Mobivity Holdings Corp.

11/26/2024 | Press release | Distributed by Public on 11/26/2024 10:52

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2024

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

For the transition period from ___________ to __________

Commission file number 000-53851

Mobivity Holdings Corp.

(Exact Name of Registrant as Specified in Its Charter)

Nevada 26-3439095
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)

3133 West Frye Road, # 215

Chandler, Arizona 85226

(Address of Principal Executive Offices)

(877) 282-7660

(Registrant's Telephone Number, including Area Code)

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

Title of each class Trading symbol(s) Name of each exchange on which registered
None None None

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

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

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

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

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

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

As of November 25, 2024, the registrant had 70,466,103shares of common stock, par value $0.001per share, issued and outstanding.

MOBIVITY HOLDINGS CORP.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations and Comprehensive Loss 2
Condensed Consolidated Statement of Stockholders' Deficit 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 25
Item 4. Controls and Procedures. 25
PART II - OTHER INFORMATION 26
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Mine Safety Disclosures 26
Item 5. Other Information 26
Item 6. Exhibits 27
SIGNATURES 28
Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Mobivity Holdings Corp.

Condensed Consolidated Balance Sheets

September 30, December 31,
2024 2023
(Unaudited) (Audited)
ASSETS
Current assets
Cash $ 532,450 $ 416,395
Accounts receivable, net of allowance for doubtful accounts $35,909and $16,107, respectively

116,748

29,904

Current assets from discontinued operations 450,517 846,561
Other current assets 267,849 135,916
Total current assets 1,367,564 1,428,776
Right to use lease assets 600,624 770,623
Intangible assets and software development costs, net 57,589 65,916
Other assets 42,349 69,036
TOTAL ASSETS $ 2,068,126 $ 2,334,351
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $

586,155

$

115,053

Liabilities from discontinued operations

2,261,892 3,257,088
Accrued interest 329,742 21,474
Accrued and deferred personnel compensation 288,064 272,247
Deferred revenue and customer deposits 20,684 155,472
Related party notes payable, net - current maturities 3,840,625 3,072,500
Notes payable, net - current maturities - 7,154
Operating lease liability, current 295,486 276,072
Other current liabilities 468,125 248,434
Total current liabilities 8,090,773 7,425,494
Non-current liabilities
Related party notes payable, net - long term 8,000,858 4,413,987
Notes payable, net - long term 224,836 265,959
Operating lease liability 436,278 660,852
Total non-current liabilities 8,661,972 5,340,798
Total liabilities 16,752,745 12,766,292
Stockholders' deficit
Common stock, $0.001par value; 100,000,000shares authorized; 70,466,103and 67,949,709, shares issued and outstanding 70,464 67,950
Equity payable 336,420 989,947
Additional paid-in capital 122,035,163 118,624,601
Accumulated other comprehensive loss 62,856 (153,831 )
Accumulated deficit (137,189,522 ) (129,960,608 )
Total stockholders' deficit (14,684,619 ) (10,431,941 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,068,126 $ 2,334,351

See accompanying notes to consolidated financial statements.

1
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Mobivity Holdings Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Revenues
Revenues $ 226,208 $ 50,180 $ 900,008 $ 183,413
Cost of revenues 120,125 35,671 $ 541,161 122,782
Gross profit 106,083 14,509 358,847 60,631
Operating expenses
Bad Debt Expense (7,575 ) - 14,849 -
General and administrative 229,968 1,352,383 542,990 2,250,757
Sales and marketing 197,713 132,518 541,762 310,323
Engineering, research, and development 323,752 79,875 840,207 196,376
Depreciation and amortization 612 1,038 2,812 4,022
Total operating expenses 744,470 1,565,814 1,942,620 2,761,478
Loss from operations (638,387 ) (1,551,305 ) (1,583,773 ) (2,700,847 )
Other income/(expense)
Loss of settlement of debt (6,514 ) - (7,699 ) (370 )
Interest expense (529,841 ) (237,376 ) (1,429,977 ) (720,265 )
Settlement Losses - (399 ) - (870 )
Foreign currency gain - (3 ) (7 ) (13 )
Total other income/(expense) (536,355 ) (237,778 ) (1,437,683 ) (721,518 )
Loss before income taxes (1,174,742 ) (1,789,083 ) (3,021,456 ) (3,422,365 )
Income tax expense - - - -
Net loss from continuing operations

(1,174,742

)

(1,789,083

)

(3,021,456

)

(3,422,365

)
Loss from discontinued operations

(1,283,810

) (1,989,189 ) (4,207,458 ) (5,106,164 )
Net Loss (2,458,552 ) (3,778,272 ) (7,228,914 ) (8,528,529 )
Other comprehensive loss, net of income tax
Foreign currency translation adjustments 1,358 91,825 216,687 123,190
Comprehensive loss $ (1,173,384 ) $ (1,697,258 ) $ (2,804,769 ) $ (3,299,175 )
Basic and Diluted $ (0.03 ) $ (0.06 ) $ (0.10 ) $ (0.13 )
Weighted average number of shares:
Basic and Diluted 70,482,976 66,785,952 69,719,515 64,878,021

See accompanying notes to consolidated financial statements (unaudited).

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Mobivity Holdings Corp.

Condensed Consolidated Statement of Stockholders' Deficit

(Unaudited)

Common Stock Equity Additional Paid-in Accumulated Other Comprehensive Accumulated

Total

Stockholders' Equity

Shares Dollars Payable Capital Loss Deficit (Deficit)
Balance, December 31, 2022 61,311,155 $ 61,311 $ 324,799 $ 108,806,353 $ (100,963 ) $ (117,896,409 ) $ (8,804,909 )
Issuance of common stock for warrant exercise 3,587,487 3,587 - 3,583,900 - - 3,587,487
Issuance of common stock for settlement of interest payable on related party debt 163,757 164 (7,713 ) 223,773 - - 216,224
RSU's issued - termination of director's service 545,012 545 (545 ) -
Stock based compensation - - - 810,157 - - 810,157
Foreign currency translation adjustment - - - - 31,502 - 31,502
Net loss - - - - - (2,478,175 ) (2,478,175 )
Balance, March 31, 2023 65,607,411 $ 65,607 $ 317,086 $ 113,423,638 $ (69,461 ) $ (120,374,584 ) $ (6,637,714 )
Issuance of common stock for PIPE financing - - - - - - -
Fair market value of options issued with related party debt 190,156 191 (9,768 ) 216,033 - - 206,456
Stock based compensation - - - 228,577 - - $ 228,577
Foreign currency translation adjustment - - - - (137 ) - (137 )
Net loss - - - - - (2,272,082 ) (2,272,082 )
Balance, June 30, 2023 65,797,567 65,798 307,318 113,868,248 (69,598 ) (122,646,666 ) (8,474,900 )
Issuance of common stock for warrant exercise 1,960,976 1,961 - 1,606,039 - - 1,608,000
Fair market value of options issued with related party debt - - - 28,463 - - 28,463
Issuance of common stock for settlement of interest payable on related party debt 191,166 191 (206,456 ) 206,265 - - -
Stock based compensation - - - 1,429,341 - - $ 1,429,341
Foreign currency translation adjustment - - - - 91,825 - 91,825
Net loss - - - - - (3,778,272 ) (3,778,272 )
Balance, September 30, 2023 67,949,709 $ 67,950 $ 100,862 $ 117,138,356 $ 22,227 $ (126,424,938 ) $ (9,095,543 )
Common Stock Equity Additional Paid-in Accumulated Other Comprehensive Accumulated

Total

Stockholders' Equity

Shares Dollars Payable Capital Loss Deficit (Deficit)
Balance, December 31, 2023 67,949,709 $ 67,950 $ 989,947 $ 118,624,601 $ (153,831 ) $ (129,960,608 ) $ (10,431,941 )
Fair value of options issued with related party debt - - 466,594 - - 466,594
Stock based compensation - Employees - - - 112,660 - - 112,660
Stock Based Compensation - Directors 81,250 - - 81,250
Foreign currency translation adjustment - - - - 217,929 - 217,929
Net loss - - - - - $ (2,254,242 ) (2,254,242 )
Balance, March 31, 2024 67,949,709 $ 67,950 $ 989,947 $ 119,285,105 $ 64,098 $ (132,214,850 ) $ (11,807,750 )
Fair value of options issued with related party debt - - 619,191 - - 619,191
Issuance of common stock for settlement of interest payable on related party debt - - 465,996 - - 465,996
Stock based compensation - Employees - - - 131,414 - - 131,414
Stock based compensation -Directors 81,249 81,249
Foreign currency translation adjustment - - - - (2,600 ) - (2,600 )
Net loss - - - - - $ (2,516,120 ) (2,516,120 )
Balance, June 30, 2024 67,949,709 $ 67,950 $ 1,455,943 $ 120,116,959 $ 61,498 $ (134,730,970 ) $ (13,028,620 )
Issuance of common stock for settlement of interest payable on related party debt 2,516,394 2,514 (1,355,081 ) 1,389,977 - - 37,410
Interest Payable on related party debt recorded to equity payable 235,558 235,558
Fair market value of options issued with related party debt - - - 298,188 - - 298,188
Stock based compensation - Employees - - - 148,789 - - 148,789
Stock Based Compensation - Directors 81,250 81,250
Foreign currency translation adjustment - - - - 1,358 - 1,358
Net loss - - - - - $ (2,458,552 ) (2,458,552 )
Balance, September 30, 2024 70,466,103 70,464 336,420 122,035,163 62,856 (137,189,522 ) (14,684,619 )

See accompanying notes to consolidated financial statements (unaudited).

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Mobivity Holdings Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended
September 30,
2024 2023
OPERATING ACTIVITIES
Net Loss $ (7,228,914 ) $ (8,528,529 )
Net loss from discontinued operations

4,207,458

5,106,164

Adjustments to reconcile net loss to net cash used in operating activities:
Loss on Settlement of Debt - related party

37,410

10,857
Bad debt expense 14,849 -
Stock-based compensation

636,612

Loss on disposal of fixed assets - -
Intangible Asset Impairment - -
Depreciation and amortization expense 48,341 162,209
Amortization of Debt Discount 372,847 89,349
Increase (decrease) in cash resulting from changes in:
Accounts receivable (101,693 ) 683,060
Other current assets - 9,634
Other assets - (13,250 )
Accounts payable 471,102 104,093
Prepaid Expenses (131,933 ) (46,231 )
Accrued interest 1,009,822 621,806
Accrued and deferred personnel compensation 15,939 (457,687 )
Other liabilities - current 219,691 (34,036 )
Lease Operating Assets (35,161 ) (30,155 )
Deferred revenue and customer deposits

(134,788

) (684,175 )
Net Cash Used in Operating Activities of continuing operations

(598,418

)

(3,006,891

)
Net Cash Used in Operating Activities of discontinuing operations

(4,806,610

)

(2,638,089

)
Net cash used in operating activities $ (5,405,028 ) $ (5,644,980 )
INVESTING ACTIVITIES
Cash paid for patent activities (8,768 ) (6,300 )
Purchases of equipment (4,559 ) (18,252 )
Net cash used in investing activities (13,327 ) (24,552 )
FINANCING ACTIVITIES
Payments on notes payable (7,035 ) (20,004 )
Proceeds from Related Party Debt 5,325,000 400,000
Proceeds from conversion of common stock warrants

-

5,195,487
Net cash provided by (used in) financing activities 5,317,965 5,575,483
Effect of foreign currency translation on cash flow 216,445 125,243
Net Change in cash 116,055 31,194
Cash at beginning of period $ 416,395 $ 426,740
Cash at end of period 532,450 457,934
Supplemental disclosures
Interest paid $

11,571

$

9,110

Non-cash investing and financing activities:

Fair Value of Options issued with related party debt $ 1,389,673 $ 28,463
Shares Issued for settlement of debt - 411,823
Shares issued for settlement of debt - related party 701,554 223,937
Par Value of RSU's issued - termination of director's service $ - $ 545

See accompanying notes to consolidated financial statements.

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Mobivity Holdings Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations and Basis of Presentation

Mobivity Holdings Corp. (the "Company" or "us", "our", or "we") is a Nevada corporation organized in 2008, which develops and operates proprietary platforms over which brick and mortar brands and digital first enterprises can conduct national and localized, data-driven marketing campaigns with unique targeting, incentivization and promotion to drive customer acquisition and loyalty. The company's core technology platform, RecurrencyTM, enables:

Transformation of messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence.
Measurement, prediction, and ability to boost guest frequency and spend by channel.
Deployment and management of one-time use offer codes and attribution of sales accurately across every channel, promotion and media program.
Delivery of uniquely attributable 1:1 offers that power incentivized actions in digital environments like user acquisition, continued monetization, and activities taken in a digital environment.

Our recurrency platform generates revenue in two ways. First, delivered as a Software-as-a-Service ("SaaS") platform used by leading convenience and quick service restaurant brands to build and engage with their loyal customers. Second, through our Connected RewardsTM business, our platform enables and powers unique incentivized programs in digital environments. Through our Connected Rewards platform, we enable businesses to reward their users and customers with products in the real world for actions taken in a digital environment. Our customers include some of the largest mobile casual game publishers in the world and some of the largest convenience and quick service restaurant brands in the world. The programs we run for our customers include incentivized user acquisition where users are rewarded with a real-world product, like a free or discounted burger, for downloading a mobile game, and rewarded play where users receive real world products for accomplishing activities in game, like achieving a certain level or winning enough points. We charge our customers for each unique action where our rewards are delivered, these include a per install or per individual engagement fee.

On September 25, 2024, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with SMS Factory, Inc., a Florida corporation ("SMS Factory"). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company's SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company's SMS/MMS text messaging platform business (the "Business Assets") effective as of September 25, 2024 (the "Closing Date"). Given that the effect of the Asset Purchase Agreement meets all the initial criteria of ASC Topic 205-20, Presentation of Financial Statements - Discontinued Operations for the classification of discontinued operations, the assets, liabilities, and operating results of Mobivity Holdings Corp have been classified as discontinued operations as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023. The consolidated financial statements for the prior periods have been adjusted to reflect comparable information.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on April 16, 2024.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year's presentation. The reclassifications did not affect previously reported net losses.

Acquisitions

We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

Cash

We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.

Accounts Receivable, Allowance for Doubtful Accounts and Concentrations

Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.

As of September 30, 2024, and December 31, 2023 we recorded an allowance for doubtful accounts of $35,909and $16,107, respectively.

Goodwill and Intangible Assets

Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.

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We conducted our annual impairment tests of goodwill as of December 31, 2023. As a result of these tests, we had a total impairment charge of $0.

Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one yearto twenty years. No significant residual value is estimated for intangible assets.

The Company's evaluation of its goodwill and intangible assets resulted in noimpairment charges for the nine months ended September 30, 2024 and 2023, respectively.

Software Development Costs

Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board ("FASB") guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or "ASC Subtopic 985-20"). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. The technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered "research and development" that are not capitalized are immediately charged to engineering, research, and development expense.

Capitalized costs for those products that are canceled or abandoned are charged to product development expenses in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to "Amortization Expense - Development" based on the straight-line method over a twenty-four-monthperiod.

The Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company's evaluation of its capitalized software development assets resulted in noimpairment charges for the three months ended September 30, 2024 and 2023, respectively.

Impairment of Long-Lived Assets

We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.

Foreign Currency Translation

The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters ("ASC 830-10"). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders' equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.

Revenue Recognition and Concentrations

Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.

Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASC 606"), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.

We determine revenue recognition under ASC 606 through the following steps:

identification of the contract, or contracts, with a customer;
identification of the performance obligations in the contract;
identification of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
recognition of revenue when, or as, we satisfy a performance obligation.

During the nine months ended September 30, 2024 and 2023, two customers accounted for 52%and 51%of our revenues, respectively.

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Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the three months ended September 30, 2024 and 2023, the comprehensive loss was $1,173,384, and $1,697,258respectively. For the nine months ended September 30, 2024 and 2023, the comprehensive loss was $2,804,769and $3,299,175respectively.

Stock-based Compensation

We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.

Research and Development Expenditures

Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.

Advertising Expense

Direct advertising costs are expensed as incurred and consist primarily of trade shows, sales enablement, content creation, paid engagement and other direct costs. Advertising expense was $151,953and $169,549for the nine months ended September 30, 2024 and 2023, respectively.

Income Taxes

We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.

Net Loss Per Common Share

Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and nine months ended September 30, 2024 and 2023, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock-based compensation, stock options and warrants were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.

Recent Accounting Pronouncements

Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company's future financial statements. The following is a summary of recent accounting developments.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on January 1, 2022.

3. Discontinued Operations

On September 25, 2024, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with SMS Factory, Inc., a Florida corporation ("SMS Factory"). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company's SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company's SMS/MMS text messaging platform business (the "Business Assets") effective as of September 25, 2024 (the "Closing Date").

The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the current assets and liabilities of discontinued operations as presented on the Company's Consolidated Balance Sheets:

As of September 30, 2024 As of December 31,2023
Assets $
Current assets
Accounts receivable $ 450,517 $ 846,561
Total Assets $ 450,517 $ 846,561
Liabilities
Current liabilities
Accounts Payable $ 2,261,892 $ 3,257,088
Total Liabilities $ 2,261,892 $ 3,257,088

The following table provides details about the major classes of line items constituting "Income (loss) from discontinued operations" as presented on the Company's Consolidated Statements of Loss:

Three Months Ended
September 30,
Nine Months Ended
September 30,
2024 2023 2024 2023
Revenues $ 1,072,865 $ 1,582,891 $ 3,473,012 $ 5,192,311
Cost of Revenue 570,704 1,125,209 2,093,161 3,475,879
Gross Profit 502,161 457,682 1,379,851 1,716,432
Operating Expenses
Bad Debt Expense (29,232 ) - 70,428 -
General and administrative 476,788 940,240 1,381,340 2,657,125
Sales and marketing 566,510 575,880 1,837,504 1,692,206
Engineering, research and development 738,649 888,671 2,254,966 2,310,888
Depreciation and amortization 2,360 29,380 13,335 126,880
Total operating expenses 1,755,075 2,434,171 5,557,573 6,787,099
Loss from Operations (1,252,914 ) (1,976,489 ) (4,177,722 ) (5,070,667 )
Other income/(expense)
Loss on settlement of debt (30,896 ) - (29,711 ) (10,487 )
Interest expense - - - -
Settlement Losses - (12,601 ) - (24,630 )
Foreign currency gain - (99 ) (25 ) (380 )
Total other income/(expense) (30,896 ) (12,700 ) (29,736 ) (35,497 )
Net Loss from Discontinued Operations $ (1,283,810 ) $ (1,989,189 ) $ (4,207,458 ) $ (5,106,164 )

The Company's execution of the Asset Purchase Agreement has met the criteria to be reported as discontinued operations. In accordance with GAAP, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets, and results of discontinued operations are reported as a separate component of Consolidated net loss in the Consolidated Statements of Loss, for all periods presented, resulting in changes to the presentation of certain prior period amounts. Cash flows from discontinued operations are not reported separately in the Consolidated Statements of Cash Flows. The assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets for all periods presented.

4. Going Concern

We had $532,450of cash as of September 30, 2024. We had a net loss of $7,228,914for the nine months ended September 30, 2024, and we used $5,405,028of cash in our operating activities during that time. In the nine months ended September 30, 2023 we had a net loss of $8,528,529 and used $5,644,980of cash in our operating expenses. We raised $3.0million in cash Convertible Notes issued during 2023. We raised an additional $5.3million from the issuance of convertible notes in 2024. There is substantial doubt that our additional cash from our warrant conversion along with our expected cash flow from operations, will be sufficient to fund our 12-month plan of operations, and there can be no assurance that we will not require significant additional capital within 12 months.

As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $137.2million as of September 30, 2024. Further losses are anticipated in the development of the Company's business raising substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next 12 months with proceeds from the sale of securities, and/or revenues from operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

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4. Intangibles

Intangible assets

The following table presents details of our purchased intangible assets as of September 30, 2024 and December 31, 2023:

Balance at December 31, 2023 Additions Impairments Amortization Foreign Exchange and Other Balance at September 30, 2024
Patents and trademarks $ 53,663 $ 8,768 $ - $ (4,930 ) $ - $ 57,501
Customer and merchant relationships 6,138 - - $ (6,138 ) - -
Trade names 1,609 - - $ (1,609 ) - -
$ 61,410 $ 8,768 $ - $ (12,677 ) $ - $ 57,501

The intangible assets are being amortized on a straight-line basis over their estimated useful lives of one yearto twenty years.

Amortization expense for intangible assets was $12,677and $28,689for the nine months ended September 30, 2024 and 2023, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for intangible assets was $1,819and $10,747for the three months ended September 30, 2024 and 2023, respectively.

The estimated future amortization expense of our intangible assets as of September 30, 2024 was as follows:

Year ending December 31, Amount
2024 $ 1,811
2025 $ 7,246
2026 $ 7,246
2027 $ 7,246
2028 $ 7,246
Thereafter $ 26,706
Total $ 57,501

5. Software Development Costs

The Company has capitalized certain costs for software developed or obtained for internal use during the application development stage as it relates to specific contracts. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities.

The following table presents details of our software development costs as of September 30, 2024 and December 31, 2023:

Balance at

December 31,

2023

Additions Amortization

Balance at

September 30,

2024

Software Development Costs $ 4,506 $ - $ (4,418 ) $ 88
$ 4,506 $ - $ (4,418 ) $ 88

Software development costs are being amortized on a straight-line basis over their estimated useful life of two years.

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Amortization expense for software development costs was $1,140and $18,120for the three months ended September 30, 2024 and 2023, respectively, and is included in depreciation and amortization on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Amortization expense for software development costs was $4,418and $95,694for the nine months ended September 30, 2024 and 2023, respectively.

The estimated future amortization expense of software development costs as of September 30, 2024 is as follows:

Year ending December 31, Amount
2024 $ 88
2025 -
2026 -
2027 -
2028 -
Thereafter -
Total $ 88

6. Operating Lease Assets

The Company entered into a lease agreement on February 1, 2021, for 8,898square feet, for its office facilities in Chandler, AZ through January 2027. Monthly rental payments, excluding common area maintenance charges, are $25,953to $28,733. The first twelve months of the lease included a 50% abatement period and a deposit of $110,000was required. The lessor contributed $110,000towards the purchase of office furniture as part of the lease agreement. As of September 30, 2024, we have an operating lease asset balance of $600,624and an operating lease liability balance of $731,764recorded in accordance with ASC 842, Leases (ASC "842").

The Company entered in to a sublease on March 1, 2024 for its office facilities in Chandler, AZ through February 28, 2025. Monthly rental payments including rental of office furniture and excluding taxes, are $24,470.

The following are additional details related to leases recorded on our balance sheet as of September 30, 2024:

Leases Classification

Balance at

September 30,

2024

Assets
Current
Operating lease assets Operating lease assets $ -
Noncurrent
Operating lease assets Noncurrent operating lease assets $ 600,624
Total lease assets $ 600,624
Liabilities
Current
Operating lease liabilities Operating lease liabilities $ 295,486
Noncurrent
Operating lease liabilities Noncurrent operating lease liabilities $ 436,278
Total lease liabilities $ 731,764
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The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:

Year ending December 31,
2024 $ 82,863
2025 337,568
2026 344,241
2027 28,733
2028 -
Thereafter -
Total future lease payments 793,405
Less: imputed interest (61,641 )
Total $ 731,764
Weighted Average Remaining Lease Term (years)
Operating leases 2.33
Weighted Average Discount Rate
Operating leases 6.75 %

7. Notes Payable and Interest Expense

The following table presents details of our notes payable as of September 30, 2024 and December 31, 2023:

Facility Maturity Interest Rate

Balance at

September 30,

2024

Balance at

December 31,

2023

ACOA Note February 1, 2024 15 % - 7,154
Related Party Secured Promissory Note June 30, 2026 8 % 5,718,738 5,677,251
Related Party Convertible Notes various 15 % 5,850,870 1,587,361
Related Party Unsecured Promissory Note June 30,2026 8 % 271,875 271,875
Convertible Notes Various 15 % 224,836 215,959
Total Debt 12,066,319 7,759,600
Less current portion (3,840,625 ) (3,079,654 )
Long-term debt, net of current portion $ 8,225,694 $ 4,679,946

ACOA Note

On November 6, 2017, Livelenz (a wholly owned subsidiary of the Company), entered into an amendment of the original agreement dated December 2, 2014, with the Atlantic Canada Opportunities Agency ("ACOA"). Under this agreement, the note will mature, and the commitments will terminate, on February 1, 2024. The monthly principal payment amount of $3,000CAD increased to $3,500CAD beginning on November 1, 2019, $4,000CAD on August 1, 2021, $4,500CAD on August 1, 2022, and $2,215CAD during the remaining term of the agreement. Payments from April-December of 2020 were voluntarily deferred by ACOA due to COVID-19.

During the nine months ended September 30, 2024 we repaid $7,035USD of principal. The final payment was made on February 28, 2024 and the loan is paid in full.

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Related Party Notes

Secured Promissory Notes

On June 30, 2021, we entered into a Credit Facility Agreement (the "Credit Agreement") with Thomas Akin, one of the Company's directors (the "Lender"). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $6,000,000under the Credit Agreement ("the "Credit Facility").

The Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum. The Company may prepay this loan without notice, penalty, or charge. In consideration of the Lender's agreement to provide the Credit Facility, the Company issued warrants to purchase shares of its common stock at an exercise price of $1.67per share in connection with the issuance of funds under the Credit Agreement. The warrants are exercisable for a period commencing upon issuance of the corresponding notes and ending 36 months after issuance of the financing. In addition, the Company has agreed to issue to the Lender additional warrants entitling the Lender to purchase a number of shares of the Company's common stock equal to twenty percent (20%) of the amount of the advances made divided by the volume-weighted average price over the 30 trading days preceding the advance (the "VWAP"). Each warrant will be exercisable over a three-year period at an exercise price equal to the VWAP.

Under the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in 24equal monthly installments commencing on June 30, 2022, and ending on June 30, 2024. On November 11, 2022, an amendment to the Credit Agreement was signed. The amendment updated the payment terms to the following: "Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances, plus accrued interest thereon, in 24 equal monthly installments commencing on January 31, 2023 and continuing thereafter on the last day of each month (or, if such last day is not a Business Day, on the Business Day immediately preceding such last day. Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum. Interest will be calculated on the basis of 365 days in a year." The amendment raised the maximum amount of the Credit Facility to $6,000,000. In addition, the interest which is accrued monthly between July 1, 2022, and December 31, 2022, will be settled into equity. Common Stock will be issued at the end of each month at a rate of $1.08per share of common stock in the amount of the interest accrued for each month.

On January 31, 2023, the Company then entered into Amendment No. 1 (the "Amendment"), which amends our existing Credit Facility Agreement[1], dated as of November 11, 2022, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the Over-The Counter Venture Market operated by OTC Markets Group Inc. ("OTCQB®") over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible notes to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the existing Credit Facility Agreement. The Amendment was considered a debt modification as the cash flows under the amended terms do not differ by at least 10% from the cash flows under the original agreement.

On January 31, 2024 amended terms were agreed upon and the Company then entered into Amendment No. 2 (the "Amendment") signed on May 3,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until June 30, 2026. Principal payments have been deferred to a period beginning on July 31, 2024 and ending June 30, 2026.

On August 13, 2024 amended terms were agreed upon and the Company then entered into Amendment No. 3 (the "Amendment") signed on May 3,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until June 30, 2026. Principal payments have been deferred to a period beginning on October 31, 2024 and ending September 30, 2026.

During the nine months ended September 30, 2024, a total of $681,432of interest was accrued by the company. The company recorded amortized discount expense of $64,053.

As of September 30, 2024, the Company had drawn a total of $5,873,125, with a debt discount of $201,087for a net principal balance of $5,672,038and has equity payable balance $336,417.

Related Party Convertible Notes

During fourth quarter 2023 the Company issued 8 Convertible Notes payable to related parties for $2,000,000. As an inducement we issued 3,333,332warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three yearsfrom the date the Convertible Note was issued.

The Convertible Note and all accrued interest thereon are convertible into shares of our common stock, from time to time, at the option of the holder thereof, at a conversion price per share equal to the larger of either $0.50or of the volume-weighted average price of our common stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the thirty (30) trading days immediately preceding such date (the "Conversion Price").

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During first quarter 2024 the Company issued 8 Convertible Notes payable to related parties for $1,950,000. As an inducement we issued 3,249,997warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three yearsfrom the date the Convertible Note was issued.

During the second quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $2,100,000. As an inducement we issued 3,499,997warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three yearsfrom the date the Convertible Note was issued.

During the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $1,275,000. As an inducement we issued 2,124,999warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three yearsfrom the date the Convertible Note was issued.

During the nine months ended September 30, 2024 accrued interest of $293,735was recorded in connection with the related party convertible notes. The Company recorded $299,917in amortized debt discount in connections with related party convertible notes.

As of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $7,325,000with a debt discount of $1,425,974for a net principal balance of $5,899,026and accrued interest of $313,233.

Unsecured Promissory Note

On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875with Talkot Fund, LP and investor in the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest are due and payable no later than December 31, 2023. We may prepay any of the UP Notes without notice, subject to a two percent (2%) pre-payment penalty. The UP Note offer was conducted by our management and there were nocommissions paid by us in connection with the solicitation. The Company issued to Talkot Fund LP warrants to purchase an aggregate of 33,017shares of its common stock at the stated exercise price per share in connection with the issuance of funds under this UP Note.

On January 31, 2023, the Lender agreed to postpone the 24-month repayment period to a later period commencing on January 31, 2024, and further agreed that interest accrued on the loan between July 1, 2022 and December 1, 2025 is to be settled in shares of the Company's common stock quarterly.

On January 31 2024, the Lender agreed to postpone the 24-month repayment period to a later period commencing on July 31, 2024.

During the nine months ended September 30, 2024, a total of $20,122of interest was accrued by the company and recorded to equity payable.

As of September 30, 2024, the Company had an outstanding principal balance of $271,875, an equity payable balance of $20,122of accrued interest.

Convertible Notes

During fourth quarter 2023 the Company issued 10 Convertible Notes payable to related parties for $250,000. As an inducement we issued 416,667warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three yearsfrom the date the Convertible Note was issued.

The Convertible Note and all accrued interest thereon are convertible into shares of our common stock, from time to time, at the option of the holder thereof, at a conversion price per share equal to the larger of either $0.50or of the volume-weighted average price of our common stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the thirty (30) trading days immediately preceding such date (the "Conversion Price")

During the nine months ended September 30, 2024 the company recorded accrued interest of $15,222in connection with convertible notes and $8,876in amortized debt discount.

As of September 30, 2024 the Convertible Notes had a principal balance of $250,000with a debt discount of $25,165for a net principal balance of $224,835and accrued interest of $16,509.

Interest Expense

Interest expense was $529,841and $237,376during the three months ended September 30, 2024 and 2023, respectively.

Interest expense was $1,429,977and $720,265during the nine months ended September 30, 2024 and 2023, respectively.

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8. Stockholders' Equity

Common Stock and Equity Payable

2023

On January 31, 2023 a total of 545,012shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and no expense was recognized during the six months ended June 30, 2023.

On March 27, 2023 a total of 154,106shares of common stock were granted from equity payable to Thomas Akin as settlement of $166,432of interest payable. The Company recorded a loss on settlement of interest payable of $44,325on December 31, 2022.

On March 27, 2023 a total of 9,651shares of common stock were granted from equity payable to Talkot Fund LP as settlement of $10,423of interest payable. The Company recorded a loss on settlement of interest payable of $2,757on December 31, 2022.

On March 31, 2023 a total of $195,171of interest was accrued and settled to equity payable for the issuance of 180,715shares of common stock. The company recorded a loss of settlement of interest payable of $10,315.

On March 31, 2023 a total of $10,196of interest was accrued and settled to equity payable for the issuance of 9,441shares of common stock. The company recorded a loss of settlement of interest payable of $542.

During March of 2023, 15warrant holders exercised their common stock purchase warrant for 3,587,487shares at the exercise price of $1.00per share, resulting in additional capital of $3,587,487. As an inducement for the holder's exercise of the warrants, we issued the holders' 1,792,745new warrants to purchase common stock at $2.00per share over a three-year period expiring in March 2026. The Company recorded $577,000of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

On June 30, 2023 a total of $196,148of interest was accrued and settled to equity payable for the issuance of 181,620shares of common stock.

On June 30, 2023 a total of $10,309of interest was accrued and settled to equity payable for the issuance of 9,546shares of common stock.

During August and September of 2023, 18 warrant holders exercised their common stock purchase warrant for 1,960,976 shares at the exercise price of $.82 per share, resulting in additional capital of $1,608,000. As an inducement for the holder's exercise of the warrants, we issued the holders' 3,921,952 new warrants to purchase common stock at $.82 per share over a one and three-year period expiring between August and September 2026. The Company recorded $1,146,562 of stock-based expense related to warrants issued during the warrant conversion offer on September 6, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 63% and 73% and an option fair value of between $0.21 and $0.40.

During the nine months ended September 30, 2023 a total of 163,757 shares were issued from stock payable related to related party accrued interest.

As of the September 30, 2023 we had an equity payable balance of $100,862.

2024

On June 30, 2024 a total of $445,379of interest was accrued and settled to equity payable for the issuance of 1,093,267shares of common stock.

On June 30, 2024 a total of $20,617of interest was accrued and settled to equity payable for the issuance of 50,609shares of common stock.

On September 30, 2024 a total of $225,136of interest was accrued and settled to equity payable for the issuance of 964,593shares of common stock.

On September 30, 2024 a total of $10,422of interest was accrued and settled to equity payable for the issuance of 44,653shares of common stock.

During the nine months ended September 30, 2024 2,516,394shares were issued for $1,355,081from equity payable and $235,558 equity payable was recorded.

As of the nine months ended September 30, 2024 we had an equity payable balance of $336,420.

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Stock-based Plans

Stock Option Activity

The following table summarizes stock option activity for the nine months ended September 30, 2024.

Options

Weighted

Average

Exercise

Price

Weighted

Average

Remaining

Contractual

Term (Years)

Outstanding at December 31, 2022 6,691,216 $ 1.19 5.86
Granted 2,678,500 $ - -
Exercised - $ - -
Forfeited/canceled (329,893 ) $ - -
Expired (1,742,468 ) $ 0.90 7.28
Outstanding at December 31, 2023 7,297,355 $ - -
Granted 260,000 $ - -
Exercised - $ - -
Forfeited/canceled (949,520 ) $ - -
Expired (2,163,335 ) $ - -
Outstanding at September 30, 2024 4,444,500 $ 0.92 7.72

2023

On May 11, 2023 the Company granted threeemployees 295,000options to purchase shares of the Company's common stock at the closing price as of May 11, 2023 of $0.98per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36monthly installments thereafter, and are exercisable until May 16, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 75.76% and an option fair value of $0.705183was $208,029.

On July 14, 2023 the Company granted oneemployees 1,000,000options to purchase shares of the Company's common stock at the closing price as of July 14, 2023 of $0.85per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36monthly installments thereafter, and are exercisable until July 14, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.55% and an option fair value of $0.5590was $605,383.

On July 17, 2023 the Company granted oneemployees 700,000options to purchase shares of the Company's common stock at the closing price as of July 17, 2023 of $0.79per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36monthly installments thereafter, and are exercisable until July 17, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.57% and an option fair value of $0.5713was $396,441.

On August 25, 2023 he Company granted fouremployees 650,000options to purchase shares of the Company's common stock at the closing price as of August 25, 2023 of $0.65per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36monthly installments thereafter, and are exercisable until August 25, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 64.81% and an option fair value of $0.4257was $285,773.

2024

On April 1, 2024, the Company granted twoemployees 250,000options to purchase shares of the Company's common stock at the closing price as of April 1, 2024 of $0.502per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36monthly installments thereafter, and are exercisable until April 1, 2034. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.63% and an option fair value of $0.212377was $53,094.

On August 14, 2024, the Company granted oneemployee 10,000options to purchase shares of the Company's common stock at the closing price as of August 14, 2024 of $0.502per share. The option shares will vest 25% immediately, then equally in 36monthly installments thereafter, and are exercisable until August 14, 2034. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.63% and an option fair value of $0.0724was $724.

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Stock-Based Compensation Expense from Stock Options and Warrants

The impact on our results of operations of recording stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 were as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
General and administrative $ 3,261 $ 62,599 $ (35,842 ) $ 181,382
Sales and marketing 105,100 108,348 301,245 248,790
Engineering, research, and development 40,429 46,830 127,461 119,334
$ 148,790 $ 217,777 $ 392,864 $ 549,506

Valuation Assumptions

The fair value of each stock option award was calculated on the date of the grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for the nine months ended September 30, 2024 and 2023.

Nine Months Ended
September 30,
2024 2023
Risk-free interest rate 4.69 % 3.99 %
Expected life (years) 7.00 7.50
Expected dividend yield - % - %
Expected volatility 73.63 % 73.47 %

The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.

The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on the historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of the Company's stock-based awards.

The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.

The expected volatility in 2024 and 2023 is based on the historical publicly traded price of our common stock.

Restricted stock units

The following table summarizes restricted stock unit activity under our stock-based plans for the year ended December 31, 2023 and for the nine months ended September 30, 2024:

Shares
Outstanding at December 31, 2022 1,929,933
Awarded 414,104
Released (545,012 )
Canceled/forfeited/expired -
Outstanding at December 31, 2023 1,799,025
Awarded 715,205
Released -
Canceled/forfeited/expired -
Outstanding at September 30, 2024 2,514,230
Expected to vest at September 30, 2024 2,514,230
Vested at September 30, 2024 2,514,230
Unvested at September 30, 2024 -
Unrecognized expense at September 30, 2024 $ -
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2023

On March 31, 2023, the Company granted fourindependent directors a total of 61,342restricted stock units. The units were valued at $65,002or $1.05per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) March 31, 2026, (B) a change in control of the Company, and (C) the termination of the director's service with the Company.

On June 30, 2023, the Company granted fourindependent directors a total of 80,160restricted stock units. The units were valued at $65,003or $0.81per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) June 30, 2026, (B) a change in control of the Company, and (C) the termination of the director's service with the Company.

On September 30, 2023, the company granted fourindependent directors a total of 101,564restricted stock units. The units were valued at $65,001or $0.64per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) September 30,2026, (B) a change in control of the Company, and (C) the termination of the director's service with the Company.

In the nine months ended September 30, 2023 the Company recorded $195,006in restricted stock expense as board compensation.

2024

On March 31, 2024 the company granted fiveindependent directors a total of 162,500restricted stock units. The units were valued at $81,250or $.50per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) March 31, 2026, (B) a change in control of the Company, and (C) the termination of the director's service with the Company.

On June 30,2024 the company granted fiveindependent directors a total of 187,210restricted stock units. The units were valued at $81,249or $.434per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) June 30, 2026, (B) a change in control of the Company, and (C) the termination of the director's service with the Company.

On September 30, 2024 the company granted fiveindependent directors a total of 365,495restricted stock units. The units were valued at $81,250or $.222per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) September 30, 2026, (B) a change in control of the Company, and (C) the termination of the director's service with the Company.

In the nine months ended September 30, 2024, the Company recorded $243,749in restricted stock expense as board compensation.

Stock Based Compensation from Restricted Stock

The impact on our results of operations of recording stock-based compensation expense for restricted stock units for the three and nine months ended September 30, 2024 and 2023 was as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
General and administrative $ 81,250 $ 65,001 $ 243,749 $ 195,006
$ 81,250 $ 65,001 $ 243,749 $ 195,006

As of September 30, 2024, there was nounearned restricted stock unit compensation.

Warrants

The following table summarizes investor warrants as of September 30, 2024 and the years ended December 31, 2023 and 2022:

Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2022 6,147,898 $ 1.45 2.27
Granted 9,563,787 $ - -
Exercised (5,548,463 ) $ - -
Canceled/forfeited/expired - $ - -
Outstanding at December 31, 2023 10,163,222 $ 0.94 2.48
Granted 8,916,660 $ - -
Exercised - $ - -
Canceled/forfeited/expired - $ - -
Outstanding at September 30, 2024 19,079,882 $ 0.77 2.13
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2023

During March 2023, 15warrant holders exercised their common stock purchase warrant for 3,587,487shares at the exercise price of $1.00per share, resulting in additional capital of $3,557,487. As an inducement for the holder's exercise of the warrants, we issued the holders' 3,921,952new warrants to purchase common stock at $2.00per share over a three-year period expiring in February 2025. The Company recorded $577,000of stock-based expense related to warrants issued during the warrant conversion offer on February 14, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on a volatility rate of 63% and an option fair value of $0.3216.

During August and September of 2023, 18warrant holders exercised their common stock purchase warrant for 1,906,976shares at the exercise price of $.82per share, resulting in additional capital of $3,557,487. As an inducement for the holder's exercise of the warrants, we issued the holders' 1,793,745new warrants to purchase common stock at $.82per share over a three-year period expiring between August and September 2026. The Company recorded $1,146,047of stock-based expense related to warrants issued during the warrant conversion offer on September 6, 2023. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 72% and an option fair value of $0.2922.

2024

During the first quarter of 2024, onewarrant holders was issued 3,291,664warrants as an inducement for Convertible Notes issued at the exercise price of $.60per share, resulting in additional capital of $2,250,000. The Company recorded $466,594of stock-based expense related to warrants issued with issuance of convertible notes. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 93% and an option fair value of $0.1418.

During the second quarter of 2024, onewarrant holders was issued 3,499,997warrants as an inducement for Convertible Notes issued at the exercise price of $.60per share, resulting in additional capital of $2,100,000. The Company recorded $371,242of stock-based expense related to warrants issued with issuance of convertible notes. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 91% and an option fair value of $0.1768.

During the third quarter of 2024, onewarrant holders was issued 2,124,999warrants as an inducement for Convertible Notes issued at the exercise price of $.60per share, resulting in additional capital of $1,275,000. The Company recorded $176,219of stock-based expense related to warrants issued with issuance of convertible notes. The total estimated value of the warrants using the Black-Scholes Model is based on an average volatility rate of 104% and an option fair value of $0.1403.

9. Fair Value Measurements

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. This hierarchy requires companies to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value.

The following table presents assets that are measured and recognized at fair value as of September 30, 2024 on a recurring and non-recurring basis:

Description Level 1 Level 2 Level 3 Gains (Losses)
Goodwill (non-recurring) $ - $ - $ - $ -
Intangibles, net (non-recurring) $ - $ - $ 57,589 $ -

The following table presents assets that are measured and recognized at fair value as of December 31, 2023 on a recurring and non-recurring basis:

Description Level 1 Level 2 Level 3 Gains (Losses)
Goodwill (non-recurring) $ - $ - $ - $ -
Intangibles, net (non-recurring) $ - $ - $ 65,916 $ -

10. Commitments and Contingencies

Litigation

Marina Soliman v. Subway Franchisee Advertising Fund Trust, LTD, Second Circuit Court of Appeals, Case No. 22-1726 - this is putative class action alleging that Defendant initiated telephone solicitations through text messages in violation of the Telephone Consumer Protection Act, 47 U.S.C § 227 et al. ("TCPA"). The district court granted Defendant's motion to dismiss. The matter has been under submission with the Court since October 24, 2023. In the event that the Court reverses and remands the matter, the Company intends to seek an individual settlement of the matter, and if one cannot be reached, the Company intends to vigorously defend the matter.

Ruhi Reimer vs. Checkers Drive-In Restaurants, Inc. - JAMS Ref No. 5410000618 - this is a single Claimant arbitration action filed against Mobivity's business partner alleging that text messages were sent to the consumer in violation of the TCPA's regulations relating to the National Do Not Call Registry. The parties are beginning discovery at this time and a Merits Hearing has been set for January 14, 2025. Based on our current understanding, we believe that the case is pretextual and was set up in advance by the Claimant and his attorneys. Because discovery has only just started, it is premature to assess whether there is any material risk of an adverse award.

Abboud v. Circle K Stores Case - United States District Court, Dist. Arizona, Case No 2:23-cv-01683-DWL - this is a putative TCPA class action alleging that Mobivity and its business partner initiated text messages in violation of the TCPA's regulations relating to the National Do Not Call Registry. We believe that plaintiff has sued the wrong defendant and that the client's other servicer is actually responsible for any text messages that were sent to the putative class. We are actively attempting to persuade Plaintiff's counsel to drop Mobivity from the suit.

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Operating Lease

As of September 30, 2024, we have an operating lease asset balance for this lease of $600,624and an operating lease liability balance for this lease of $731,764recorded in accordance with ASC 842.

11. Related Party Transactions

Secured Promissory Notes

On June 30, 2021, we entered into a Credit Facility Agreement with Thomas Akin, one of the Company's directors (the "Lender"). The Credit Facility Agreement was amended on November 11, 2022 to allow the Company to borrow up to $6,000,000. The Credit Facility Agreement was amended again on January 31, 2023 to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025.

As of September 30, 2024, the Company had drawn a total of $5,873,125, with a debt discount of $201,087for a net principal balance of $5,672,038and has equity payable balance $336,417.

Unsecured Promissory Note

On July 1, 2021, we entered into UP Notes in the aggregate principal amount of $271,875with Talkot Fund, LP and investor in the Company. Each UP Note bears interest on the unpaid balance at the rate of fifteen percent (15%) per annum and the principal and accrued interest are due and payable no later than December 31, 2023.

As of September 30, 2024, the Company had an outstanding principal balance of $271,875, an equity payable balance of $20,122of accrued interest.

Convertible Notes

During first quarter of 2024, the Company issued 8 Convertible Notes payable to related parties for $1,950,000. As an inducement we issued 3,249,997warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the second quarter of 2024 the Company 8 Convertible Notes payable to related parties for $2,100,000. As an inducement we issued 3,499,997warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $1,275,000. As an inducement we issued 2,124,999warrants to purchase shares of our common stock at $.60per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

As of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $7,325,000with a debt discount of $1,425,974for a net principal balance of $5,899,026and accrued interest of $313,233.

For more details regarding the three related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.

12. Sales of Certain Contracts

Acquisition by SMS Factory

On September 25, 2024, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with SMS Factory, Inc., a Florida corporation ("SMS Factory"). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company's SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company's SMS/MMS text messaging platform business (the "Business Assets") effective as of September 25, 2024 (the "Closing Date").

In consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $303,000.

The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.

13. Subsequent Events

Convertible Notes

During October 2024, the Company issued one Convertible Notes to Thomas B. Akin for a total amount of $350,000.

Related Party Notes Payable

The Company entered into Amendment No. 4 (the "Amendment") to Amended and Restated Credit Facility Agreement and Convertible Notes (the Credit Facility Agreement), signed on November 21,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until March 31, 2027. Principal payments have been deferred to a period beginning on April 30, 2025 and ending March 31, 2027.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made and are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," or "will," and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption "Risk Factors" included in our 2023 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 17, 2024, and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Overview

Mobivity Holdings Corp. (the "Company" or "us", "our", or we") develops and operates proprietary platforms over which brick and mortar brands and digital first enterprises can conduct national and localized, data-driven marketing campaigns with unique targeting, incentivization and promotion to drive customer acquisition and loyalty. The company's core technology platform, RecurrencyTM, enables

Transformation of messy point-of-sale (POS) data collected from thousands of locations and digital environments into usable intelligence.
Measurement, prediction, and ability to boost guest frequency and spend by channel.
Deployment and management of one-time use offer codes and attribution of sales accurately across every channel, promotion and media program.
Delivery of uniquely attributable 1:1 offers that power incentivized actions in digital environments like user acquisition, continued monetization, and activities taken in a digital environment.

Our recurrency platform generates revenue in 2 ways. First, delivered as a Software-as-a-Service ("SaaS") platform used by leading convenience and quick service restaurant brands to build and engage with their loyal customers. Second, through our Connected RewardsTM business, our platform enables and powers unique incentivized programs in digital environments. Through our Connected Rewards platform, we enable businesses to reward their users and customers with products in the real world for actions taken in a digital environment. Our customers include some of the largest mobile casual game publishers in the world and some of the largest convenience and quick service restaurant brands in the world. The programs we run for our customers include incentivized user acquisition where users are rewarded with a real-world product, like a free or discounted burger, for downloading a mobile game, and rewarded play where users receive real world products for accomplishing activities in game, like achieving a certain level or winning enough points. We charge our customers for each unique action where our rewards are delivered, these include a per install or per individual engagement fee.

The Recurrency Platform

The Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights and power Connected Rewards interactions. Our technology analyzes transaction data to provide insights, delivers mobile rewards and powers redemption at all potential points of sale (i.e., mobile, in-store, in-app), and provides 100% attribution of the transaction. In Connected Rewards applications, Recurrency is integrated into mobile gaming platforms and mobile attribution partners to deliver the necessary data to deliver rewards for in-game actions.

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Company Strategy

Our objective is to build an industry-leading mobile marketing technology product that bridges between in-person and digital environments powering a unique and defensible alternative for digital-first businesses to engage and retain their customers by rewarding them with real-world products and offers. The key elements to our strategy are:

Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our ability to integrate our Recurrency platform into digital environments and deliver rewards based on activities taken in a digital environment. Because of our long history operating as a loyalty marketing solution we believe we have a defensible head start and ability to continue building products and features that will retain our competitive advantage.
Evolve our sales and customer support infrastructure to uniquely meet the needs of the quickly evolving digital marketing universe. We have quickly evolved our organization and business to fill a gap in the digital marketing landscape. Through continued innovation and emphasis on automation and predictive analytics we believe we will expand our niche and create further value for our Connected Rewards Customers.
Acquire complementary businesses and technologies. We will continue to search and identify unique opportunities which we believe will enhance our product features and functionality, revenue goals, and technology. We intend to target companies with some or all of the following characteristics: (1) an established revenue base; (2) strong and defensible technology services that further build out and differentiate our platform; (3) opportunities for substantial expense reductions through integration into our platform; and (4) strong sales teams. Our acquisitions have historically been consummated through the issuance of a combination of our common stock and cash.
Build our intellectual property portfolio. We currently have nine issued patents that we believe have significant potential application in the technology industry. We plan to continue our investment in building a strong intellectual property portfolio.

While these are the key elements of our current strategy, there can be no guarantees that our strategy will not change or that our strategy will be successful or implemented at all.

Recent Events

2024 Related Party Convertible Notes

During the first quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $1,950,000. As an inducement we issued 3,249,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the second quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $2,100,000. As an inducement we issued 3,499,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

During the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $1,275,000. As an inducement we issued 2,124,999 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.

2024 Related Party Notes Payable

The Company entered into Amendment No. 2 (the "Amendment") to Amended and Restated Credit Facility Agreement and Convertible Notes (the Credit Facility Agreement), signed on May 3,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until June 30, 2026. Principal payments have been deferred to a period beginning on July 31, 2024 and ending June 30, 2026.

Acquisition of Certain Contracts by SMS Factory

On September 25, 2024, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with SMS Factory, Inc., a Florida corporation ("SMS Factory"). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company's SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company's SMS/MMS text messaging platform business (the "Business Assets") effective as of September 25, 2024 (the "Closing Date").

In consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $303,000. The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.

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Results of Operations

Revenues

Revenues consist primarily of those generated by a suite of products under the Recurrency platform. The Recurrency platform is comprised of POS Data Capture, Analytics, Offers and Promotions, Predictive Offers, Personalized Receipt Promotions, Customized Mobile Messaging, Belly Loyalty, and other revenues.

Revenues for the three months ended September 30, 2024, were $226,208 an increase of $176,028 compared to $50,180 for the same period in 2023.

Revenues for the nine months ended September 30, 2024, were $900,008 an increase of $716,595 compared to $183,413 for the same period in 2023.

This decrease is primarily due to a decrease of in subscription revenue.

Cost of Revenues

Cost of revenues consists primarily of cloud-based software licensing fees, short code maintenance expenses, messaging-related expenses, and other expenses.

Cost of revenues for the three months ended September 30, 2024, was $120,125, an increase of $84,454, or 237%, compared to $35,671 for the same period in 2023.

Cost of revenues for the nine months ended September 30, 2024, was $541,161, an increase of $418,379, or 237%, compared to $122,782 for the same period in 2023.

This increase is primarily due to an decrease in SMS/MMS Messaging costs.

Bad Debt Expense

Bad Debt expense for the nine months ended September 30, 2024 was $14,849, an increase of $14,849, or 100%, compared to $0 for the nine months ended September 30, 2023. This increase is due to a decrease in past due invoices.

Bad Debt expense for the three months ended September 30, 2024 was a gain of $7,575 an decrease of $7,575, or 100%, compared to $0 for the three months ended September 30, 2023. This decrease is due to a decrease in past due invoices.

General and Administrative

General and administrative expenses consist primarily of salaries and personnel-related expenses, consulting costs, and other expenses.

General and administrative expenses decreased $1,122,415, or 83%, to $229,968, during the three months ended September 30, 2024, compared to $1,352,383 for the same period in 2023. The decrease in general and administrative expenses was primarily due to a decrease in stock related expense for the warrant exercise that occurred during the same period in 2023.

General and administrative expenses decreased $1,707,767, or 76%, to $542,990, during the nine months ended September 30, 2024, compared to $2,250,757 for the same period in 2023. The decrease in general and administrative expenses was primarily due to a decrease in stock related expense for the warrant exercise that occurred during the same period in 2023.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and personnel-related expenses, stock-based compensation expenses, consulting costs, and other expenses.

Sales and marketing expenses increased $65,195, or 49%, to $197,713 during the three months ended September 30, 2024, compared to $132,518 for the same period in 2023. The increase is primarily due to an increase in travel and tradeshow expenses.

Sales and marketing expenses increased $231,439, or 75% to $541,762 during the nine months ended September 30, 2024, compared to $310,323 for the same period in 2023. The increase is primarily due to an increase in travel and tradeshow expenses.

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Engineering, Research & Development

Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.

Engineering, research & development expenses increased $243,877, or 305%, to $323,752 during the three months ended September 30, 2024, compared to $79,875 for the same period in 2023. This increase is primarily due to an increase in payroll expenses.

Engineering, research & development expenses increased $643,831, or 328%, to $840,207 during the nine months ended September 30, 2024, compared to $196,376 for the same period in 2023. This increase is primarily due to an increase in payroll expenses.

Depreciation and Amortization

Depreciation and amortization expenses consist of depreciation on our equipment and amortization of our intangible assets.

Depreciation and amortization expense decreased $426, or 41%, to $612 during the three months ended September 30, 2024 compared to $1,038 for the same period in 2023.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2023.

Depreciation and amortization expense decreased $1,210 or 30%, to $2,812 during the nine months ended September 30, 2024 compared to $4,022 for the same period in 2023.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2023.

Interest Expense

Interest expense increased $292,465, or 123%, to $529,841 during the three months ended September 30, 2024, compared to $237,376 in the same period in 2023. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.

Interest expense increased $709,712, or 99%, to $1,429,977 during the nine months ended September 30, 2024, compared to $720,265 in the same period in 2023. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.

Settlement Losses

Settlement losses consist of legal settlement for TCPA settlements.

Settlement losses for the three months ended September 30, 2024 and 2023 were $0 and $399, respectively.

Settlement losses for the nine months ended September 30, 2024 and 2023 were $0 and $870, respectively.

Loss on Settlement of Debt

Loss on Settlement of debt consists of the expense from the settlement of notes payable when they are settled into shares.

Loss on settlement of debt for the three months ended September 30, 2024 and 2023 was $6,514 and $7,699, respectively.

Loss on settlement of debt for the nine months ended September 30, 2024 and 2023 was $0 and $370, respectively.

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Foreign Currency

The Company's financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three and nine months ended September 30, 2024, was $1 Canadian equals $0.74 U.S. Dollars, respectively. This compares to an average rate of $1 Canadian equals $0.74 during the same period in 2023. The Company's functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:

The Company sells products primarily in U.S. Dollars; therefore, reported revenues are not highly impacted by foreign currency volatility.
A portion of the Company's expenses are incurred in Canadian Dollars and therefore fluctuate in U.S. Dollars as the U.S. Dollar varies. A weaker U.S. Dollar results in an increase in translated expenses, and a stronger U.S. Dollar results in a decrease.
Changes in foreign currency rates also impact the translated value of the Company's working capital that is held in Canadian Dollars. Foreign exchange rate fluctuations result in foreign exchange gains or losses based upon movement in the translated value of Canadian working capital into U.S. Dollars.

The change in foreign currency was a gain of $1,358 and a loss of $91,825 for the three months ended September 30, 2024 and 2023, respectively.

The change in foreign currency was a gain of $216,687 and a gain of $123,190 for the nine months ended September 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

As of September 30, 2024, we had current assets of $1,367,564, including $532,450 in cash, and current liabilities of $8,090,773, resulting in a working capital deficit of $6,723,209.

We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to sufficiently fund our current level of operations through the end of the next 12 months or beyond. We will require additional capital and will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. There can be no assurance we will be able to obtain access to capital as and when needed, or that the terms of any available financing will be commercially reasonable.

The Company entered in to a sublease on March 1, 2024 for its office facilities in Chandler, AZ through February 28, 2025. Monthly rental payments including rental of office furniture and excluding taxes, are $24,470. The Company has transition to a 100% remote work force and this has resulted in a decrease in monthly rental expense.

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Cash Flows

Nine Months Ended
September 30,
2024 2023
Net cash provided by (used in):
Operating activities $ (5,405,028 ) $ (5,644,980 )
Investing activities (13,327 ) (24,552 )
Financing activities 5,317,965 5,575,483
Effect of foreign currency translation on cash flow 216,445 125,243
Net change in cash $ 116,055 $ 31,194

Operating Activities

We used cash in operating activities totaling $5,405,028 during the nine months ended September 30, 2024 and used cash in operating activities totaling $5,644,980 during the nine months ended September 30, 2023. Key drivers of the cash used in operating activities are the net loss of $7,228,914, a net loss from discontinued operations of $4,207,458 changes to accounts receivable of $86,844, accrued interest of $1,009,822, stock-based compensation of $636,612, accounts payable of $471,102, and amortization of debt discount of $372,874.

Investing Activities

Investing activities during the nine months ended September 30, 2024, consisted of $4,559 of equipment purchases compared to $20,004 in the nine months ended September 30, 2023 and $8,768 of cash paid for patent activities comparted $0 compared to the same period in 2023.

Financing Activities

Financing activities during the nine months ended September 30, 2024 consisted of $5,325,000 of proceeds from related party convertible notes compared to $400,000 in the nine months ended September 30, 2023 In addition, there was $0 proceeds from conversion of warrants compared to $5,195,487 additional paid in capital from a warrant conversation to common stock in the nine months ended September 30, 2023. In the nine months ended September 30, 2024, payments of $7,035 were made on notes payable compared to $20,004 in the same period in 2023.

Critical Accounting Estimates

We have adopted various accounting policies to prepare the our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgments, and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the accompanying notes to the condensed consolidated financial statements. There were no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2024.

Refer to Note 2, "Summary of Significant Accounting Policies," in the accompanying notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management, with the participation of our Principal Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. "Disclosure controls and procedures," as defined in Exchange Act Rule 13a-15(e), are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our Principal Executive Officer and Interim Chief Financial Officer, concluded that as of September 30, 2024 our disclosure controls and procedures were not effective.

As a small company with limited resources that are mainly focused on the development and sales of software products and services, the Company does not employ a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material misstatement to occur in future periods while it employs the current number of personnel in its finance department.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Marina Soliman v. Subway Franchisee Advertising Fund Trust, LTD, Second Circuit Court of Appeals, Case No. 22-1726 - this is putative class action alleging that the Company initiated telephone solicitations through text messages in violation of the Telephone Consumer Protection Act, 47 U.S.C § 227 et al. ("TCPA"). The district court granted the Company's motion to dismiss. The matter has been under submission with the Court of Appeals since October 24, 2023. In the event that the Court reverses and remands the matter, the Company intends to seek an individual settlement of the matter, and if one cannot be reached, the Company intends to vigorously defend the matter.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "Form 10-K"), which could materially affect our business, financial condition or future results. There have been no material changes in the risk factors disclosed in the Form 10-K

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information

During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modifiedor terminatedany contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

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Item 6. Exhibits

Exhibit No. Description
2.1 Asset Purchase Agreement, dated September 25, 2024, by and between Mobivity Holdings Corp. and SMS Factory, Inc.
3.1 Restated Articles of Incorporation filed with the Nevada Secretary of State on August 12, 2022 (incorporated by reference to Exhibit 3.1[FD1] to the Company's Quarterly Report on Form 10-Q filed on May 9, 2024) [FD1]Note, we added the specific exhibit references (it is typically not sufficient to refer to the report as a whole).
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed on October 20, 2008)
3.3 Amendment No. 1 to Bylaws (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed on October 20, 2008)
3.4 Amendment No. 2 to the Bylaws, effective as of May 20, 2013 (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed May 24, 2013)
10.1 Amendment No. 4 to Amended and Restated Credit Facility Agreement and Convertible Notes, dated as of November 21, 2024, between Mobivity Holdings Corp. and Thomas B. Akin*
31.1 Certification by Principal Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 *
31.2 Certification by Principal Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002 *
32.1 Certification Pursuant to 18 U.S.C. Section 1350 *
101.INS Inline XBRL Instance Document *
101.SCH Inline XBRL Taxonomy Schema Document
101.CAL Inline XBRL Taxonomy Calculation Linkbase Document *
101.DEF Inline XBRL Taxonomy Definition Linkbase Document *
101.LAB Inline XBRL Taxonomy Label Linkbase Document*
101.PRE Inline XBRL Taxonomy Presentation Linkbase Document *
104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

* Filed electronically herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized

Mobivity Holdings Corp.
Date: November 26, 2024 By: /s/ Bryce D. Daniels
Bryce D. Daniels

President

(Principal Executive Officer)
Date: November 26, 2024 By: /s/ Skye Fossey-Tomaske
Skye Fossey-Tomaske

Interim Chief Financial Officer

(Principal Accounting Officer)

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