this amendment.
| ● | Related Party Loan – Professor Paul Morrissey, Director. |
On
September 8, 2023, the Company entered into a new loan agreement with Professor Paul Morrissey for $
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company had the following related party transactions:
| ● | Loans payable to Stephen Morris | |
| ● | Loan payable to Director of the Company. |
Loans payable to related party transactions are disclosed in Note 7.
NOTE 9 – WARRANT LIABILITY
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instruments should be classified as a liability due to reset provisions and variability in exercise price resulting in there being no fixed value or explicit limit to the number of shares to be delivered upon exercise. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense items.
| F-13 |
The Company determined our warrant liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of September 30, 2024. The Black Scholes model requires three basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model.
For the period ended September 30, 2024, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:
| Nine Months Ended | ||||
| September 30, 2024 | ||||
| Expected term (years) | ||||
| Expected average volatility | ||||
| Expected dividend yield | % | |||
| Risk-free interest rate | ||||
The following table summarizes the changes in the warrant liabilities during the nine months ended September 30, 2024, and the year ended December 31, 2023:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
| Warrant liability December 31, 2023 | $ | |||
| Addition of new warrants | $ | |||
| Change in fair value of warrant liability | ||||
| Warrant liability as of September 30, 2024 | $ | |||
NOTE 10 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized preferred shares with a par value of $ per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
Series C Convertible Preferred Stock
On March 4, 2023, the Company filed a Certificate of Designation with the Wyoming Secretary of State, which established shares of the Company’s Series C Convertible Preferred Stock, with a Stated Value of $ per share.
The Company has the right to redeem the Series C Convertible Preferred Stock in accordance with the following schedule:
| ● | ||
| ● | The
Company shall pay an |
| F-14 |
The Series C Convertible Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forth in the Certificate of Designation).
On
March 4, 2022, the Company entered into a Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS
Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to $
On
March 4, 2022, the Company issued to GHS the first tranche of shares of Series C Convertible Preferred Stock, as well as commitment
shares of shares of Series C Convertible Preferred Stock and warrant shares (the “GHS Warrant”). Warrant shares
represent
GHS
delivered gross proceeds of $
On March 9, 2022, the Company entered a Securities Purchase Agreement with Proactive Capital Partners LP (“Proactive”), whereby Proactive agreed to purchase shares of Series C Preferred Stock.
The
Company agreed to issue Proactive commitment shares of shares of Series C Convertible Preferred Stock and warrant shares (the
“Warrant”). Warrant shares represent
On
March 9, 2022, the Company issued shares of Series C Convertible Preferred stock to Proactive Capital Partners LP as per the Securities
Purchase Agreement. Proactive delivered gross proceeds of $
On
April 24, 2022, the Company issued the second tranche of shares of Series C Convertible Preferred Stock and warrant shares
as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
May 25, 2022, the Company issued the third tranche of shares of Series C Convertible Preferred Stock and warrant shares as
per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
| F-15 |
On
September 24, 2022, the Company issued the fourth tranche of shares of Series C Convertible Preferred Stock and warrant shares
as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for £
As
a result of the above transactions, the Company received total net proceeds of $
As of September 30, 2024, and December 31, 2023, the Company had shares of Series C Preferred Stock issued and outstanding.
Common Stock
The Company has authorized common shares with a par value of $ per share. Each common share entitles the holder to one vote, in person or by proxy, on any matter on which action of the corporation’s stockholders is sought.
During the year ended December 31, 2023, the Company issued the following unregistered securities:
| ● |
shares for Investor Relations services valued at $ | |
| ● |
shares for Consultancy services valued at $ | |
| ● |
shares for Professional services valued at $ | |
| ● |
shares for Series C Preference Shares Dividend valued at $ | |
| ● |
shares for Loan Resolution valued at $ |
During the nine months ended September 30, 2024, the Company did not issue unregistered securities.
On September 30, 2024, and December 31, 2023, the Company had shares of common stock issued and outstanding.
The above securities were issued in reliance on the exemption from registration provided by Section 4.(a)(2) of the Securities Act of 1933, as amended, and in reliance on the exception from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.
Warrants
The Company identified conversion features embedded within warrants issued during the nine months ended September 30, 2023. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision that could cause adjustments in redemption value and the number of shares issued upon exercise (see Note 9—Warrant Liability).
| F-16 |
A summary of activity during the nine months ended September 30, 2024, follows:
| Warrants Outstanding | Weighted Average | |||||||||||
| Number of | Weighted Average | Remaining life | ||||||||||
| Warrants | Exercise Price | (years) | ||||||||||
| Outstanding, December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited/canceled | - | |||||||||||
| Outstanding, September 30, 2024 | $ | |||||||||||
| Exercisable Warrants, September 30, 2024 | $ | |||||||||||
The following table summarizes information relating to outstanding and exercisable warrants as of September 30, 2024:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||
| Number
of Warrants | Weighted Average Remaining Contractual life (in years) | Weighted
Average Exercise Price | Number
of Shares | Weighted
Average Exercise Price | ||||||||||||||
| $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||
As of September 30, 2024, the intrinsic value of the warrants is $, as the price of the Company’s stock was below the warrant exercise price.
2022 Equity Incentive Plan
On
April 1, 2023, the
Number of Shares | Weighted-Average Exercise Price (per share) | |||||||
| Outstanding as of December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ( | ) | ( | ) | ||||
| Outstanding on September 30, 2023 | $ | |||||||
| Exercisable at September 30, 2024 | ||||||||
| Weighted-average fair value of options granted in the period | $ | |||||||
| F-17 |
| Three Months Ended | ||||
| September 30, 2024 | ||||
| Expected life (years) | – | |||
| Risk-free interest rate | % | |||
| Expected forfeiture rate | % | |||
| Volatility | % - % | |||
| Expected dividend yield | % | |||
| Number of Shares | ||||
| Non-vested as of December 31, 2023 | ||||
| Granted | ||||
| Forfeited or expired | ( | ) | ||
| Vested | ( | ) | ||
| Non-vested as of September 30, 2024 | ||||
| Options | Options | |||||||
| Outstanding | Exercisable | |||||||
| Number of shares | ||||||||
| Weighted-average contractual life in years | ||||||||
| Weighted-average exercise price | $ | |||||||
| Intrinsic value | $ | |||||||
The total intrinsic value of options on September 30, 2023, is zero because the closing stock price was below the weighted average exercise value.
The Company recognized compensation costs of $ and $ for the nine months ended September 30, 2024 and 2023, respectively. The Company recognized compensation costs of $ and $ for the three months ended September 30, 2024 and 2023, respectively.
As
of September 30, 2024, there were $
| F-18 |
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Lease
The
Company rents virtual space month-to-month at 21 West 46th St, New York, NY 10036. The monthly rate is $
Investor Relations
On
February 14, 2023, the Company entered into a twelve-month Consulting Agreement with Beyond Media SEZC. Under the agreement, Beyond Media
will receive $ monthly in cash and shares of common stock valued at $
On
June 15, 2023, the Company entered into a six-month Consulting Agreement with Launchpad LLC. Under the agreement, Launchpad LLC will
receive $
Employment and Separation Agreements
| ● | Steven Saunders, Former Chief Commercial Officer and Director |
On
January 31, 2023, the Company entered Separation Agreements with Steven Saunders. He is no longer an officer or director of our Company,
and all prior agreements are terminated. Mr. Saunders and the Company agreed to a settlement totaling $
| ● | Rik Willard, Former Chief Executive Officer and Director |
On
January 31, 2023, the Company entered into Separation Agreements with Rik Willard, our then-chief Executive Officer. Mr. Willard is no
longer an officer or director of our Company, and all prior agreements are terminated in their entirety. Mr. Willard and the Company
agreed to a settlement totaling $
| ● | Stephen Morris, Founder, Chief Technical Officer and Director |
On
April 1, 2023, the Company entered into an Amended Employment Agreement with Stephen Morris, Founder, Chief Technical Officer, and Chair.
The Company will compensate Mr. Morris with $
On April 1, 2023, the The options were fully vested as Mr. Morris completed two years and three months of service.
On
December 31, 2023, the Company entered into a Second Amended Employment Agreement with Stephen Morris to reduce his base pay from $
to $ per annum and forfeit $
| F-19 |
| ● | David Chetwood, Chief Financial Officer and Director |
On
April 1, 2023, the Company entered into an Amended Employment Agreement, effective February 10, 2023, with David Chetwood, Chief Financial
Officer and Director. The Company will compensate Mr. Chetwood with a base pay of $
On May 12, 2023, the As of September 30, 2024, there were non-vested share options, which we will recognize over the next seven months.
On
December 31, 2023, the Company entered into a Second Amended Employment Agreement with David Chetwood to reduce his base pay from $
to $ per annum and forfeit $
| ● | Timothy Burks, Chief Executive Officer and Director |
On April 1, 2023, the
On July 1, 2023, the
On
December 31, 2023, the Company entered into an Amended Employment Agreement with Timothy Burks to reduce his base pay from $ to
$ per annum and forfeit $
Effective July 8, 2024, the Corporation’s shareholders, acting by written consent and representing at least a simple majority (55.9%) of the Corporation’s issued and outstanding shares of Common Stock, voted to remove Timothy Burks from the Corporation’s Board of Directors.
Immediately following the shareholder vote, the two remaining Directors, David Chetwood and Steve Morris, voted unanimously to remove Timothy Burks from the corporation’s office of Chief Executive Officer, effective July 8, 2024.
| ● | Paul Morrissey, Director |
On April 6, 2023, the
On July 6, 2023, the
On
December 31, 2023, the Company entered into an Amended Non-Executive Director Agreement with Morrissey to reduce his director fee from
$ to $ per annum and forfeit $
Effective July 8, 2024, the Corporation’s shareholders, acting by written consent and representing at least a simple majority (55.9%) of the Corporation’s issued and outstanding shares of Common Stock, voted to remove Paul Morrissey from the Corporation’s Board of Directors.
NOTE 12 - SUBSEQUENT EVENTS
Effective October 17, 2024, Stephen Morris resigned as our Chief Executive Officer.
On October 17, 2024, we appointed Stephen Morris as Chief Technical Officer and Manfred Ebensberger as Chief Executive Officer. Mr. Ebensberger has also been appointed to our Board of Directors.
Our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 27, 2023, which is incorporated herein by reference, provides Mr. Morris’s employment history.
Mr. Morris has material direct or indirect interests in transactions with us over the last two years, as provided for in our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 27, 2023, Annual Report on Form 10-K filed with the Securities Exchange Commission on March 29, 2023, and Quarterly Report Form 10-Q filed with the Securities and Exchange Commission on August 14, 2024, which are incorporated herein by reference.
On
October 17, 2024, our Board of Directors approved an Executive Consulting Agreement in favor of Mr. Ebensberger. The Executive Consulting
Agreement with Mr. Ebensberger provides that we will compensate him with an annual salary of $
Effective
October 17, 2024, the Company and David Chetwood, CFO, amended Mr. Chetwood’s Employment Agreement to reduce his base annual salary
from $
The Company evaluated subsequent events through November 14, 2024, when the financial statements were available to be issued. The Company has concluded that no further subsequent events require disclosure.
| F-20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Some of the statements contained in this Quarterly Report on Form 10-Q of Bubblr, Inc. (hereinafter the “Company,” “Bubblr,” “BBLR,” “Ethical Web.AI,” “we,” “us,” or “our”) discuss future expectations, contain projections of our plan of operation or financial condition or state other forward-looking information. In this Annual Report, forward-looking statements are generally identified by words such as “anticipate,” “plan,” “believe,” “expect,” “estimate,” and the like. Forward-looking statements involve future risks and uncertainties, and some factors could cause actual results or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on numerous factors and is derived using numerous assumptions. A reader should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report. Key factors that may cause actual results to differ from projections include, for example:
| ● | our strategies, prospects, plans, expectations, forecasts, or objectives; | |
| ● | our ability to achieve marketable products and the costs and timing thereof; | |
| ● | acceptance of our products by our target market and our ability to compete in such a market; | |
| ● | our ability to raise additional financing when needed and the terms and timing thereof; | |
| ● | our ability to expand, protect, and maintain our intellectual property rights; | |
| ● | our future operations, financial position, revenues, costs, expenses, uses of cash, capital requirements, our need for additional financing, or the period for which our existing cash resources will be sufficient to meet our operating requirements; | |
| ● | our analysis of the target market for our platform; | |
| ● | the impact of COVID-19 and other future pandemics and other adverse public health developments on our operations and our industry; | |
| ● | regulatory developments in the United States and other countries; | |
| ● | our compliance with all applicable laws, rules, and regulations, including those of the Securities and Exchange Commission, or SEC; | |
| ● | our ability to compete in the United States and internationally with more substantial companies; | |
| ● | general economic, business, political, and social conditions; | |
| ● | our reliance on and our ability to retain (and, if necessary, timely recruit and replace) our officers, directors, and key employees and their ability to timely and competently perform; | |
| ● | our ability to generate significant revenues and achieve profitability; | |
| ● | our ability to manage the growth of our business; | |
| ● | our commercialization of our platform and marketing capabilities and strategies; | |
| ● | our ability to expand, protect, and maintain our intellectual property position; | |
| ● | the success of competing third-party platforms; | |
| ● | our ability to fully remediate our identified internal control material weaknesses; | |
| ● | our ability to comply with regulatory requirements relating to our business and the costs of compliance with those requirements; | |
| ● | the specific risk factors discussed under the heading “Risk Factors” set forth in this Annual Report; and | |
| ● | various other matters, many of which are beyond our control. |
| 4 |
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-K to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the ordinary course of our public disclosure practices. Additionally, the discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Form 10-Q.
Business Overview
Bubblr, Inc., d/b/a Ethical Web AI is an artificial intelligence (“AI”) company that has patent-protected (granted and pending) intellectual properties.
The Company stands at the forefront of a technological revolution committed to remedying the fragmented landscape of the current Internet through its advanced, ethically focused artificial intelligence software platforms.
Our Company embodies integrity and innovation in technology. We aspire to mend the dysfunctional aspects of online experiences while promoting digital wellness and ethical engagement.
Mission
At Ethical Web AI we are dedicated to fostering a new era of the internet rooted in the principles of ethical engagement, consumer privacy, and communal prosperity.
We endeavor to decentralize profits and authority, channeling control back into the hands of consumers who engage with our technology. This approach will disrupt traditional power structures in the digital economy, dismantling monopolistic barriers and facilitating an environment where businesses, irrespective of scale, can compete fairly and collectively thrive.
Products
Our product ecosystem, at the heart of our value proposition, features two trailblazing solutions poised to redefine user interaction within the digital realm:
Ethical Web
Ethical Web is our main product. It is the technical manifestation of our first granted patent, US Patent No. 10977387, entitled “Internet Search Mechanism.” It is a transformative technology that will profoundly change the internet.
Very high-precision searches are executed through anonymous super apps. These high-precision queries include every attribute of the product or service being searched for, as well as geographical data and availability information.
A profoundly different aspect of this new search method is that searches can persist and that search results can be delivered sometime in the future as they become available. This ability to persist in a search provides a new concierge search capability.
Consumers can build and use their super apps as follows:
| ● | Consumers retain complete control of their anonymity. They can chat with a potential supplier without giving up any personal information. This aspect alone profoundly changes the way suppliers must treat potential customers. | |
| ● | There is no registration process, no identity (email or mobile number) to give up, and no behavioral tracking data recorded. It is an entirely safe and secure environment. | |
| ● | There are no advertisements. | |
| ● | Consumers pay a monthly subscription fee rather than a 30% charge on every item they sell. | |
| ● | Owners decide what the apps look like, what prices to charge, and collect the revenue. It is a uniquely decentralized offer. |
The AI Seek App
AI models have shown certain limitations in adaptability, cost-effectiveness, and data contemporaneity. AI Seek, leveraging its strategic intellectual property assets, is a state-of-the-art generative AI app crafted to transcend these limitations and offer a superior, consumer-friendly alternative.
AI Seek, built on the foundations of our proprietary patents, presents a significant upgrade over existing technologies. Our version stands out not only in terms of enhanced performance but also in its cost structure, making it more affordable.
Upholding our commitment to user privacy, AI Seek operates with complete consumer anonymity. This commitment is reflected in its no-registration process, absence of cookies, and a staunch policy against behavioral data tracking, setting a new standard for user privacy in the AI space.
| 5 |
Another groundbreaking feature of AI Seek is that each prompt query result is delivered on a unique web page that includes dynamically generated hypertext links. These hypertext links may include multimedia such as videos and images and text links to other salient web pages, making it a far superior research tool.
Though in its infancy, AI Seek has already begun to generate revenue with a small, dedicated user base of individuals. These early adopters’ continuous engagement and constructive feedback have been instrumental in refining the app’s functionalities.
Conclusion
These community super apps are set to redefine internet search and e-commerce, areas that have seen little fundamental change in the past quarter-century. One of the platform’s innovative features is the “concierge search,” where users can anonymously leave requests for goods or services that are not immediately available, enabling future transaction fulfillment.
Furthermore, Ethical Web AI takes user privacy and control seriously. Our platform ensures user anonymity and places consumers in complete control of communication channels, transforming the way they interact with online marketplaces.
Competition
We compete with several large companies that include AI in their suite of product offerings. The AI industry also has numerous smaller companies that compete in the AI space without owning any protected intellectual property and that rely heavily, if not totally, on access to or linkage to third-party search engines and AI.
We face competition from companies with much more significant capital resources than us, and as a result, we could struggle to attract users and gain market share. Many of our competitors have greater brand name recognition and may be better positioned to adapt to changes in the industry or the economy as a whole. We will strive to advance our technology in each of these sectors ahead of our competitors to gain market share.
We also face intense competition in employing qualified employees. Our ability to continue to compete effectively will depend upon our ability to attract, retain, motivate, and compensate new employees. W
Our competitors may announce new products, services, or enhancements that better address changing industry standards or users’ needs, such as mobile access or a different market focus. Any such increased competition could cause pricing pressure, loss of business, or decreased user activity, any of which could adversely affect our business and operating results.
We believe that our competitive strengths and protection via our IP are defensible under the umbrella protection of our patents.
Intellectual Property
We have created a new search mechanism, “AN INTERNET-BASED SEARCH MECHANISM,” which has been granted a patent in South Africa (2016/06947), New Zealand (725014), the United States of America (‘Utility Patent No. US 10977387), Canada (2962520), and we have patents pending on the same processes in Australia (2015248619), the European Union (15723990.6) and the United Kingdom (PCT/GB2015/051130), creating an alternative economic ecosystem to tackle the current broken model and better serve all main participant groups. This utility patent defines a profoundly unique way for internet users to search the internet for goods or services rather than text-based search engine solutions. The technical manifestation of this utility patent is the Ethical Web ATI Open-Source Platform.
We have filed a sister patent that is specifically for searching for information rather than goods or services. US Patent Application No. 17/980298 was filed in the USA in November 2022. It is titled “Contextual enveloping via dynamically generated hypertext links.” This utility patent defines a radically unique way for consumers to search for information only, which again is fundamentally different from traditional search engines. The technical manifestation of this patent is the AI Seek AI LLM (Large Language Model), as it works exceptionally well with AI LLMs such as Chat GPT 4 and Claude 2.
| 6 |
We have also recently filed another patent with the U.S. Patent Office (application number 18/376,101), which currently has a generic title of “computer-implemented method and system.” Again, this utility patent resolves a significant issue with existing foundation AI LLM, such as Chat GPT and Claude 2, whereby they cannot provide information that needs contemporaneous data. This is because the established AI LLMs have a training data database that was limited to some point in the past. For example, Chat GPT’s training data only goes up to September 2021. Claude 2 will be updating their training data to January 2023. This utility patent uses an internally trained AI LLM that identifies those search prompts that require contemporaneous data (for example, stock prices and sports data) and augments the prompt with the necessary contemporaneous data to radically improve AI LLM’s output to include references to the required contemporaneous data. The technical manifestation of this patent is delivered in version 4 and beyond of our AI Seek consumer app.
Government Regulation
We are subject to many foreign and domestic laws and regulations that affect companies conducting business online, many of which are evolving and could be interpreted in ways that could harm our business. In the United States and abroad, laws and regulations relating to the liability of providers of online services for activities of their users and other third parties are being tested by many claims, including actions based on invasion of privacy and other torts, unfair competition, copyright, and trademark infringement, and other theories based on the nature and content of the materials searched, or the content provided by users. Further, some countries impose regulations regarding or require licenses to conduct various aspects of our business, including employee recruiting and news-related services. Any court ruling or other governmental action that imposes liability on providers of online services for the activities of their users or other third parties could harm our business. In addition, rising concern about the use of social networking technologies for illegal conduct, such as the unauthorized dissemination of national security information, money laundering, or supporting terrorist activities, may in the future produce legislation or other governmental action that could require changes to our website platform, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our platform.
In the area of information security and data protection, we are committed to upholding the highest standards. Most states have enacted laws and regulations requiring notification to users when there is a security breach of personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to implement practically. The costs of compliance with these laws and regulations may increase in the future due to amendments or changes in interpretation. However, our commitment to data protection remains unwavering. Furthermore, any failure on our part to comply with these laws and regulations may subject us to significant liabilities, which we are actively working to avoid.
We are also subject to federal, state, and foreign laws and regulations regarding data privacy and protection. Our privacy policies describe our practices concerning using, storing, transmitting, and disclosing personal information, including visitor and user data. Any failure by us to comply with these terms or privacy-related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of privacy and data protection laws and regulations and their application to online services are unclear, evolving, and in a state of flux. For example, in October 2015, the highest court in the European Union invalidated reliance on the US-EU Safe Harbor regime as one of the legally recognized mechanisms under which the personal data of European citizens could be transferred to the United States. There is a risk that these laws and regulations may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and a manner inconsistent with our current data protection practices or that new laws or regulations will be enacted. In addition, because our platform will be accessible worldwide, certain foreign governments may claim that we are required to comply with their laws and regulations, including with respect to the storage, use, and disclosure of user information, even in jurisdictions where we have no local entity, employees, or infrastructure. Complying with these varying domestic and international requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our users’ privacy and data could result in a loss of user confidence in our services and, ultimately, in a loss of users, which could adversely affect our business.
Employees
As of November 14, 2024, we have four full-time employees, not represented by any labor union.
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Legal Proceedings
From time to time, we may become parties to various lawsuits, claims, and other legal proceedings arising in our business’s ordinary course. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition, or results of operation if determined adversely to us.
Smaller Reporting Company
The Company is a “smaller reporting company” defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company,” these exemptions will remain available.
Implications of Being an Emerging Growth Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act).
As an emerging growth company, we may take advantage of reduced or “scaled” disclosure requirements that otherwise apply to public companies. These reduced or scaled disclosure requirements include, but are not limited to:
| 1. | being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report; | |
| 2. | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; | |
| 3. | being able to take advantage of the reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements, and registration statements, and | |
| 4. | being exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We elected to take advantage of certain of the reduced disclosure obligations in this Annual Report and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information we provide to our stockholders may be different from what you might receive from other public reporting companies that are not emerging growth companies.
The JOBS Act also provides that an emerging growth company may take advantage of an extended transition period to comply with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Compliance after Termination of Emerging Growth Company Status
After our emerging growth company status is terminated, we cannot take advantage of the reduced or scaled disclosure requirements described in subparagraphs 1. and 4., above. However, in the event we are a “smaller reporting company,” as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended after our emerging growth company status has terminated, we will still be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 2. and 3., above, for as long as we continue to have smaller reporting company status.
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Available Information
We make available, free of charge, on or through our website, at www.ethicalweb.ai, our Annual Report on Form 10-K, which includes our audited financial statements, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC maintains a website that contains these reports and other information at www.sec.gov. Our website and the information contained therein or connected to it are not intended to be and are not incorporated into this Annual Report on Form 10-K.
Results of Operation
| Three Months Ended September 30, | Changes | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| Revenue | ||||||||||||||||
| Net sales | $ | 1,415 | $ | 1,151 | $ | 1,168 | 22.9 | % | ||||||||
| Cost of sales | 140 | - | 140 | n/a | ||||||||||||
| Gross profit | 1,275 | 1,151 | 124 | 10.8 | % | |||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 313,869 | 1,016,034 | (702,165 | ) | -69.1 | % | ||||||||||
| Professional fees | 18,228 | 13,878 | 4,350 | 31.3 | % | |||||||||||
| Sales and marketing | 26,721 | 93,125 | (66,404 | ) | 3 | % | ||||||||||
| Amortization and depreciation | 59,238 | 54,331 | 4,907 | 9.0 | % | |||||||||||
| Research and development | 53,886 | 59,889 | (6,003 | ) | -10.0 | % | ||||||||||
| Total operating expense | 471,942 | 1,237,257 | (765,315 | ) | -61.9 | % | ||||||||||
| Operating loss | (470,667 | ) | (1,236,106 | ) | 765,439 | -61.9 | % | |||||||||
| Other income (expense) | ||||||||||||||||
| Other income | 135 | 29 | 106 | 365.5 | % | |||||||||||
| Interest expense | (77 | ) | (7,704 | ) | 7,627 | -99.0 | % | |||||||||
| Disposal of fixed assets | (89 | ) | - | (89 | ) | n/a | ||||||||||
| Gain (loss) on change in fair value of warrant derivative liability | (26,226 | ) | 117,515 | (143,741 | ) | -122.3 | % | |||||||||
| Foreign currency transaction (loss) gain | 86 | (44,667 | ) | 44,753 | -100.2 | % | ||||||||||
| Total other income (expense) | (26,171 | ) | 65,173 | (91,344 | ) | -140.2 | % | |||||||||
| Net loss before income tax | (496,838 | ) | (1,170,933 | ) | 674,095 | -57.6 | % | |||||||||
| Provision for income tax | - | - | - | 0.0 | % | |||||||||||
| Net loss after income tax | $ | (496,838 | ) | $ | (1,170,933 | ) | $ | 674,095 | -57.6 | % | ||||||
Three months ended September 30, 2024, compared to three months ended September 30, 2023
Revenues: We received our first revenues from operations in July 2023. We will not achieve higher revenues unless we further develop, market, support, and deliver our products and service offerings. Despite our efforts, we cannot guarantee that we will achieve significant revenues.
General and Administrative—General and administrative expenses consist mainly of compensation and costs associated with non-specific business costs. These include office costs, computer software, and telecoms. The decrease is primarily due to granting stock options to long-serving executives and new executives in 2023.
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Professional Fees – Professional fees consist of costs related to legal, accounting, and consulting services. The increase in professional fees was primarily due to expenses to re-audit 2023.
Sales and Marketing – Sales and marketing costs are explicitly incurred in relation to fees and expenses for investor relations, advertising, marketing, press releases, and public relations. The decrease in activity in 2004 was due the lack of revenue and funding in 2024.
Amortization and depreciation – A sizable portion of the amortization and depreciation costs are related to the amortization of patents and intellectual property held in the UK subsidiary Bubblr Ltd.
Research and Development – Costs incurred in developing the Company’s platform include those associated with salaries and benefits for development staff, external contractors, and specialist software for product development.
Other Income (expense) – The majority of other income and expense is the gain (loss) on the change in fair value of warrant derivative liability and foreign currency translation gains (loss).
Gain (loss) on change in fair value of warrant derivative liability – The Company analyzed the warrants issued concerning the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense items.
The average exercise price for warrants determined at issue is $0.32 per share. If the warrants were exercised on September 30, 2024, the Company would realize a gain due to the difference between the cash received on conversion and the issue cost to the Company of $0.035 per share, the fair value market price of the common stock on September 30, 2024.
Foreign currency translation gain (loss): Gains and losses in foreign currency translation are due to fluctuations in the U.S. dollar and British pound sterling exchange rates.
Net Loss after income tax – The net loss after income tax was $533,475 and $1,170,933 for the three months ended September 30, 2024, and 2023, respectively.
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Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
| Nine Months Ended September 30, | Changes | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| Revenue | ||||||||||||||||
| Net sales | $ | 4,087 | $ | 1,151 | $ | 2,672 | ||||||||||
| Cost of sales | 1,151 | - | 1,011 | n/a | ||||||||||||
| Gross profit | 2,936 | 1,151 | 1,661 | n/a | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 945,538 | 2,211,310 | (1,265,772 | ) | -57.2 | % | ||||||||||
| Professional fees | 71,281 | 178,612 | (107,331 | ) | -60.1 | % | ||||||||||
| Sales and marketing | 38,666 | 511,141 | (472,475 | ) | -92.4 | % | ||||||||||
| Amortization and depreciation | 420,372 | 176,840 | 243,532 | 137.7 | % | |||||||||||
| Research and development | 151,524 | 151,160 | 364 | 0.2 | % | |||||||||||
| Total operating expense | 1,664,018 | 3,229,063 | (1,603,682 | ) | -42.0 | % | ||||||||||
| Operating loss | (1,661,082 | ) | (1,991,806 | ) | 1,603,467 | -49.7 | % | |||||||||
| Other income (expense) | ||||||||||||||||
| Other income | 14,182 | 142 | 14,040 | 9887.3 | % | |||||||||||
| Interest expense | (6,196 | ) | (9,450 | ) | 3,254 | -34.4 | % | |||||||||
| Disposal of fixed assets | (9,420 | ) | - | (9,420 | ) | n/a | ||||||||||
| Gain (loss) on change in fair value of warrant derivative liability | (6,425 | ) | 114,984 | ) | (121,409 | ) | -105.6 | % | ||||||||
| Foreign currency transaction (loss) gain | 98 | (6,250 | ) | 6,348 | -101.6 | % | ||||||||||
| Total other income (expense) | (7,761 | ) | 99,426 | (107,187 | ) | -107.8 | % | |||||||||
| Net loss before income tax | (1,668,843 | ) | (3,128,486 | ) | 1,496,280 | -47.8 | % | |||||||||
| Provision for income tax | - | - | - | 0.0 | % | |||||||||||
| Net loss after income tax | $ | (1,668,843 | ) | $ | (3,128,486 | ) | $ | 1,496,280 | -47.8 | % | ||||||
Revenues – We started to achieve revenue from operations in July 2023. We will not achieve higher revenues unless we develop, market, support, and deliver our products and service offerings. Despite our efforts, we cannot guarantee that we will achieve significant revenues.
General and Administrative – General and administrative expenses consist mainly of compensation and costs associated with non-specific business costs. These include, but are not limited to, office costs, computer software, and telecoms. The decrease is primarily due to granting stock options to long-serving executives and new executives in 2023, offset by accrued compensation and director fees for new executives hired in the second quarter of 2023.
Professional Fees – Professional fees consist of costs related to legal, accounting, and consulting. The decrease in professional fees was primarily due to lower legal fees in 2024, offset by expenses to reaudit the 2023 financial statements.
Sales and Marketing – Sales and marketing costs are explicitly incurred in relation to fees and expenses for investor relations, advertising, marketing, press releases, and public relations. The significant decrease in activity was due to a reduction in funding in 2024.
Amortization and depreciation – A sizable portion of the amortization and depreciation costs are related to the amortization of patents and intellectual property held in the UK subsidiary Bubblr Ltd. The increase in 2024 is due to an adjustment to the accumulated amortization of intellectual property.
Research and Development – Costs incurred in developing the Company’s platform include those associated with development staff and specialist software for product development.
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Other Income (expense) – The majority of other income and expense is the gain (loss) on the change in fair value of warrant derivative liability and foreign currency translation gains (loss).
Gain (loss) on change in fair value of warrant derivative liability – The Company analyzed the warrants issued concerning the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense items.
The average exercise price for warrants determined at issue is $0.32 per share. If the warrants were exercised on September 30, 2024, the Company would realize a gain due to the difference between the cash received on conversion and the issue cost to the Company of $0.035 per share, the fair value market price of the common stock on September 30, 2024.
Foreign currency translation gain (loss) – The gains and losses in foreign currency translation are due to fluctuations in the U.S. dollar and British pound sterling exchange rates.
Net Loss after income tax – The net loss after income tax was $1,632,206 and $3,128,486 for the nine months ended September 30, 2024, and 2023, respectively.
Liquidity and Capital Resources
The following table provides selected financial data about our Company:
| September 30, 2024 | December 31, 2023 | Change | % | |||||||||||||
| Current Assets | $ | 5,843 | $ | 95,171 | $ | (89,328 | ) | 94 | % | |||||||
| Current Liabilities | 2,015,122 | 1,487,471 | 527,651 | 35 | % | |||||||||||
| Working Capital Deficit | $ | (2,009,279 | ) | (1,392,300 | ) | $ | (616,979 | ) | 44 | % | ||||||
Current Assets
Current assets consist of cash and other receivables. The decrease in current assets in 2024 was primarily due to the cash receipt of an R&D Credit in 2024.
Current Liabilities
Current Liabilities consist of accounts payable, accrued liabilities, and loans.
The $527,651 increase in current liabilities was primarily due to increases in accrued director fees, dividends payable, and salaries, offset by a decrease in the current portion of related party loans.
Working Capital Deficit
The working capital deficit increased by $616,979 in the nine months ending on September 30, 2024.
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Liquidity
During the last two years and through the date of this Report, we have faced an increasingly challenging liquidity situation that has limited our ability to execute our operating plan. We will need to obtain capital to continue operations, but there is no assurance that we can secure such funding on acceptable terms.
As no significant revenues are generated from our current operations, we will require additional debt or capital to continue operating and expanding our business. Sources of additional financing or arrangements with third parties may include equity or debt financing, bank loans, related-party loans, or revolving credit facilities. We may not successfully locate suitable financing transactions in the required period, and we may not obtain the capital we require by other means. Unless we can attract additional investment, our operating as a going concern is in doubt.
We voluntarily file annual, quarterly, and current reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board (“PCAOB”) have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costly. We will need capital investment to comply with the Exchange Act requirements.
If we cannot obtain sufficient additional capital, we may have to cease filing our SEC reports and operations altogether. Suppose we get additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations. In that case, the percentage ownership of our stockholders will be reduced, and stockholders may experience additional dilution. Equity securities may have rights, preferences, or privileges that are senior to common stock.
Cash Flow
Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Cash used in Operating activities | $ | (214,009 | ) | $ | (412,603 | ) | $ | (82,997 | ) | (129,016 | ) | |||||
| Cash used in Investing Activities | (13,972 | ) | (21,935 | ) | (2,065 | ) | (9,096 | ) | ||||||||
| Cash provided by Financing Activities | 221,410 | 382,970 | 85,088 | 81,159 | ||||||||||||
| Cash on Hand | $ | 717 | $ | 1,660 | $ | 717 | $ | 1,660 | ||||||||
Operating Activities
The decrease in net cash used in operating activities was primarily due to increased accrued liabilities.
Investing Activities
Net cash used in investing activities was on Patents and Trademarks.
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Financing Activities
The increase in net cash provided by financing activities was due to an increase in related party loans.
Cash on Hand
The Company is currently exploring future fundraising options, including equity, debt, the sale of/or the licensing of the Company’s Patent(s) and IP, with a holdback of the Company’s rights to use the IP to secure funding for operations. If we cannot secure additional financing, the implementation of our business plan will be impaired. There can be no assurance that such additional funding will be available to us on acceptable terms or at all.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe our most critical accounting policies and estimates relate to the following:
| ● | Foreign Currency Translations | |
| ● | Intangible Assets | |
| ● | Long-lived Assets | |
| ● | Income Taxes | |
| ● | Stock-based Compensation | |
| ● | Common Stock Purchase Warrants and Derivative Financial Instruments | |
| ● | Convertible Financial Instruments | |
| ● | Fair Value of Financial Instruments |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British Pounds (GBP). Local currency assets and liabilities are translated at the exchange rates on the balance sheet date, and local currency revenues and expenses are translated at weighted average exchange rates during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed straight-line over the estimated periods benefited. Patents, technology, and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.
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Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on comparing the undiscounted future cash flows to the recorded value of the asset. The asset is written down to its estimated fair value if an impairment is indicated.
Income Taxes
The Company accounts for income taxes using the asset and liability method per ASC 740, “Income Taxes.” The asset and liability method provides that deferred tax bases of assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if specific criteria are met. These criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed conventional, as that term is described under applicable U.S. GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments per ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Stock-Based Compensation
The Company accounts for stock-based compensation per ASC Topic 718 Compensation-Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenses in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Stock Options awarded as compensation per the Company’s 2022 Equity Incentive Plan are deemed unissued until vested. Stock Option compensation is recognized as an expense over the vesting period. Awards forfeited due to unfulfillment of obligations, such as termination of employment before the award is fully vested, for no cash or other consideration, are not recognized as an expense, and any previously recognized costs are reversed in the period of forfeiture.
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
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Recent Accounting Pronouncements
For discussion of recently issued and adopted accounting pronouncements, please see Note 2 to the unaudited consolidated financial statements as of and for the nine-months ended September 30, 2024, and 2023, included herein.
Off-Balance Sheet Arrangements
As of September 30, 2024, there were no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. However, our chief executive officer and our chief financial officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period being reported by this Form 10-Q and have concluded that we have material weaknesses and significant deficiencies in our internal control over financial reporting as described below. Accordingly, our disclosure controls and procedures were not effective or sufficient to accomplish their objectives at the reasonable assurance level as of September 30, 2024.
Management’s Report of Internal Control over Financial Reporting
Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. An evaluation was performed of the effectiveness of our internal control over financial reporting. The evaluation was based on the framework in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any effectiveness evaluation in future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
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Based on our evaluation under the criteria outlined in the 2013 Internal Control-Integrated Framework, our management concluded that as of September 30, 2024, our internal control over financial reporting was not effective because of the identification of material weaknesses described as follows:
| ● | We did not have controls to validate the completeness and accuracy of underlying data used to determine accounting transactions. Accordingly, we have a material weakness because there is a reasonable possibility that a material misstatement to the interim or annual consolidated financial statements would not be prevented or detected on a timely basis. | |
| ● | We have limited written documentation of our internal control policies and procedures. Section 404 of the Sarbanes-Oxley Act, which applies to us, requires written documentation of key internal controls over financial reporting. Management evaluated the impact of our failure to have written documentation on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. | |
| ● | We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the greatest extent possible, separate individuals should initiate transactions and record transactions. Management evaluated the impact of our failure to segregate duties on our disclosure controls and procedures assessment and concluded that the control deficiency that resulted represented a material weakness. | |
| ● | We have insufficient personnel with the requisite expertise in the key functional areas of finance and accounting. | |
| ● | We do not have a functioning audit committee, compensation committee, or an outside independent director on our board of directors. This results in ineffective oversight in establishing and monitoring required internal controls and procedures. |
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our Management is committed to improving its internal controls when we have adequate resources. We will appoint independent directors and establish an audit committee and compensation committee. Due to these material weaknesses, misstatements that could be material to the annual or interim consolidated financial statements could occur that would not be prevented or detected during our financial close and reporting process.
Our Company plans to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have been unable to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes: (1) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management, and (2) adopt sufficient written policies and procedures for accounting and financial reporting, and (#) appoint an audit committee. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. Remediation efforts may be materially affected if we do not secure such funds.
Changes in Internal Control over Financial Reporting
In the nine months ended September 30, 2024, there were no material changes in our internal control over financial reporting that materially affected or are reasonably likely to affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceedings and are unaware of any pending legal proceeding in which any of our officers, directors, or beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 1A: Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.
In the nine months ended September 30, 2024, the Company did not issue unregistered securities:
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
See Exhibit Index below for exhibits required by Item 601 of Regulation S-K.
| Exhibit Number | Description of Exhibit | |
| 31.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101** | The following materials are from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Extensible Business Reporting Language (XBRL). | |
| **Provided herewith |
| 18 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BUBBLR, INC. | |
| Date: November 14, 2024 | /s/ Manfred Ebensberger |
| Manfred Ebensberger | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 14, 2024 | /s/ David Chetwood |
| David Chetwood | |
Chief Financial Officer (Principal Accounting and Financial Officer) |
| 19 |