SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015
COMMISSION FILE NUMBER: 000-51160
MOBIQUITY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK |
|
11-3427886 |
(State of jurisdiction of Incorporation) |
|
(I.R.S. Employer Identification No.) |
600 OLD COUNTRY ROAD, SUITE 541
GARDEN CITY, NY 11530
(Address of principal executive offices)
(516) 256-7766
(Registrant's telephone number)
(Former name, address
and fiscal year, if changed since last report)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No o
Indicate by checkmark whether the registrant
has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required
to submit and post such file).
Yes x No o
Indicate by checkmark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of
the Exchange Act.
Large Accelerated Filer o |
Accelerated Filer o |
Accelerated Filer o |
Smaller Reporting Company x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of August 11, 2015, the registrant had a total of 75,395,562
shares of Common Stock outstanding.
MOBIQUITY TECHNOLOGIES, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
|
PAGE |
PART I. FINANCIAL INFORMATION |
|
|
|
Item 1. Condensed Consolidated Financial Statements (Unaudited) |
3 |
|
|
Condensed Consolidated Balance Sheets as of June 30, 2015 (unaudited) and December 31, 2014 |
3 |
|
|
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2015 and June 30, 2014 (unaudited) |
4 |
|
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and June 30, 2014 (unaudited) |
5 |
|
|
Notes to Condensed Financial Statements (unaudited) |
6 |
|
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
23 |
|
|
Item 3 Quantitative and Qualitative Disclosures |
30 |
|
|
Item 4. Controls and Procedures |
30 |
|
|
PART II. OTHER INFORMATION |
|
|
|
Item 1. Legal Proceedings |
31 |
|
|
Item la. Risk Factors |
31 |
|
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Item 2. Changes in Securities |
31 |
|
|
Item 3. Defaults Upon Senior Securities |
32 |
|
|
Item 4. Mine Safety Disclosures |
32 |
|
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Item 5. Other Information |
32 |
|
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Item 6. Exhibits and Reports on Form 8-K |
32 |
|
|
SIGNATURES |
34 |
PART I. FINANCIAL INFORMATION
Item
1. Financial Statements.
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed
Consolidated Balance Sheets
| |
June 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
| |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 1,446,061 | | |
$ | 1,654,171 | |
Accounts receivable, net | |
| 298,131 | | |
| 445,892 | |
Inventory, net | |
| 211,298 | | |
| 190,854 | |
Prepaid expenses and other current assets | |
| 108,831 | | |
| 152,502 | |
Total Current Assets | |
| 2,064,321 | | |
| 2,443,419 | |
| |
| | | |
| | |
Property and equipment, net | |
| 171,541 | | |
| 262,480 | |
| |
| | | |
| | |
Intangible assets, net | |
| 80,017 | | |
| 94,328 | |
| |
| | | |
| | |
Other Assets | |
| 41,616 | | |
| 33,741 | |
Total Assets | |
$ | 2,357,495 | | |
$ | 2,833,968 | |
| |
| | | |
| | |
Liabilities and Stockholders' Deficit | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 452,036 | | |
$ | 609,957 | |
Accrued expenses | |
| 311,017 | | |
| 369,383 | |
Convertible promissory note | |
| 322,000 | | |
| 322,000 | |
Total Current Liabilities | |
| 1,085,053 | | |
| 1,301,340 | |
| |
| | | |
| | |
Long-term portion of convertible notes | |
| 3,933,795 | | |
| 2,573,979 | |
Total Liabilities | |
| 5,018,848 | | |
| 3,875,319 | |
| |
| | | |
| | |
Stockholders' Deficit: | |
| | | |
| | |
Preferred Stock, $.0001 par value; 5,000,000 shares authorized, zero and zero shares issued and outstanding at June 30,
2015 and December 31, 2014 respectively | |
| – | | |
| – | |
Common stock, $.0001 par value; 200,000,000 and 200,000,000 shares authorized; 74,700,562 and
64,818,243 shares issued and outstanding at June 30, 2015, and December 31, 2014 | |
| 7,475 | | |
| 6,482 | |
Additional paid-in capital | |
| 32,870,001 | | |
| 28,966,269 | |
Accumulated other comprehensive loss | |
| (6,091 | ) | |
| (2,236 | ) |
Accumulated deficit | |
| (35,532,738 | ) | |
| (30,011,866 | ) |
Total Stockholders' Deficit | |
| (2,661,353 | ) | |
| (1,041,351 | ) |
Total Liabilities and Stockholders' Deficit | |
$ | 2,357,495 | | |
$ | 2,833,968 | |
See notes to condensed consolidated financial statements.
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed
Consolidated Statements of Operations
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Revenues, net | |
| 571,568 | | |
$ | 928,530 | | |
| 1,086,951 | | |
$ | 1,559,351 | |
Cost of Revenues | |
| 430,599 | | |
| 743,496 | | |
| 868,023 | | |
| 1,249,378 | |
Gross Profit | |
| 140,969 | | |
| 185,034 | | |
| 218,928 | | |
| 309,973 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Expenses: | |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative | |
| 2,984,395 | | |
| 2,090,199 | | |
| 5,562,500 | | |
| 4,553,137 | |
Total Operating Expenses | |
| 2,984,395 | | |
| 2,090,199 | | |
| 5,562,500 | | |
| 4,553,137 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from Operations | |
| (2,843,426 | ) | |
| (1,905,165 | ) | |
| (5,343,572 | ) | |
| (4,243,164 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Income (Expense): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (98,470 | ) | |
| (13,361 | ) | |
| (177,336 | ) | |
| (23,490 | ) |
Interest income | |
| 12 | | |
| 42 | | |
| 36 | | |
| 93 | |
Total Other Income (Expense) | |
| (98,458 | ) | |
| (13,319 | ) | |
| (177,300 | ) | |
| (23,397 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Loss | |
| (2,941,884 | ) | |
$ | (1,918,484 | ) | |
| (5,520,872 | ) | |
$ | (4,266,561 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Comprehensive Income (Loss) | |
| (6,091 | ) | |
| 4,832 | | |
| (6,091 | ) | |
| (1,158 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Comprehensive Loss | |
$ | (2,947,975 | ) | |
$ | (1,913,652 | ) | |
$ | (5,526,963 | ) | |
$ | (4,267,719 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Loss Per Common Share: | |
| | | |
| | | |
| | | |
| | |
Basic and Diluted | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.08 | ) | |
$ | (0.08 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted Average Common Shares Outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic and Diluted | |
| 72,695,216 | | |
| 60,601,623 | | |
| 68,832,778 | | |
| 56,029,260 | |
See
notes to condensed consolidated financial statements.
MOBIQUITY
TECHNOLOGIES,
INC.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, | |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
Cash Flows from Operating Activities: | |
| | |
| |
Net loss | |
$ | (5,520,872 | ) | |
$ | (4,267,719 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 110,471 | | |
| 163,159 | |
Stock-based compensation | |
| 955,214 | | |
| 1,642,194 | |
Stock issued for services | |
| 140,340 | | |
| – | |
Debt discount on deferred financing | |
| 9,816 | | |
| – | |
Changes in operating assets and liabilities: | |
| | | |
| | |
(Increase) decrease in operating assets: | |
| | | |
| | |
Accounts receivable | |
| 147,761 | | |
| 61,831 | |
Inventory | |
| (20,444 | ) | |
| (96,140 | ) |
Prepaid expenses and other assets | |
| 35,796 | | |
| 5,720 | |
Increase (decrease) in operating liabilities: | |
| | | |
| | |
Accounts payable | |
| (157,921 | ) | |
| 27,901 | |
Accrued expenses | |
| 30,805 | | |
| (53,225 | ) |
Total adjustments | |
| 1,251,838 | | |
| 1,751,440 | |
Net Cash Used in Operating Activities | |
| (4,269,034 | ) | |
| (2,516,279 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Purchase of property and equipment | |
| (5,221 | ) | |
| (17,607 | ) |
Net Cash Used in Investing Activities | |
| (5,221 | ) | |
| (17,607 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from Loan | |
| 1,350,000 | | |
| – | |
Proceeds from issuance of stock | |
| 2,720,000 | | |
| 2,523,800 | |
Net Cash Provided by Financing Activities | |
| 4,070,000 | | |
| 2,523,800 | |
| |
| | | |
| | |
Net Increase (Decrease) in Cash and Cash Equivalents | |
| (204,255 | ) | |
| (10,086 | ) |
Cash and Cash Equivalents, beginning of period | |
| 1,654,171 | | |
| 1,740,989 | |
Change in foreign currency | |
| (3,855 | ) | |
| – | |
Cash and Cash Equivalents, end of period | |
$ | 1,446,061 | | |
$ | 1,730,903 | |
| |
| | | |
| | |
| |
| | | |
| | |
Supplemental Disclosure Information: | |
| | | |
| | |
Cash paid for interest | |
$ | 51,150 | | |
$ | 10,129 | |
Cash paid for taxes | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
Non-cash Disclosures: | |
| | | |
| | |
Stock issued for interest | |
$ | 89,171 | | |
$ | – | |
See
notes to condensed consolidated financial statements.
MOBIQUITY TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
NATURE OF OPERATIONS —
On September 10, 2013,
Mobiquity Technologies, Inc. changed its name from Ace Marketing & Promotions, Inc. (the "Company" or "Mobiquity").
We operate through two wholly-owned U.S. subsidiaries, namely, Mobiquity Networks, Inc. and Ace Marketing & Promotions, Inc.
Mobiquity Networks owns 100% of Mobiquity Wireless S.L.U, a company incorporated in Spain. This corporation has an office in Spain
to support our U.S. operations.
We operate a national location-based
mobile advertising network that has developed a consumer-focused proximity network which we believe is unlike any other in the
United States. Our integrated suite of proprietary location based mobile advertising technologies allows clients to execute more
personalized and contextually relevant experiences, driving brand awareness and incremental revenue.
Leveraging our agreement
with Simon Property Group, Inc. (which we refer to herein as Simon or Simon Property), the largest mall operator in the U.S. in
terms of number of properties, we have installed our location-based mobile advertising solutions in the common areas of approximately
240 Simon retail destinations across the U.S. to create "smart malls" using Bluetooth-enabled iBeacon compatible technology.
In April 2015, we entered into an agreement with Macerich Partnership, L.P. (which we refer to herein as Macerich) to expand our
mall footprint into approximately 55 Macerich malls by June 1, 2015. We plan to expand our mall footprint into the common areas
of other malls and outside of malls with additional synergistic venues that will allow for cross marketing opportunities, including
venues such as stadiums, arenas, additional college campuses, airports and retail chains. For example, we have entered into an
agreement with the New York State University at Stony Brook to deploy a mobile advertising network in their new arena. This type
of installation will enable fan engagement, cross-marketing opportunities, sponsorship activation and create interactive event
experiences. This is our first installation in the university market.
Ace Marketing is our legacy
marketing and promotions business which provides integrated marketing services to our commercial customers. While Ace Marketing
currently represents substantially all of our revenue, we anticipate that activity from Ace Marketing will represent a diminishing
portion of corporate revenue as our attention is now principally focused on developing and executing on opportunities in our Mobiquity
Networks business.
Our Agreements with Mall Property Owners/Managers
and IBM
Simon Properties
We entered into an initial
agreement with Simon Property in April 2011. This agreement was amended in September 2013 and July 2014 to, among other things,
expand the number of Simon mall properties covered by the agreement. Pursuant to our agreement with Simon, we have the right, on
an exclusive basis, to install Bluetooth proximity marketing equipment to send information across the air space of the common areas
of our Simon mall network, which includes approximately 240 malls across the United States. Under a master agreement and related
agreements between us and Simon covering approximately 240 Simon malls, Simon is entitled to receive fees from us equal to a minimum
fee plus the greater of a pre-set, per mall fee or a percentage of revenues derived from within the Simon mall network as well
as certain commission fees based on revenues generated through Simon's sales efforts. We believe that the revenue share in which
Simon participates will exceed the minimum annual mall fees if we generate revenues within the Simon network of approximately $14
million or more in a calendar year. Our agreement with Simon requires us to maintain letters of credit for each calendar year under
the agreement represented by the minimum amount of fees due for such calendar year as well as certain levels of insurance. The
agreement also provides for Simon to adjust the number of malls subject to the agreement from time to time based upon changes in
its beneficial ownership interest in the malls. Our agreement with Simon expires on December 31, 2017. Our agreement with Simon
is subject to earlier termination by either us or Simon following a notice and cure period in the event of a material breach of
the agreement.
Macerich
In April 2015, we entered
into a license agreement with Macerich. Pursuant to our agreement with Macerich, we have the right to install Mobi-Beacons to send
information across the air space of the common areas of our Macerich mall network, which will, when fully installed we estimate
to include approximately 55 malls, across the United States. Our right to install our Mobi-Beacons to market and sell third party
paid advertising in the interior common areas of these malls shall be exclusive. Under a Macerich license agreement between us
and Macerich currently covering 55 malls, Macerich is entitled to receive fees from us equal to a minimum fee plus the greater
of a pre-set per mall fee or a percentage of revenues derived from within the Macerich mall network as well as certain commission
fees based on revenues generated through Macerich's sales efforts. We believe that the revenue share in which Macerich participates
will exceed the minimum annual mall fees if we generate revenues with the Macerich network of approximately $3 million or more
in a calendar year. The agreement also provides for Macerich to adjust the number of malls subject to the agreement from time-to-time
based upon changes in its beneficial ownership in the malls. Our agreement with Macerich has a term of three years but is subject
to earlier termination (i) with cause following a notice and cure period in the event of material breach of the agreement or (ii)
without cause by Macerich after one year on 90 days' prior written notice to us. In the event of termination of the agreement without
cause, Macerich will reimburse us for certain out-of-pocket expenses.
IBM
In April 2015, we entered
into a Joint Initiative Agreement with IBM and enrolled as an IBM Business Partner through IBM's PartnerWorld program. We are teaming
with IBM to deliver jointly developed solutions for mall-based tenants, including retail clients. These solutions leverage the
Mobiquity Networks beacon platform deployed exclusively in the common areas of our mall footprint across the United States, as
well as our SDK which can be embedded within mall clients' mobile apps, to deliver relevant content in real time to shoppers' smart
phones as they visit these malls. IBM has agreed to work with these clients to provide the analytics solutions needed to deliver
personalized, one-on-one content to shoppers through our platform, and to help clients obtain insights from shopper transactions
to drive improved customer experience and business performance. IBM services will also provide the integration capabilities needed
to combine the Mobiquity Network platform in the mall common areas with the in-store server and network infrastructure, to optimize
delivery of context-relevant content for the shopper. Together, our Joint initiative Agreement with IBM can help their mall clients
provide enhanced omni-channel marketing solutions and optimize business results. The agreement has an initial terms of two years
and may be extended by agreement of the parties.
PRINCIPLES OF CONSOLIDATION
- The accompanying consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace
Marketing & Promotions, Inc., and its wholly owned subsidiaries, Mobiquity Networks, Inc., Ace Marketing, Inc., (which has
had its name changed to Ace Marketing & Promotions, Inc. and Mobiquity Wireless S.L.U.). All intercompany accounts and transactions
have been eliminated in consolidation.
The Condensed Consolidated
Balance Sheets as of June 30, 2015 and December 31, 2014, the Condensed Consolidated Statements of Operations for the three months
and six months ended June 30, 2015 and 2014 and the Condensed Consolidated Statements of Cash Flows for the six months ended June
30, 2015 and 2014 have been prepared by us without audit, and in accordance with the requirements of Form 10-Q and, therefore,
they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations,
and cash flows in conformity with accounting principles generally accepted in the United States of America. In our opinion, the
accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly in all material
respects our financial position as of June 30, 2015, results of operations for the three months and six months ended June 30, 2015
and 2014 and cash flows for the six months ended June 30, 2015 and 2014. All such adjustments are of a normal recurring nature.
The results of operations and cash flows for the three months ended June 30, 2015 are not necessarily indicative of the results
to be expected for the full year. We have evaluated subsequent events through the filing of this Form 10-Q with the SEC, and determined
there have not been any events that have occurred that would require adjustments to our unaudited Condensed Financial Statements.
The information contained
in this report on Form 10-Q should he read in conjunction with our Form 10-K for our fiscal year ended December 31, 2014.
ESTIMATES - The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL
INSTRUMENTS - Effective January 1, 2008, the Company adopted FASB ASC 820, "Fair Value Measurements and Disclosures"
("ASC 820"), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition
for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements,
and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of
ASC 820 did not have an impact on the Company's financial position or operating results, but did expand certain disclosures.
ASC 820 defines fair value
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs
such as quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based
inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs
for which there is little or no market data, which require the use of the reporting entity's own assumptions.
Cash and cash equivalents
include money market securities that are considered to be highly liquid and easily tradable as of June 30, 2015 and December 31,
2014. These securities are valued using inputs observable in active markets for identical securities and are therefore classified
as Level 1 within our fair value hierarchy.
The carrying amounts of
financial instruments, including accounts receivable, accounts payable and accrued liabilities, and promissory note, approximated
fair value as of June 30, 2015 and December 31, 2014, because of the relatively short-term maturity of these instruments and their
market interest rates. No instruments are carried at fair value.
RECLASSIFICATIONS - Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported losses.
CASH AND CASH EQUIVALENTS
- The Company considers all highly liquid debt instruments with a maturity of three months or less, as well as bank money
market accounts, to be cash equivalents. As of June 30, 2015 and December 31, 2014, the balances were $1,446,061 and $1,654,171,
respectively.
CONCENTRATION OF CREDIT
RISK - Financial instruments, which potentially subject the Company to concentrations of credit
risk, consist principally of trade receivables and cash and cash equivalents.
Concentration of credit
risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company's customer
base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial
strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited.
The Company places its
temporary cash investments with high credit quality financial institutions. At times, the Company maintains bank account balances,
which exceed FDIC limits. As June 30, 2015 and December 31, 2014, the Company exceeded FDIC limits by $1,013,509 and $1,292,227,
respectively.
REVENUE RECOGNITION —
The Company recognizes revenue, for all revenue streams, when it is realized or realizable and estimable in accordance with ASC
605, "Revenue Recognition". The Company will recognize revenue only when all of the following criteria have been
met:
|
· |
Persuasive evidence for an agreement exists; |
|
· |
Service has been provided; |
|
· |
The fee is fixed or determinable; and, |
|
· |
Collection is reasonably assured. |
ACE MARKETING — Ace
Marketing's revenue is recognized when title and risk of loss transfers to the customer and the earnings process is complete. In
general, title passes to our customers upon the customer's receipt of the merchandise. Revenue is recognized on a gross basis since
Ace Marketing has the risks and rewards of ownership, latitude in selection of vendors and pricing, and bears all credit risk.
Advance payments made by customers are included in customer deposits. Ace Marketing records all shipping and handling fees billed
to customers as revenues and related costs as cost of goods sold, when incurred. Additional source of revenue, derived from emails/texts
directly to consumers are recognized under contractual arrangements. Revenue from this advertising method is recognized at the
time of service provided.
MOBIQUITY NETWORKS - Mobiquity
Networks. Mobiquity has three avenues of income with our beacon platform, Bluetooth Push and Wi-Fi. Revenue is realized with the
signing of the advertising contract. The customer signs a contract directly with us for an advertising campaign with mutually agreed
upon term and is billed on the start date of the advertising campaign, which are normally in short duration periods. Revenue is
recognized the same way for the three mobile solutions. The first option to earn revenue with the beacon platform is for customers
to contract for advertising campaigns, on our platform, either directly through their own app or through various third party apps.
The second option to earn revenue is through a revenue share with advertising exchanges and networks that deliver advertising campaigns
to their customers based on our real-time location signal data. The third option would be through selling our historical data to
data management platform companies.
ALLOWANCE FOR DOUBTFUL
ACCOUNTS - Management must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and
changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of June 30, 2015 and
December 31, 2014, allowance for doubtful accounts were $40,000 and $40,000, respectively.
INVENTORY - Inventory is
recorded at cost (First In, First Out) and is comprised of finished goods. The Company maintains an inventory on hand for its largest
customer's frequent order items. All items held are branded for the customer, therefore are not available for public distribution.
The Company has an agreement with this customer, for cost recovery, if vendor relationship is terminated. There have been minimal
reserves placed on inventory, based on this arrangement. As of June 30, 2015 and December 31, 2014, the Company has reserved against
$31,676 and $31,676, respectively.
PROPERTY
AND EQUIPMENT - Property and equipment are stated at cost. Depreciation is expensed using the straight-line method over
the estimated useful lives of the related assets of three to five years. Leasehold improvements are being amortized using
the straight-line method over sixty months of the estimated useful lives of the related assets or the remaining term of the
lease. The costs of additions and improvements, which substantially extend the useful life of a particular asset,
are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the cost
and related accumulated depreciation are removed from the account and the gain or loss on disposition is reflected
in operating income.
LONG LIVED ASSETS - Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate
that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based
on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets,
if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its
undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the
asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at
a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any
periods presented.
WEBSITE TECHNOLOGY - Website
technology developed during the prior years were capitalized for the period of development and testing. Expenditures during the
planning stage and after implementation have been expensed in accordance with ASC 985.
ADVERTISING COSTS
- Advertising costs are expensed as incurred. For the quarters ended June 30, 2015 and June 30, 2014, there were advertising
costs of $5,295 and $0, respectively. For the six months ended June 30, 2015 and June 30, 2014, there were advertising costs of
$5,495 and $288, respectively.
ACCOUNTING FOR STOCK BASED
COMPENSATION. Stock based compensation cost is measured at the grant date fair value of the award and is recognized as expense
over the requisite service period. The Company uses the Black-Sholes option-pricing model to determine fair value of the awards,
which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their
vested stock options before exercising them ("expected term"), the estimated volatility of the Company's common stock
price over the expected term ("volatility") and the number of options for which vesting requirements will not be completed
("forfeitures"). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation,
and the related amount recognized on the consolidated statements of operations. Refer to Note 8 "Stock Option Plans"
in the Notes to Consolidated Financial Statements in this report for a more detailed discussion.
BENEFICIAL CONVERSIONS
- Debt instruments that contain a beneficial conversion feature are recorded as deemed interest to the holders of the convertible
debt instruments. The beneficial conversion is calculated as the difference between the fair values of the underlying common stock
less the proceeds that have been received for the debt instrument limited to the value received.
FOREIGN
CURRENCY TRANSLATIONS - The Company's functional and reporting currency is the U.S. dollar. We own a subsidiary in Europe.
Our subsidiary's functional currency is the EURO. All transactions initiated in EUROs are translated into U.S. dollars
in accordance with ASC 830-30, the average exchange rate of 1.1094% and period end exchange rate of 1.300% were used for the
second quarter of 2015 "Translation of Financial Statements," as follows:
|
(i) |
Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date. |
|
(ii) |
Fixed assets and equity transactions at historical rates. |
|
(iii) |
Revenue and expense items at the average rate of exchange prevailing during the period. |
Adjustments arising from
such translations are deferred until realization and are included as a separate component of stockholders' equity as a component
of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported
as other comprehensive income.
No significant realized
exchange gains or losses were recorded since March 7, 2013 (date of acquisition of subsidiary) to June 30, 2015.
INCOME TAXES - Deferred
income taxes are recognized for temporary differences between financial statement and income tax basis of assets and liabilities
for which income tax or tax benefits are expected to be realized in future years. A valuation allowance is established to reduce
deferred tax assets, if it is more likely than not, that all or some portion of such deferred tax assets will not be realized.
The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We have reviewed the FASB
issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness
dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter
previous generally accepted accounting principles and does not believe that any new or modified principles will have a material
impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject
to the formal review of our financial management and certain standards are under consideration.
NOTE 2: LOSS PER SHARE
Basic loss per common share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Dilutive
loss per share gives effect to stock options and warrants, which are considered to be dilutive common stock equivalents. Basic
loss per common share was computed by dividing net loss by the weighted average number of shares of common stock outstanding. The
number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted
loss per common share calculation was approximately 51,681,000 and 33,304,000 because they are anti-dilutive as a result of a net
loss for the three months ended June 30, 2015 and 2014, respectively.
NOTE 3: CONVERTIBLE PROMISSORY NOTE
Summary of Convertible Promissory Notes:
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | |
Arnost Note (a) | |
$ | 322,000 | | |
$ | 322,000 | |
Cavu Notes (b), net of $38,205 debt discounts | |
| 211,795 | | |
| – | |
Berg Notes (c)(d) | |
| 3,722,000 | | |
| – | |
Total Debt | |
| 4,255,795 | | |
| 322,000 | |
Current portion of debt | |
| 322,000 | | |
| 322,000 | |
Long-term portion of debt | |
$ | 3,933,795 | | |
$ | – | |
|
(a) |
On June 12, 2012, the Company closed on a security agreement (the "Security Agreement") with TCA related to a $350,000 Convertible promissory note issued by the Company in favor of TCA (the "Convertible Note"), which Convertible Note was funded by TCA on June 12, 2012. The maturity date of the Convertible Note was December 2013, and the Convertible Note bears interest at a rate of twelve percent (12%) per annum. The Convertible Note is convertible into shares of the Company's common stock at a price equal to ninety-five percent (95%) of the average of the lowest daily volume weighted average price of the Company's common stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note may be prepaid in whole or in part at the Company's option without penalty. The Security Agreement granted to TCA a continuing, first priority security interest in all of the Company's assets, wheresoever located and whether now existing or hereafter arising or acquired. The Company's wholly-owned subsidiary, Mobiquity Networks, Inc., also entered into a similar Security Agreement and Guaranty Agreement. On December 12, 2013, TCA sold its entire interest in the Company's $350,000 secured promissory note to Thomas Arnost, a director of the Company, at face value. Mr. Arnost entered into an amendment to the note to extend the maturity date of the note to June 12, 2014, which was later extended to December 12, 2014 and again extended to December 31, 2015, subject to his right to declare the note due and payable at any time in his sole discretion. Also, the interest rate was raised from 12% per annum to 15% and the conversion price of the shares issuable upon conversion of the note was fixed at $.30 per share. The aforementioned note is convertible at the sole discretion of the noteholder. The Company recognized a beneficial conversion, in the amount of $116,667, based on the fixed conversion price, compared to the fair market trading value at the date of the agreement. The noteholder immediately converted $28,000 into 93,334 shares of common stock in December 2013. The balance on the note is $322,000 as of June 30, 2015 and December 31, 2014. |
|
(b) |
In July 2014, the Company raised $250,000 in gross proceeds from the sale of convertible promissory notes in the principal amount of $250,000 with a maturity date of July 31, 2017. The noteholders also received Class CC Warrants to purchase 125,000 shares of common Stock, exercisable at $1.20 per share through July 31, 2017. The placement agent received $17,500 in cash, 25,000 shares of restricted Common Stock and five-year warrants to purchase 7,500 shares of Common Stock at an exercise price of $.60 per share. The notes bear interest at the rate of 6% per annum with semi-annual payments to be paid on January 31' and July 31' of each year with the first interest payment due on January 31, 2015. At the option of the noteholder, the principal and accrued interest thereon is convertible at the greater of $.50 per share or 85% of the average daily volume weighted average price of the Company's Common Stock on the OTCQB during the 20 trading days immediately preceding the applicable interest date or conversion date. In the event the Company's Common Stock has a closing sales price of at least $1.00 per share on the OTCQB for a period of at least 10 trading days with an average daily volume weighted average of at least 25,000 shares, then the Company's promissory notes shall automatically converted into shares of the Company's Common Stock at 85% of the average VWAP during the 20 trading days immediately preceding the conversion date. |
The Company evaluated the terms of
the new note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock. The Company
determined that the conversion feature did not meet the definition of a derivative and therefore did not bifurcate the conversion
feature and account for it as a separate derivative liability. The Company valued the warrants and allocated $33,362 to the warrants;
increasing additional paid in capital and off-setting the notes by the warrant value as debt discount. The Company is amortizing
the debt discount over the term of the notes, accreting the costs until the note balance equals the face value of the note. The
Company recognized $9,110 of interest due to the amortization of the debt discount. The Company evaluated the conversion feature
for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and
was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized
the beneficial conversion feature in the amount of $59,379 in 2014. The beneficial conversion feature was recorded as an
increase in additional paid-in capital.
|
(c) |
In November 2014, Carl and Mary Ann Berg 2011 CRT, Carl Berg Trustee, loaned us $1,000,000 pursuant to a two-year unsecured loan. This loan is repayable in November 2016 with interest at the rate of 4% per annum. Carl Berg is the brother of Clyde Berg. In December 2014, the Clyde Berg 2011 CRT with Carl Berg as Trustee, loaned us $1,000,000 pursuant to a two-year unsecured loan. This loan is repayable in December 2016 with interest at the rate of 4% per annum. We have an agreement with the Bergs to loan us an additional $500,000 on the same terms. These monies were received by us in January 2015. On December 29, 2014, Clyde Berg's daughter loaned us $50,000 pursuant to a two-year note. The principal and accrued interest thereon is convertible at any time by the noteholders into shares of common stock at a conversion price of $.50 per share. For every $1.00 of principal and accrued interest thereon converted, the noteholder will also receive a five-year warrant to purchase one share of common stock at an exercise price of $1.00 per share. |
|
(d) |
On December 15, 2014, we entered into a letter agreement with Carl E. Berg. The agreement recognized that Carl and Mary Ann Berg 2011 CRT, Carl Berg Trustee, and Clyde Berg 2011 CRT, Carl Berg Trustee, will have provided $2.5 million of unsecured loans to us between November and December 2014 ($2 million received in 2014, $500,000 received in January 2015). The notes mature two years from the origination date and bear interest at 4%. Pursuant to said letter agreement, we agreed that these unsecured loans may be sold, assigned or transferred to Clyde J. Berg, Carl E. Berg and/or Kara Ann Berg or any entity controlled by any of the aforementioned individuals in a combination of the aforementioned persons or entities. This letter agreement provides that if Mr. Carl E. Berg or any permitted transferee purchases or otherwise acquires the $2.5 million of unsecured notes, that these notes shall be convertible at any time prior to maturity or redemption thereof at a conversion price of $.50 per share. For every $1.00 in principal converted, a five-year warrant to purchase one additional share of common stock at an exercise price of $1.00 per share will be issued. In the event that $2.5 million is timely converted on or before January 30, 2015, we will also issue as a bonus warrants to purchase 1,000,000 shares of common stock, exercisable at $.50 per share over a five year period from the date of issuance. We also agreed to grant Mr. Berg the right to lend us up to an additional $3.75 million of optional loans on the same terms and conditions described above on or before February 15, 2015, 850,000 of which was received by us in February 2015. In the event such optional loan is converted into common stock on or before March 31, 2015, we will also issue as an additional bonus warrants to purchase up to 1,000,000 shares of common stock at an exercise price of $.50 per share from the date of issuance. We also agreed to grant him the right to lend us up to an additional $3.75 million on the same terms and conditions on or before May 15, 2015 and in the event such additional optional loan is converted into common stock on or before June 30, 2015, we will also issue bonus warrants to Mr. Berg to purchase up to 1,000,000 shares of common stock at an exercise price of $.50 per share over a period of five years from the date of issuance. All bonus warrants contain cashless exercise provisions. The 2,000,000 bonus warrants described above assumes full funding of the $7.5 million optional loans and 100% conversion on or before the dates described above. In the event the amount of optional loans is less than an aggregate of $3.75 million converted prior to March 31, 2015 and an additional $3.75 million converted prior to June 30, 2015, then the bonus warrants to purchase an aggregate of 2,000,000 shares will be proportionately reduced. In the second quarter, all dates were extended by the Company unilaterally through June 30, 2015. In summary, in the event all $10 million is provided to us, including an additional $7.5 million on a timely basis, subject to our right of acceptance or rejection in our sole discretion, and all loans are timely converted on or before the dates described above, we will have issued 20 million shares of common stock, 10 million warrants to purchase shares of common stock at an exercise price of $1.00 per share, plus five year bonus warrants to purchase 3,000,000 shares of our common stock at an exercise price of $.50 per share with cashless exercise provisions pertaining to the bonus warrants. Also, in the event the $10 million of funding is completed, Mr. Berg has the right to appoint one independent member to the board, which nominee will be subject to normal background checks. As of June 30, 2015, no additional monies were received by the Company and there have been no conversions of debt into common stock and warrants. |
The Company evaluated the terms of
December 15, 2014 agreement and accounted for the modification of the original notes as an extinguishment of the old notes and
fair valued the new note agreement. The Company valued the note with conversion features and warrants and determined that the value
of the new agreement resulted in a $322,000 loss on the extinguishment of debt and a corresponding premium to the loan value.
NOTE 4: STOCKHOLDERS' EQUITY (DEFICIT)
During 2014, the Company
has raised gross proceeds of $3,276,310, net of offering costs of $283,990, from the sale of its Common Stock, at $0.30 to $0.50
per share, in exchange for 10,867,669 common shares and warrants to purchase 4,433,839 shares at an exercise price of $.50 to $1.00
per share through December 31, 2017 and 2019.
During 2014 the Company
received $175,000 of the stock subscription receivables from 2013.
During 2014, the Company
issued to consultants and employees, 784,000 shares of stock for services rendered, at a fair market value of $366,541. Also, the
Company issued another 135,000 shares of the common stock to a consultant for prepaid services, at a fair market value of $53,055.
During 2014, the Company
recorded $3,117,000 for stock based compensation related to warrants and options. The Company also recorded a beneficial conversion
feature of $59,379 related to a convertible promissory note for $250,000.
December 2014, the Company
issued 500,000 common shares for the receipt of $150,000 cash, from the exercise of 500,000 warrants.
During the year ending
December 2014, cashless exercise of warrants resulted in the issuance of 66,536 shares of common stock.
During 2014, the Company
issued 62,791 common shares, valued at $27,000, in payment of interest expense.
During the quarter ended
March 31, 2015, the Company commenced a private placement offering at an offering price of $.30 per share with matching warrants
issued to purchase an additional share of common stock at $.45 per share through March 31, 2020. Three investors purchased an
aggregate of 1,666,667 shares for proceeds of $500,000 from our private placement offering on March 30, 2015. The Company also
issued 77,143 shares for $27,000 of interest and 90,000 shares for $22,000 of services rendered during the quarter.
During the
quarter ended June 30, 2015, the Company issued 7,400,000 shares for proceeds of $2,220,000 under the private placement offering.
We also issued 236,842 shares for $59,000 of interest and 435,000 shares for $119,000 of services during the quarter.
NOTE 5: STOCK COMPENSATION
Compensation costs related
to share-based payment transactions, including employee stock options, are recognized in the financial statements utilizing the
straight line method for the cost of these awards.
The Company's results for
the three month periods ended June 30, 2015 and 2014 include employee share-based compensation expense totaling approximately $501,000
and $551,000, respectively. The Company's results for the six month periods ended June 30, 2015 and 2014 include employee share-based
compensation expense totaling approximately $955,000 and $1,642,000, respectively. Such amounts have been included in the Condensed
Consolidated Statements of Operations within selling, general and administrative expenses. No income tax benefit has been recognized
in the statement of operations for share-based compensation arrangements due to a history of operating losses.
The following table summarizes
stock-based compensation expense for the three and six months ended June 30, 2015 and 2014 (unaudited):
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Employee stock-based compensation - option grants | |
$ | 315,763 | | |
$ | 14,791 | | |
$ | 751,754 | | |
$ | 29,582 | |
Employee stock-based compensation - stock grants | |
| – | | |
| – | | |
| – | | |
| – | |
Non-Employee stock-based compensation - option grants | |
| 11,455 | | |
| 214,748 | | |
| 29,405 | | |
| 920,261 | |
Non-Employee stock-based compensation - stock grants | |
| – | | |
| 321,603 | | |
| – | | |
| 370,748 | |
Non-Employee stock-based compensation-stock warrant | |
| 174,055 | | |
| – | | |
| 174,055 | | |
| 321,603 | |
Total | |
$ | 501,273 | | |
$ | 551,142 | | |
$ | 955,214 | | |
$ | 1,642,194 | |
NOTE 6: STOCK OPTION PLAN
During Fiscal 2005, the
Company established, and the stockholders approved, an Employee Benefit and Consulting Services Compensation Plan (the "2005
Plan") for the granting of up to 2,000,000 non-statutory and incentive stock options and stock awards to directors, officers,
consultants and key employees of the Company. On June 9, 2005, the Board of Directors amended the Plan to increase the number of
stock options and awards to be granted under the Plan to 4,000,000. During Fiscal 2009, the Company established a plan of long-term
stock-based compensation incentives for selected Eligible Participants of the Company covering 4,000,000 shares. This plan was
adopted by the Board of Directors and approved by stockholders in October 2009 and shall be known as the 2009 Employee Benefit
and Consulting Services Compensation Plan (the "2009 Plan"). In September 2013, the Company's stockholders approved an
increase in the number of shares covered by the 2009 Plan to 10,000,000. In February 2015, the board approved, subject to stockholder
approval within one year, an increase in the number of shares under the 2009 Plan to 20,000,000 shares. (The 2005 and 2009 Plans
are collectively referred to as the "Plans" and the Company has a combined 14,000,000 shares, which will increase to
24,000,000 shares upon stockholder approval of the increase in the 2009 Plan, available for issuance under the Plans.)
All stock options under
the Plans are granted at or above the fair market value of the common stock at the grant date. Employee and non-employee stock
options vest over varying periods and generally expire either 5 or 10 years from the grant date. The fair value of options at the
date of grant was estimated using the Black-Scholes option pricing model. For option grants, the Company will take into consideration
payments subject to the provisions of ASC 718 "Stock Compensation", previously Revised SFAS No. 123 "Share-Based
Payment" ( "SFAS 123 (R)"). The fair values of these restricted stock awards are equal to the market value of the
Company's stock on the date of grant, after taking into certain discounts. The expected volatility is based upon historical volatility
of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of
grant and exercise of options for all employees. Previously, such assumptions were determined based on historical data.
The weighted average assumptions
made in calculating the fair values of options granted during the three and six months ended June 30, 2015 and 2014 are as follows:
|
|
Three Months Ended
June 30 |
|
|
Six Months Ended
June 30 |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Expected volatility |
|
|
27.07% |
|
|
|
136.44% |
|
|
|
32.04% |
|
|
|
119.24% |
|
Expected dividend yield |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Risk-free interest rate |
|
|
1.61% |
|
|
|
.97% |
|
|
|
1.90% |
|
|
|
1.10% |
|
Expected term (in years) |
|
|
7.25 |
|
|
|
5 |
|
|
|
8.89 |
|
|
|
5.67 |
|
|
|
Share |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Term |
|
|
Aggregate
Intrinsic
Value |
|
Outstanding, January 1, 2015 |
|
|
16,980,000 |
|
|
|
.51 |
|
|
|
5.74 |
|
|
$ |
160,100 |
|
Granted |
|
|
2,460,000 |
|
|
|
.30 |
|
|
|
7.85 |
|
|
|
– |
|
Exercised |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Cancelled & Expired |
|
|
(600,000 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, June 30, 2015 |
|
|
18,840,000 |
|
|
|
.40 |
|
|
|
8.27 |
|
|
$ |
9,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, June 30, 2015 |
|
|
15,117,372 |
|
|
|
.41 |
|
|
|
8.17 |
|
|
$ |
9,000 |
|
The weighted-average grant-date
fair value of options granted during the six months ended June 30, 2015 and 2014 was $.40 and $0.41, respectively.
The aggregate intrinsic
value of options outstanding and options exercisable at June 30, 2015 is calculated as the difference between the exercise price
of the underlying options and the market price of the Company's common stock for the shares that had exercise prices, that were
lower than the $.25 closing price of the Company's common stock on June 30, 2015.
As of June 30, 2015, the
fair value of unamortized compensation cost related to unvested stock option awards was $1,334,725.
The weighted average
assumptions made in calculating the fair value of warrants granted during the three and six months ended June 30, 2015 and 2014
are as follows:
|
|
Three Months Ended
June 30 |
|
|
Six Months Ended
June 30 |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Expected volatility |
|
|
4.68% |
|
|
|
156.68% |
|
|
|
4.68% |
|
|
|
156.681% |
|
Expected dividend yield |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Risk-free interest rate |
|
|
.12% |
|
|
|
1.69% |
|
|
|
.12% |
|
|
|
1.69% |
|
Expected term (in years) |
|
|
.50 |
|
|
|
5 |
|
|
|
.50 |
|
|
|
5 |
|
|
|
Share |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Term |
|
|
Aggregate
Intrinsic
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2015 |
|
|
23,773,914 |
|
|
$ |
.58 |
|
|
|
2.50 |
|
|
$ |
53,500 |
|
Granted |
|
|
9,066,668 |
|
|
$ |
.45 |
|
|
|
4.96 |
|
|
|
– |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
(6,000 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Outstanding, June 30, 2015 |
|
|
32,834,582 |
|
|
$ |
.45 |
|
|
|
4.74 |
|
|
|
7,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable, June 30, 2015 |
|
|
32,834,582 |
|
|
$ |
.45 |
|
|
|
4.74 |
|
|
$ |
7,500 |
|
NOTE 7: COMMITMENTS AND CONTINGENCIES
COMMITMENTS —
In April 2011, we entered
into our agreement with Simon Property Group, which agreement was amended first in September 2013 and then in July 2014. This second
amendment provides for us to expand our location-based mobile mall network footprint to about 240 Simon malls across the United
States. Our agreement with Simon currently expires December 31, 2017. Simon is entitled to receive fees from us equal to the greater
of a pre-set per mall fee or a percentage of revenues derived from within the Simon Mall network. The revenue share agreement in
which Simon participates will exceed the minimum annual mall fees if the Company has generated revenues within the Simon network
of about $15 million or more in a calendar year. Our agreement with Simon requires the company to maintain letters of credit for
each calendar year under the agreement represented by the minimum amount of fees due for such calendar year. For 2015, the minimum
fees of $2.7 million has been secured through two bank letters of credit, one of which was issued in the amount of $1,350,000 utilizing
the funds of a non-affiliated stockholder and the second letter of credit was obtained in the same amount through the funds of
Thomas Arnost, our Executive Chairman. In the event Simon draws down upon either letter of credit, we have 30 days after the draw
down to obtain replacement letters of credit. Each person who secured our letters of credit has the opportunity to notify us that
they wish to turn the cash funds securing the letters of credit over to us and to convert such funds into Common Stock originally
at a conversion price of $1.00 per share and recently adjusted to $.30 per share. Also, each person who issued the letter of credit
is receiving quarterly, while the letters of credit are outstanding, options to purchase 125,000 shares of Common Stock, exercisable
at the prevailing market price per share on the date of grant and interest at the rate of 8% per annum on the monies that they
have had to set aside in their bank accounts and are unable to have access to such monies.
In February 2012, the Company
entered into a lease agreement for new executive office space of approximately 4,200 square feet located at 600 Old Country Road,
Suite 541, Garden City, NY 11530. The lease agreement is for 63 months, commencing April 2012 and expiring June 2017. The annual
rent under this office facility for the first year is estimated at $127,000, including electricity, subject to an annual increase
of 3%. In the event of a default in which the Company is evicted from the office space, Mobiquity would be responsible to the landlord
for an additional payment of rent of $160,000 in the first year of the lease, an additional payment of $106,667 in the second year
of the lease and an additional payment of rent of $53,333 in the third year of the lease. Such additional rent would be payable
at the discretion of the Company in cash or in Common Stock of the Company.
The Company leases office
space under non-cancelable operating leases in Farmingville, NY which expired in November 2014. The Company is currently operating
on a month to month basis with an increase of 5% in rents. The Company is obligated for the payment of real estate taxes under
these leases. The Company also leases on a month to month basis another office in the 600 Old Country Road building which is approximately
800 square feet at a cost of $1650 per month. The Company also leases approximately 1,200 square feet of office and warehouse space
in Spain at a monthly cost of approximately $2,200.
In March of 2014, the Company
entered into a month to month lease agreement for approximately a 400 square foot office space in Manhattan NY at $3,700 per month.
In May of 2015 we expanded our current month to month lease agreement for approximately 400 additional square feet for a total
rent of $5,250 per month.
In April 2015,
we entered into a license agreement with Macerich. Pursuant to our agreement with Macerich, we have the right to install Mobi-Beacons
to send information across the air space of the common areas of our Macerich mall network, which will, when fully installed we
estimate to include approximately 55 malls, across the United States. Our right to install our Mobi-Beacons to market and sell
third party paid advertising in the interior common areas of these malls shall be exclusive. Under a Macerich license agreement
between us and Macerich currently covering 55 malls, Macerich is entitled to receive fees from us equal to a minimum fee plus the
greater of a pre-set per mall fee or a percentage of revenues derived from within the Macerich mall network as well as certain
commission fees based on revenues generated through Macerich's sales efforts. We believe that the revenue share in which Macerich
participates will exceed the minimum annual mall fees if we generate revenues with the Macerich network of approximately $3 million
or more in a calendar year. The agreement also provides for Macerich to adjust the number of malls subject to the agreement from
time-to-time based upon changes in its beneficial ownership in the malls. Our agreement with Macerich has a term of three years
but is subject to earlier termination (i) with cause following a notice and cure period in the event of material breach of the
agreement or (ii) without cause by Macerich after one year on 90 days' prior written notice to us. In the event of termination
of the agreement without cause, Macerich will reimburse us for certain out-of-pocket expenses.
In April 2015,
we entered into a Joint Initiative Agreement with IBM and enrolled as an IBM Business Partner through IBM's PartnerWorld program.
We are teaming with IBM to deliver jointly developed solutions for mall-based tenants, including retail clients. These solutions
leverage the Mobiquity Networks beacon platform deployed exclusively in the common areas of our mall footprint across the United
States, as well as our SDK which can be embedded within mall clients' mobile apps, to deliver relevant content in real time to
shoppers' smart phones as they visit these malls. IBM has agreed to work with these clients to provide the analytics solutions
needed to deliver personalized, one-on-one content to shoppers through our platform, and to help clients obtain insights from shopper
transactions to drive improved customer experience and business performance. IBM services will also provide the integration capabilities
needed to combine the Mobiquity Network platform in the mall common areas with the in-store server and network infrastructure,
to optimize delivery of context-relevant content for the shopper. Together, our Joint Initiative Agreement with IBM can help their
mall clients provide enhanced omni-channel marketing solutions and optimize business results. The agreement has an initial terms
of two years and may be extended by agreement of the parties.
Rent and real estate tax
expense was approximately $758,500 and $299,900 for the three months ended June 30, 2015 and 2014, respectively. Rent and real
estate tax expense was approximately $1,498,000 and $592,600 for the six months ended June 30, 2015 and 2014, respectively.
EMPLOYMENT CONTRACTS —
Michael D. Trepeta and Dean L. Julia
On March 1, 2005, the Company
entered into employment contracts with two of its officers, namely, Dean L. Julia and Michael D. Trepeta. The employment agreements
provide for minimum annual salaries, currently $30,000 per month (which does not include $2,000 per month which has been deferred
until receipt of additional financing), plus bonuses equal to 5% of pre-tax earnings (as defined) and other perquisites commonly
found in such agreements. On March 1st of each year, each officer receives a $2,000 per month salary increase. In addition, pursuant
to the employment contracts, the Company annually grants each officer options to purchase 200,000 shares of common stock.
On August 22, 2007, the
Company approved a three year extension of the employment contracts with two of its officers expiring on February 28, 2011. The
employment agreements provided for minimum annual salaries with scheduled increases per annum to occur on every anniversary date
of the contract and extension commencing on March 1, 2008. A signing bonus of options to purchase 150,000 shares granted to each
executive were fully vested at the date of the grant and exercisable at $1.20 per share through August 22, 2017. Ten year options
to purchase 50,000 shares of common stock are to be granted at fair market value on each anniversary date of the contract and extension
commencing March 1, 2008. Termination pay of one year base salary based upon the scheduled annual salary of each executive officer
for the next contract year, plus the amount of bonuses paid (or entitle to be paid) to the executive for the current fiscal year
of the preceding fiscal year, whichever is higher.
On April 7, 2010, the Board
of Directors approved a five-year extension of the employment contract of Dean L. Julia and Michael D. Trepeta to expire on March
1, 2015, The Board approved the continuation of each officer's current salary and scheduled salary increases on March 1st
of each year. The Board also approved a signing bonus of stock options to purchase 200,000 shares granted to each officer which
is fully vested at the date of grant and exercisable at $.50 per share through April 7, 2020; ten-year stock options to purchase
100,000 shares of Common Stock to be granted to each officer at fair market value on each anniversary date of the contract and
extension thereof commencing March 1, 2011; and termination pay of one year base salary based upon the scheduled annual salary
of each executive officer for the next contract year plus the amount of bonuses paid or entitled to be paid to the executive for
the current fiscal year or the preceding fiscal year, whichever is higher. In the event of termination, the executives will continue
to receive all benefits included in the employment agreement through the scheduled expiration date of said employment agreement
prior to the acceleration of the termination date thereof.
In July 2012, the Company
approved and in January 2013 the Company implemented amending the employment agreements of Messrs. Julia and M. Trepeta to expire
on February 28, 2017, subject to an automatic one year renewal on March 1, 2013 and on each March 1' thereafter, unless the Employment
Agreement is terminated in accordance with its terms on or before December 30th of the prior calendar year. In the event of termination
without cause, the executives will continue to receive all salary and benefits included in the employment agreement through the
scheduled expiration date of said employment agreement prior to the acceleration of the termination date thereof, plus one year
termination pay.
On May 28, 2013, the Company
approved amending the employment agreements of Messrs. Julia and Trepeta to provide that each officer may choose an annual bonus
equal to 5% of pre-tax earnings for the most recently completed year before deduction of annual bonuses paid to officers or, in
the event majority control of the Company is acquired by a person or a group of persons during the prior fiscal year, the officer
may choose to receive the aforementioned bonus or 1% of the control consideration paid by acquirer(s) to acquire majority control
of the Company.
Thomas Arnost
In December 2014, we entered
into a three-year employment agreement with Thomas Arnost serving as Executive Chairman of the board. Mr. Arnost receives a monthly
salary of $10,000 plus an annual grant of options for serving on the board of directors. In the event of his termination, by Mr.
Arnost or by the company for cause, Mr. Arnost will receive his pay through the termination date. In the event that Mr. Arnost
is terminated without cause, he shall be entitled to receive his salary paid through the end of the term of his agreement. Mr.
Arnost may terminate the agreement at any time by giving three months prior written notice to our board of directors. Mr. Arnost
will also be entitled to indemnification against all claims, judgments, damages, liabilities, costs and expenses (including reasonably
legal fees) arising out of, based upon or related to his performance of services to us, to the maximum extent permitted by law.
Sean Trepeta
In December 2014, Mobiquity
Networks entered into an employment agreement with Sean Trepeta, to serve as President of Mobiquity Networks as an employee at
will. Mr. Trepeta, as a full-time employee, is to be paid a salary at the rate of $20,000 per month. Upon the execution of the
agreement, he received 10-year options to purchase 1,500,000 shares of our common stock vesting quarterly over a period of three
years. For calendar 2015, he will be entitled to a bonus of $125,000 upon revenues of Mobiquity Networks achieving a minimum of
$6 million in revenues and a further bonus of $125,000 for a total of $250,000 at such time as Mobiquity Network's revenues achieve
a minimum of $12 million, it being understood that any revenues which do not have a 30% margin shall not count toward these totals.
All options granted to Mr. Trepeta will become immediately vested in the event of a change in control of our Company or sale of
substantially all of our assets. In the event we terminate Mr. Trepeta without cause, after six months of continued employment
under the employment agreement, Mr. Trepeta is entitled to receive three months' severance pay.
Paul Bauersfeld
In December 2014, we entered
into an employment agreement with Paul Bauersfeld, our Chief Technology Officer, who is an employee at will. Mr. Bauersfeld, as
a full-time employee, is to be paid a salary at the rate of $25,000 per month. Upon the execution of the agreement, he received
10-year options to purchase 1,000,000 shares of our common stock vesting quarterly over a period of three years. For calendar 2015,
he will be entitled to a bonus of $125,000 upon revenues of Mobiquity Networks achieving a minimum of $6 million in revenues and
a further bonus of $125,000 for a total of $250,000 at such time as Mobiquity Network's revenues achieve a minimum of $12 million,
it being understood that any revenues which do not have a 30% margin shall not count toward these totals. The foregoing compensatory
arrangements with Mr. Bauersfeld is in addition to the non-statutory stock options to purchase 2,600,000 shares of our common stock
previously granted to Mr. Bauersfeld. All options granted to Mr. Bauersfeld will become immediately vested in the event of a change
of control of our company or sale of substantially all of our assets. In the event we terminate Mr. Bauersfeld without cause. Mr.
Bauersfeld is entitled to receive six months' severance pay.
Sean McDonnell
Sean McDonnell, our Chief
Financial Officer, is an employee at will and is currently receiving a salary of $132,000 per annum.
TRANSACTIONS WITH MAJOR CUSTOMERS
—
The Company sells its branded
merchandise to a geographically diverse group of customers, performs ongoing credit evaluations of its customers and generally
does not require collateral. During the three months ended June 30, 2015 a customer accounted for approximately 30% of net revenues
and for the three months ended June 30, 2014 a customer accounted for approximately 25% of net revenues. The Company holds on hand
certain items that are ordered on a regular basis.
NOTE 8: SEGMENT INFORMATION
Reportable operating segment
is determined based on Mobiquity Technologies, Inc.'s management approach. The management approach, as defined by accounting standards
which have been codified into FASB ASC 280, "Segment Reporting," is based on the way that the chief operating decision-maker
organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance.
Our chief operating decision-maker is our Chief Executive Officer and Chief Financial Officer.
While our results of operations
are primarily reviewed on a consolidated basis, the chief operating decision-maker also manages the enterprise in two operating
segments: (i) Ace Marketing and Promotions, Inc. captures Branding & Branded Merchandise (ii) Mobiquity Networks represent
our Mobil Marketing.
Corporate management defines
and reviews segment profitability based on the same allocation methodology as presented in the segment data tables below:
Second Quarter of Fiscal 2015
|
|
Quarter Ended June 30, 2015 |
|
|
|
Ace Marketing & Promotions, Inc. |
|
|
Mobiquity Networks, Inc. |
|
|
Total |
|
Revenues, net |
|
$ |
571,568 |
|
|
$ |
– |
|
|
$ |
571,568 |
|
Operating (loss), before interest, amortization, depreciation and taxes |
|
|
(856,027 |
) |
|
|
(1,938,427 |
) |
|
|
(2,794,454 |
) |
Interest income |
|
|
12 |
|
|
|
– |
|
|
|
12 |
|
Interest (expense) |
|
|
(98,470 |
) |
|
|
– |
|
|
|
(98,470 |
) |
Depreciation and amortization |
|
|
(13,766 |
) |
|
|
(35,206 |
) |
|
|
(48,972 |
) |
Net Loss |
|
|
(968,251 |
) |
|
|
(1,973,633 |
) |
|
|
(2,941,884 |
) |
Assets at June 30, 2015 |
|
|
2,069,102 |
|
|
|
288,393 |
|
|
|
2,357,495 |
|
Six Months of Fiscal 2015
|
|
Six Months Ended June 30, 2015 |
|
|
|
Ace Marketing & Promotions, Inc. |
|
|
Mobiquity Networks, Inc. |
|
|
Total |
|
Revenues, net |
|
$ |
1,086,951 |
|
|
$ |
– |
|
|
$ |
1,086,951 |
|
Operating (loss), before interest, amortization, depreciation and taxes |
|
|
(1,496,140 |
) |
|
|
(3,737,227 |
) |
|
|
(5,233,367 |
) |
Interest income |
|
|
36 |
|
|
|
– |
|
|
|
36 |
|
Interest (expense) |
|
|
(177,336 |
) |
|
|
– |
|
|
|
(177,336 |
) |
Depreciation and amortization |
|
|
(36,373 |
) |
|
|
(73,832 |
) |
|
|
(110,205 |
) |
Net Loss |
|
|
(1,709,813 |
) |
|
|
(3,811,059 |
) |
|
|
(5,520,872 |
) |
Assets at June 30, 2015 |
|
|
2,069,102 |
|
|
|
288,393 |
|
|
|
2,357,495 |
|
All intersegment sales
and expenses have been eliminated from the tables above.
NOTE 9: COMMON STOCK PURCHASE AGREEMENT
On March 31, 2014, the
Company entered into a common stock purchase agreement (referred to herein as the "Purchase Agreement"), with Aspire
Capital Fund, LLC, an Illinois limited liability company (referred to herein as "Aspire Capital"), which provides that,
upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an
aggregate of $15.0 million of Common Stock over the approximately 24-month term of the Purchase Agreement. In consideration for
entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, we issued to Aspire Capital 1,000,000
shares of Common Stock as a commitment fee (referred to in herein as the "Commitment Shares"). Upon execution of the
Purchase Agreement, we sold to Aspire Capital 1,000,000 shares of Common Stock (referred to herein as the "Initial Purchase
Shares"). Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with
Aspire Capital (referred to herein as the "Registration Rights Agreement"), in which we agreed to file one or more registration
statements as permissible and necessary to register under the Securities Act of 1933, as amended, or the Securities Act, the sale
of the shares of Common Stock that have been and may be issued to Aspire Capital under the Purchase Agreement.
Pursuant to the Purchase
Agreement and the Registration Rights Agreement, the Company was obligated to register 15,000,000 shares of Common Stock under
the Securities Act, which includes the Commitment Shares and Initial Purchase Shares that have already been issued to Aspire Capital
and an additional 13,000,000 shares of Common Stock which the Company may issue to Aspire Capital after the registration statement
is declared effective under the Securities Act. Said Registration Statement was declared effective by the SEC on April 28, 2014.
From April 28, 2014, the
effective date of the Registration Statement, through April 30, 2015, the date that the Registration Statement became stale, on
any trading day on which the closing sale price of our Common Stock exceeds $0.16, we have the right, in our sole discretion, to
present Aspire Capital with a purchase notice (each, a "Purchase Notice"), directing Aspire Capital (as principal) to
purchase up to 200,000 shares of Common Stock per trading day, provided that the aggregate price of such purchase shall not exceed
$250,000 per trading day, up to $15.0 million of Common Stock in the aggregate at a per share price (the "Purchase Price")
calculated by reference to the prevailing market price of the Common Stock (as more specifically described below).
In addition, on any date
on which we submit a Purchase Notice for 200,000 shares to Aspire Capital, while we have an effective and current Registration
Statement and the closing sale price of the Common Stock is equal to or greater than $0.50 per share, we also have the right, in
our sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a "VWAP Purchase
Notice") directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of Common Stock
traded on the OTCQB on the next trading day (the "VWAP Purchase Date"), subject to a maximum number of shares we may
determine (the "VWAP Purchase Share Volume Maximum") and a minimum trading price (the "VWAP Minimum Price Threshold")
(as more specifically described below). The purchase price per Purchase Share pursuant to such VWAP Purchase Notice (the "VWAP
Purchase Price") is calculated by reference to the prevailing market price of Common Stock (as more specifically described
below).
The Purchase Agreement
provides that the Company and Aspire Capital shall not affect any sales under the Purchase Agreement on any purchase date where
the closing sale price of the Common Stock is less than $0.16 per share (the "Floor Price"). This Floor Price and the
respective prices and share numbers in the preceding paragraphs shall be appropriately adjusted for any reorganization, recapitalization,
non-cash dividend, stock split, reverse stock split or other similar transaction. There are no trading volume requirements or restrictions
under the Purchase Agreement, and the Company will control the timing and amount of any sales of Common Stock to Aspire Capital.
Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as the Company directs in accordance
with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future
fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Purchase
Agreement may be terminated by the Company at any time, at its discretion, without any penalty or cost to the Company.
In order for the Company
to retain its rights under the Aspire Purchase Agreement, the Company needs to file a post-effective amendment to its Registration
Statement in order to obtain a current Registration Statement and Prospectus. Until a post-effective amendment is filed and declared
effective by the SEC, the Company has no right to require Aspire Capital to purchase any shares of common stock from the Company.
NOTE 10: STOCKHOLDER AUTHORIZATION OF REVERSE
STOCK SPLIT/APPROVAL OF UPLISTING OF THE COMPANY’S COMMON STOCK ON THE NYSE MKT SUBJECT TO MEETING CERTAIN CONDITIONS
On November 17, 2014, we
held a special meeting of our stockholders to approve authorizing our board of directors to effectuate a reverse stock split in
its sole discretion of not less than 1-for-5 and not greater than 1-for-20 for the purpose of attempting to obtain a listing of
our common stock on the NYSE MKT. Such approval was obtained. In the second quarter of 2015, the Company obtained an approval letter
from the NYSE MKT for the Company’s common stock to list on the Exchange, subject to various conditions. The two principal
conditions were obtaining a minimum price of $3.00 per share as a result of the completion of the reverse stock split and completing
a satisfactory public financing.
NOTE 11: SUBSEQUENT EVENTS
There are no subsequent
events required to be disclosed in the Notes to Financial Statements through the date of the report, except as follows:.
In November 2014, Carl
and Mary Ann Berg 2011 CRT Carl Berg Trustee loaned Mobiquity $1 million. In December 2014, Clyde J. Berg 2011 CRT Carl Berg Trustee
loaned Mobiquity $1 million. In December 2014, Sherry Berg-Zorn loaned Mobiquity $50,000. An additional $500,000 was loaned in
January 2015 by the Clyde J. Berg CRT. In February 2015, Berg & Berg Enterprises loaned $850,000 to Mobiquity. On July 31,
2015, the Company agreed on behalf of the aforementioned debt holders (in anticipation of the $500,000 loan referenced in the next
paragraph by Berg & Berg Enterprises) that the principal and accrued interest on these Notes aggregating $3.4 million are now
convertible at $.30 per share. Further, for every $1.00 principal and accrued interest thereon converted, the Note Holder will
receive a five-year warrant to purchase one share of common stock at an exercise price of $.50 per share. All other bonus warrants
referenced in Note 3(d) will no longer be issued to the Note Holders upon conversion of their securities as no conversions took
place as of June 30, 2015.
In August 2015, the Company
raised $605,000 from two investors and issued unsecured promissory notes in the principal amount of $605,000, including $500,000
to Berg & Berg Enterprises and $105,000 to Mr. and Mrs. Anthony Abbruzzese. Mr. Abbruzzese has agreed to become a director
of the Company upon the successful uplisting of our common stock on the NYSE MKT. The notes are due the earlier of December 31,
2016 or the completion of an equity financing of at least $2.5 million. The Company agreed to issue prepaid interest of 605,000
shares of common stock and warrants to purchase an additional 605,000 shares of common stock at an exercise price of $.40 per share
through August 31, 2017. The notes are convertible at $.30 per share. However, the noteholder has the right at any time after September
1, 2015 to convert the notes into equity securities of the company on the same terms as the last equity transaction completed by
the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information contained
in this Form 10-Q and documents incorporated herein by reference are intended to update the information contained in the Company's
Form 10-K for its fiscal year ended December 31, 2014 which includes our audited financial statements for the year ended December
31, 2014 and such information presumes that readers have access to, and will have read, the "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Risk Factors" and other information contained in such Form 10-K
and other Company filings with the Securities and Exchange Commission ("SEC").
This Quarterly Report on
Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements
involve risks and uncertainties, and actual results could be significantly different than those discussed in this Form 10-Q. Certain
statements contained in Management's Discussion and Analysis, particularly in "Liquidity and Capital Resources," and
elsewhere in this Form 10-Q are forward-looking statements. These statements discuss, among other things, expected growth, future
revenues and future performance. Although we believe the expectations expressed in such forward-looking statements are based on
reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ
materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. The forward-looking
statements are subject to risks and uncertainties including, without limitation, the following: (a) changes in levels of competition
from current competitors and potential new competition, (b) possible loss of customers, and (c) the company's ability to attract
and retain key personnel, (d) The Company's ability to manage other risks, uncertainties and factors inherent in the business and
otherwise discussed in this 10-Q and in the Company's other filings with the SEC. The foregoing should not be construed as an exhaustive
list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made
by us. All forward-looking statements included in this document are made as of the date hereof, based on information available
to the Company on the date thereof, and the Company assumes no obligation to update any forward-looking statements.
Company Overview
We operate a national location-based
mobile advertising network that has developed a consumer-focused proximity network which we believe is unlike any other in the
United States. Our integrated suite of proprietary location based mobile advertising technologies allows clients to execute more
personalized and contextually relevant experiences, driving brand awareness and incremental revenue.
We have installed our location-based
mobile advertising solutions in approximately 240 Simon Mall and 55 Macerich mall locations to create "smart malls" using
Bluetooth-enabled iBeacon compatible technology. We plan to expand our mall footprint in other malls and outside the malls with
additional synergistic venues that will allow for cross marketing opportunities in such venues as stadiums, arenas, additional
college campuses, airports and retail chains. For example, we have entered into an agreement with the New York State University
at Stony Brook to deploy a mobile advertising network in their new arena. This type of installation will enable fan engagement,
cross-marketing opportunities, sponsorship activation and create interactive event experiences. This is our first installation
in the university market.
Ace Marketing is our legacy
marketing and promotions business which provides integrated marketing services to our commercial customers. While Ace Marketing
currently represents substantially all of our revenue, we anticipate that activity from Ace Marketing will represent a diminishing
portion of corporate revenue as our attention is now principally focused on developing and executing on opportunities in our Mobiquity
Networks business.
Our Agreements with Mall
Property Owners/Managers and IBM
Simon Properties
We entered
into an initial agreement with Simon Property in April 2011. This agreement was amended in September 2013 and July 2014 to, among
other things, expand the number of Simon mall properties covered by the agreement. Pursuant to our agreement with Simon, we have
the right, on an exclusive basis, to install Bluetooth proximity marketing equipment to send information across the air space of
the common areas of our Simon mall network, which includes approximately 240 malls across the United States. Under a master agreement
and related agreements between us and Simon covering approximately 240 Simon malls, Simon is entitled to receive fees from us equal
to a minimum fee plus the greater of a pre-set, per mall fee or a percentage of revenues derived from within the Simon mall network
as well as certain commission fees based on revenues generated through Simon's sales efforts. We believe that the revenue share
in which Simon participates will exceed the minimum annual mall fees if we generate revenues within the Simon network of approximately
$14 million or more in a calendar year. Our agreement with Simon requires us to maintain letters of credit for each calendar year
under the agreement represented by the minimum amount of fees due for such calendar year as well as certain levels of insurance.
The agreement also provides for Simon to adjust the number of malls subject to the agreement from time to time based upon changes
in its beneficial ownership interest in the mails. Our agreement with Simon expires on December 31, 2017. Our agreement with Simon
is subject to earlier termination by either us or Simon following a notice and cure period in the event of a material breach of
the agreement.
Macerich
In April 2015,
we entered into a license agreement with Macerich. Pursuant to our agreement with Macerich, we have the right to install Mobi-Beacons
to send information across the air space of the common areas of our Macerich mall network, which will, when fully installed we
estimate to include approximately 55 malls, across the United States. Our right to install our Mobi-Beacons to market and sell
third party paid advertising in the interior common areas of these malls shall be exclusive. Under a Macerich license agreement
between us and Macerich currently covering 55 malls, Macerich is entitled to receive fees from us equal to a minimum fee plus the
greater of a pre-set per mall fee or a percentage of revenues derived from within the Macerich mall network as well as certain
commission fees based on revenues generated through Macerich's sales efforts. We believe that the revenue share in which Macerich
participates will exceed the minimum annual mall fees if we generate revenues with the Macerich network of approximately $3 million
or more in a calendar year. The agreement also provides for Macerich to adjust the number of malls subject to the agreement from
time-to-time based upon changes in its beneficial ownership in the malls. Our agreement with Macerich has a term of three years
but is subject to earlier termination (i) with cause following a notice and cure period in the event of material breach of the
agreement or (ii) without cause by Macerich after one year on 90 days' prior written notice to us. In the event of termination
of the agreement without cause, Macerich will reimburse us for certain out-of-pocket expenses.
IBM
In April 2015,
we entered into a Joint Initiative Agreement with IBM and enrolled as an IBM Business Partner through IBM's PartnerWorld program.
We are teaming with IBM to deliver jointly developed solutions for mall-based tenants, including retail clients. These solutions
leverage the Mobiquity Networks beacon platform deployed exclusively in the common areas of our mall footprint across the United
States, as well as our SDK which can be embedded within mall clients' mobile apps, to deliver relevant content in real time to
shoppers' smart phones as they visit these malls. IBM has agreed to work with these clients to provide the analytics solutions
needed to deliver personalized, one-on-one content to shoppers through our platform, and to help clients obtain insights from shopper
transactions to drive improved customer experience and business performance. IBM services will also provide the integration capabilities
needed to combine the Mobiquity Network platform in the mall common areas with the in-store server and network infrastructure,
to optimize delivery of context-relevant content for the shopper. Together, our Joint Initiative Agreement with IBM can help their
mall clients provide enhanced omni-channel marketing solutions and optimize business results. The agreement has an initial terms
of two years and may be extended by agreement of the parties.
Critical Accounting Policies
Our discussion and analysis
of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. The preparation of financial statements requires management
to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including,
but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other
assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following
critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.
REVENUE RECOGNITION – The Company recognizes
revenue, for all revenue streams, when it is realized or realizable and estimable in accordance with ASC 605, "Revenue
Recognition". The Company will recognize revenue only when all of the following criteria have been met:
| · | Persuasive evidence for an agreement exists; |
| · | Service has been provided; |
| · | The fee is fixed or determinable; and, |
| · | Collection is reasonably assured. |
ACE MARKETING – Ace Marketing's revenue
is recognized when title and risk of loss transfers to the customer and the earnings process is complete. In general, title passes
to our customers upon the customer's receipt of the merchandise. Revenue is recognized on a gross basis since Ace Marketing has
the risks and rewards of ownership, latitude in selection of vendors and pricing, and bears all credit risk. Advance payments made
by customers are included in customer deposits. Ace Marketing records all shipping and handling fees billed to customers as revenues
and related costs as cost of goods sold, when incurred. Additional source of revenue, derived from emails/texts directly to consumers
are recognized under contractual arrangements. Revenue from this advertising method is recognized at the time of service provided.
MOBIQUITY NETWORKS – Mobiquity Networks.
Mobiquity has three avenues of income with our beacon platform, Bluetooth Push and Wi-Fi. Revenue is realized with the signing
of the advertising contract. The customer signs a contract directly with us for an advertising campaign with mutually agreed upon
term and is billed on the start date of the advertising campaign, which are normally in short duration periods. Revenue is recognized
the same way for the three mobile solutions. The first option to earn revenue with the beacon platform is for customers to contract
for advertising campaigns, on our platform, either directly through their own app or through various third party apps. The second
option to earn revenue is through a revenue share with advertising exchanges and networks that deliver advertising campaigns to
their customers based on our real-time location signal data. The third option would be through selling our historical data to data
management platform companies.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. We are required
to make judgments based on historical experience and future expectations, as to the realizability of our accounts receivable. We
make these assessments based on the following factors: (a) historical experience, (b) customer concentrations, customer credit
worthiness, (d) current economic conditions, and (e) changes in customer payment terms.
ACCOUNTING FOR STOCK BASED COMPENSATION. Stock
based compensation cost is measured at the grant date fair value of the award and is recognized as expense over the requisite service
period. The Company uses the Black-Sholes option-pricing model to determine fair value of the awards, which involves certain subjective
assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising
them ("expected term"), the estimated volatility of the Company's common stock price over the expected term ("volatility")
and the number of options for which vesting requirements will not be completed ("forfeitures"). Changes in the subjective
assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated
statements of operations.
Plan of Operation
Our goal is to enhance
the shopper experience with retail customers by providing valuable and relevant content in real-time based on location. We achieve
this goal by providing our customers (such as retailers, brands, and the entertainment industry) with a highly targeted form of
mobile marketing engagement. Our platform enables interaction and advertising based on time, location and personalization to create
the most effective campaigns/experiences possible, in a way that is not possible without our network. We connect fans and brands
in the retail space by increasing individual retail location app usage and driving foot traffic to such individual retail locations.
We have deployed our Mobiquity hardware solutions in about 240 Simon and 55 Macerich malls in the United States. We intend to expand
our sales and marketing human resource capability to focus on generating revenue over our network. Our sales and marketing team
will be seeking to generate revenue over our network through five primary verticals:
|
1. |
Retailers, Brands and Apps relevant to the shopping experience. |
|
2. |
Shopping/Coupon related Apps with relevant offers. |
|
3. |
Entertainment Apps relevant to the shopper demographic. |
|
4. |
Advertising Networks and Exchanges serving location relevant ads. |
|
5. |
Data Analytic and Social Media Apps requesting real-time location based signal. |
We plan to expand on our
current footprint into the common areas of other malls and with additional synergistic venues that will allow for cross marketing
opportunities. Such venues include but are not limited to; stadiums, arenas, college campuses, airports and retail chains. The
purpose of this type of expansion will be to create a unified network that will allow relevant beacon companies the opportunity
to become part of the Mobiquity network. They may find it advantageous to become part of our network, so they will have the ability
to drive traffic into their stores. In the future, we may also build a Private Ad Exchange that will allow for programmatic buying
where advertisers will be given permission to engage with shoppers through the Mobiquity
network. Additionally, we plan to add other mobile services and plug-ins such as; loyalty programs, indoor mapping, security
and mobile payments.
We anticipate continuing to rely on external
financing from sales of our common stock to support our operations until cash flow from operations has a positive impact on operations,
although no assurances can be given in this regard.
RESULTS OF OPERATIONS
The following
table sets forth certain selected unaudited condensed statement of operations data for the periods indicated in dollars and as
a percentage of total net revenues. The following discussion relates to our results of operations for the periods noted and is
not necessarily indicative of the results expected for any other interim period or any future fiscal year. In addition, we note
that the period-to-period comparison may not be indicative of future performance.
Second Quarter June 30, 2015 vs
Second Quarter June 30, 2014
| |
Three Months Ended June 30 | |
| |
2015 | | |
2014 | |
Revenue | |
$ | 571,568 | | |
$ | 928,530 | |
Cost of Revenues | |
$ | 430,599 | | |
$ | 743,496 | |
Gross Profit | |
$ | 140,969 | | |
$ | 185,034 | |
Selling, General and Administrative Expenses | |
$ | 2,984,395 | | |
$ | 2,090,199 | |
(Loss) from Operations | |
$ | (2,843,426 | ) | |
$ | (1,905,165 | ) |
We generated
revenues of $571,568 in the second quarter of 2015 compared to $928,530 in the same period of the prior year, a decrease in revenues
of $356,962. As our mall network has only recently been constructed and expanded, at the current time, revenues from the use of
our Mobiquity devices are not a material portion of our consolidated revenues. In the fourth quarter of 2015, we anticipate our
revenues increasing in our Mobiquity Networks subsidiary due to the implementation of our Mobi-Beacons and the expectation that
advertisers will begin to utilize our mall network.
Cost of revenues
was $430,599 or 75.3% of revenues in the second quarter of 2015 compared to $743,496 or 80% of revenues in the same fiscal period
of the prior year. Cost of revenues includes purchases and freight costs associated with the shipping of merchandise to our customers.
The change in cost of revenues of $312,897 in 2015 is related to volume and product mix of the products our customers purchased.
Gross profit
was $140,969 for the second quarter of 2015 or 24.7% of net revenues compared to $185,034 in the same fiscal period of the prior
year or 20% of revenues. Gross profits will vary period-to-period depending upon a number of factors including the mix of items
sold and the volume of product sold. Also, it is our practice to pass freight costs on to our customers with low to no profit margin.
As advertising revenue from the use of our Mobiquity devices increases, it is expected that our margins will increase significantly.
As our mall network has only recently been constructed and is currently being expanded, at the current time, revenues from the
use of our Mobiquity devices are not a material portion of our consolidated revenues.
Selling, general,
and administrative expenses were $2,984,395 for the second quarter of 2015 compared to $2,090,199 in the comparable period of the
prior year, an increase of $894,196. Such operating costs include payroll and related expenses, commissions, insurance, rents,
fee payments to Simon Property Group, professional (consulting) and public awareness fees. The increase in operating expenses was
primarily due to the increase in salaries and non-cash stock based compensation.
The loss from
operations for the second quarter of 2015 was $2,843,426 as compared to $1,905,165 for the comparable period of the prior year.
The increase in operating loss is attributable to the focused effort in creating the infrastructure required to move forward with
the mall network, and the hiring of additional Company personnel to provide information technology support, sales and office employees.
No benefit
for income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our
ability to be profitable in the future is dependent upon the successful introduction and usage of our proximity marketing services.
Interest
expense was $98,470 for the second quarter of 2015 compared to $13,361 in the comparable period of the prior year,
an increase of $85,109. The increased cost relates to the financing needed to fund our expansion of the additional malls added
to our network.
Six Months Ended June 30, 2015 vs
Six Months Ended June 30, 2014
| |
Six Months Ended June 30 | |
| |
2015 | | |
2014 | |
Revenue | |
$ | 1,086,951 | | |
$ | 1,559,351 | |
Cost of Revenues | |
$ | 868,023 | | |
$ | 1,249,378 | |
Gross Profit | |
$ | 218,928 | | |
$ | 309,973 | |
Selling, General and Administrative Expenses | |
$ | 5,562,500 | | |
$ | 4,553,137 | |
(Loss) from Operations | |
$ | (5,343,572 | ) | |
$ | 4,243,164 | ) |
We generated
revenues of $1,086,951 in the first six months of 2015 compared to $1,559,351 in the same period of the prior year, a decrease
in revenues of $472,400. As our mall network has only recently been constructed and expanded, at the current time, revenues from
the use of our Mobiquity devices are not a material portion of our consolidated revenues. In the fourth quarter of 2015, we anticipate
our revenues increasing in our Mobiquity Networks subsidiary due to the implementation of our Mobi-Beacons and the expectation
that advertisers will begin to utilize our mall network.
Cost of revenues
was $868,023 or 79.8% of revenues in the first six months of 2015 compared to $1,249,278 or 80.1% of revenues in the same fiscal
period of the prior year. Cost of revenues includes purchases and freight costs associated with the shipping of merchandise to
our customers. The change in cost of revenues of $381,355 in 2015 is related to volume and product mix of the products our customers
purchased.
Gross profit
was $218,928 for the first six months of 2015 or 20.2% of net revenues compared to $309,973 in the same fiscal period of the prior
year or 19.9% of revenues. Gross profits will vary period-to-period depending upon a number of factors including the mix of items
sold and the volume of product sold. Also, it is our practice to pass freight costs on to our customers with low to no profit margin.
As advertising revenue from the use of our Mobiquity devices increases, it is expected that our margins will increase significantly.
As our mall network has only recently been constructed and is currently being expanded, at the current time, revenues from the
use of our Mobiquity devices are not a material portion of our consolidated revenues.
Selling, general,
and administrative expenses were $5,562,500 for the first six months of 2015 compared to $4,553,137 in the comparable period of
the prior year, an increase of $1,009,363. Such operating costs include payroll and related expenses, commissions, insurance, rents,
fee payments to Simon Property Group, professional (consulting) and public awareness fees. The increase in operating expenses was
primarily due to the increase in salaries.
The losses from
operations for the first six months of 2015 was $5,343,572 as compared to $4,243,164 for the comparable period of the prior year.
The increase in operating loss is attributable to the focused effort in creating the infrastructure required to move forward with
the mall network, and the hiring of additional Company personnel to provide information technology support, sales and office employees.
No benefit for
income taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability
to be profitable in the future is dependent upon the successful introduction and usage of our proximity marketing services.
Interest
expense was $177,336 for the first six months of 2015 compared to $23,490 in the comparable period of the prior year,
an increase of $153,846. The increased cost relates to the financing needed to fund our expansion of the additional malls
added to our network.
Liquidity and Capital Resources
The Company had cash
and cash equivalents of $1,446,061 at June 30, 2015. Cash used in operating activities for the six months ended June 30, 2015 was
$4,269,034. This resulted primarily from a net loss of $5,520,872, offset by stock based compensation of $955,214, depreciation
and amortization of $110,471, decrease in accounts receivable of $147,761 and an increase in Inventory of $20,444, decrease in
prepaid expenses and other assets of $35,796 and a decrease of accounts payable and accrued expenses of $127,116. The Company had
an increase in investing activities of $5,221 with the purchase of equipment. Cash flow from financing activities of $4,070,000
resulted from the proceeds from the issuance of the Company's Common Stock and Warrants to purchase additional shares of Common
Stock and securing two year promissory notes totaling $1,350,000.
The Company had cash and
cash equivalents of $1,730,903 at June 30, 2014. Cash used in operating activities for the six months ended June 30, 2014 was $2,516,279.
This resulted primarily from a net loss of $4,267,719, offset by stock based compensation of $1,642,194,a decrease in accounts
receivable of $61,831 and an increase in Inventory of $96,140, decrease in prepaid expenses and other assets of $5,720 and a increase
of accounts payable and accrued expenses of $25,324. The Company had an increase in investing activities of $17,607 with the purchase
of equipment. Cash flow from financing activities of $2,523,800 resulting from the proceeds from the issuance of the Company's
Common Stock and Warrants to purchase additional shares of Common Stock.
Our Company
commenced operations in 1998 and was initially funded by our three founders, each of whom has made demand loans to our Company
that have been repaid. Since 1999, we have relied primarily on equity financing from outside investors to supplement our cash flow
from operations.
We anticipate
that our future liquidity requirements will arise from the need to finance our accounts receivable and inventories, hire additional
sales persons, capital expenditures and possible acquisitions. The primary sources of funding for such requirements will be cash
generated from operations, raising additional capital from the sale of equity or other securities and borrowings under debt facilities
which currently do not exist. We believe that we can generate sufficient cash flow from these sources to fund our operations for
at least the next twelve months. In the event we should need additional financing, we can provide no assurances that we will be
able to obtain financing on terms satisfactory to us, if at all.
Recent Financings
Since January
1, 2013, we have completed the various financing summarized below.
Date |
|
Dollar Amount |
|
|
# of Securities Sold |
|
|
|
|
|
|
During 2013 |
|
$ |
5,562,816 |
|
|
Issued 19,125,000 common shares and warrants to purchase 9,562,000 shares |
January/February 2014 |
|
$ |
2,060,300 |
|
|
Issued 6,867,669 common shares and warrants to purchase 3,433,339 shares |
March 2014 |
|
$ |
500,000 |
|
|
Issued 2,000,000 common shares. |
July 2014 |
|
$ |
1,000,000 |
|
|
Issued 2,000,000 shares and warrants to purchase 1,000,000 shares |
July 2014 |
|
$ |
250,000 |
|
|
Issued convertible note in the principal amount of $250,000 and warrants to purchase 125,000 shares |
November 2014 (1) |
|
$ |
1,000,000 |
|
|
Issued two-year promissory note in the principal amount of $1,000,000 |
December 2014 (1) |
|
$ |
1,050,000 |
|
|
Issued two-year promissory note in the principal amount of $1,050,000 |
January 2015 (1) |
|
$ |
500,000 |
|
|
Issued two-year promissory note in the principal amount of $500,000 |
February 2015 (1) |
|
$ |
850,000 |
|
|
Issued two-year promissory note in the principal amount of $850,000 |
March 2015 |
|
$ |
500,000 |
|
|
Issued 1,666,667 common shares and a like number of warrants |
April 2015 |
|
$ |
1,710,000 |
|
|
Issued 5,700,000 common shares and a like number of warrants |
May 2015 |
|
$ |
510,000 |
|
|
Issued 1,700,000 common shares and a like number of warrants |
August 2015 |
|
$ |
605,000 |
|
|
Issued promissory notes in the principal amount of $605,000 and 605,000 shares of restricted common stock and warrants to purchase an additional 605,000 shares of restricted common stock |
(1) See "Agreement with Carl E. Berg"
below.
Loan Agreements
In November 2014, Carl
and Mary Ann Berg 2011 CRT Carl Berg Trustee loaned Mobiquity $1 million. In December 2014, Clyde J. Berg 2011 CRT Carl Berg Trustee
loaned Mobiquity $1 million. In December 2014, Sherry Berg-Zorn loaned Mobiquity $50,000. An additional $500,000 was loaned in
January 2015 by the Clyde J. Berg CRT. In February 2015, Berg & Berg Enterprises loaned $850,000 to Mobiquity. On July 31,
2015, the Company agreed on behalf of the aforementioned debt holders (in anticipation of the $500,000 loan referenced in the next
paragraph by Berg & Berg Enterprises) that the principal and accrued interest on these Notes aggregating $3.4 million are now
convertible at $.30 per share. Further, for every $1.00 principal and accrued interest thereon converted, the Note Holder will
receive a five-year warrant to purchase one share of common stock at an exercise price of $.50 per share. No other securities will
be issued to the Note Holders upon conversion of their securities. In August 2015, Berg & Berg Enterprises loaned an additional
$500,000 to us and received prepaid interest of 500,000 shares of common stock and warrants to purchase an additional 500,000 shares
at $.40 per share through August 31, 2017. The Berg & Berg Enterprise note is convertible at $.30 per share and is repayable
at the earlier of December 31, 2016 or the completion of an equity financing of at least $2.5 million. The Note Holder also has
the right to elect to convert the $500,000 note into equity securities of our company on the same terms as the last equity transaction
completed by us. In August 2015, Mr. and Mrs. Anthony Abbruzzese (see “Management”) loaned $105,000 to us and received
prepaid interest of 105,000 shares of common stock and warrants to purchase an additional 105,000 shares at $.40 per share through
August 31, 2017. The Abbruzzese note is convertible at $.30 per share and is repayable at the earlier of December 31, 2016 or the
completion of an equity financing of at least $2.5 million. The Note Holder also has the right to elect to convert the $105,000
note into equity securities of our company on the same terms as the last equity transaction completed by us.
Assignment of Secured Promissory Note
In December 2013, Thomas
Arnost, current Vice Chairman of Mobiquity, purchased from TCA Global Credit Master Fund, the Company's outstanding secured convertible
promissory note in the amount of $350,000. Subsequently, Mr. Arnost and the Company agreed to fix the conversion price of the
note at $.30 per share, extend the due date of the Note to June 12, 2014, which was subsequently extended to December 22, 2014
and again extended to December 31, 2015, subject to Mr. Arnost's right to call the note at any time in his sole discretion, and
increase the interest rate to 15% per annum. The Company has the right to prepay the note, subject to Mr. Arnost's right of conversion.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market risk is the
risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments.
The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative
financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any
credit facilities with variable interest rates.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure
controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit
under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated
to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision
and with the participation of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based
on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective
as of the end of the period covered by this report.
There were no changes
in the Company's internal controls over financial reporting during the most recently completed fiscal quarter that have materially
affected or are reasonably likely to materially affect the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As of the
filing date of this Form 10-Q, we are not a party to any pending legal proceedings.
ITEM 1A. RISK FACTORS
As a Smaller Reporting
Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting
obligations and therefore are not required to provide the information requested by this Item 1A.
ITEM 2. CHANGES IN SECURITIES.
(a) From
January 1, 2015 through June 30, 2015, we had no sales or issuances of unregistered common stock, except we made sales or issuances
of unregistered securities listed in the table below:
Date of Sale |
|
Title of Security |
|
Number Sold |
|
Consideration Received and Description
of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers |
|
Exemption
from
Registration
Claimed |
|
If Option, Warrant or
Convertible Security, terms of exercise or conversion |
|
|
|
|
|
|
|
|
|
|
|
Jan. – March 2015 |
|
Promissory Notes |
|
$1,350,000 in principal amount |
|
$1,350,000 in principal amount; no cash compensation was paid. |
|
Section 4(2) |
|
Not applicable (1) |
|
|
|
|
|
|
|
|
|
|
|
March 2015 |
|
Common Stock and Warrants |
|
1,666,667 common Shares and warrants |
|
$500,000 received;
no commissions paid |
|
Rule 506 |
|
Warrants exercisable at $.45 through March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
Jan. – March 2015 |
|
Common Stock |
|
90,000
Shares |
|
Services rendered;
no commissions paid |
|
Section 4(2) |
|
Not applicable |
|
|
|
|
|
|
|
|
|
|
|
April – June 2015 |
|
Common Stock |
|
435,000
Shares |
|
Services rendered;
no commissions paid |
|
Section 4(2) |
|
Not applicable |
|
|
|
|
|
|
|
|
|
|
|
April – May 2015 |
|
Common Stock and Warrants |
|
7,400,000 common Shares and warrants |
|
$2,220,000 received;
no commissions paid |
|
Rule 506 |
|
Warrants exercisable at $.45 through March 31, 2020 |
(1) | | On December 15, 2014, we entered into a letter agreement with Carl E. Berg. The agreement
recognized that Carl and Mary Ann Berg 2011 CRT, Carl Berg Trustee, and Clyde Berg 2011 CRT, Carl Berg Trustee, will have provided
$2.5 million of unsecured loans to us between November and December 2014 ($2 million received in 2014, $500,000 received in January
2015). The notes mature two years from the origination date and bear interest at 4%. Pursuant to said letter agreement, we agreed
that these unsecured loans may be said, assigned or transferred to Clyde J. Berg, Carl E. Berg and/or Kara Ann Berg or
any entity controlled by any of the aforementioned individuals in a combination of the aforementioned persons or entities. This
letter agreement provides that if Mr. Carl E. Berg or any permitted transferee purchases or otherwise acquires the $2.5 million
of unsecured notes, that these notes shall be convertible at any time prior to maturity or redemption thereof at a conversion
price of $.50 per share. For every $1.00 in principal converted, a five-year warrant to purchase one additional share of common
stock at an exercise price of $1.00 per share will be issued. In the event that $2.5 million is timely converted on or before
January 30, 2015, we will also issue as a bonus warrants to purchase 1,000,000 shares of common stock, exercisable at $.50 per
share over a five year period from the date of issuance. We also agreed to grant Mr. Berg the right to lend us up to an additional
$3.75 million of optional loans on the same terms and conditions described above on or before February 15, 2015, 850,000 of which
was received by us in February 2015. In the event such optional loan is converted into common stock on or before March 31, 2015,
we will also issue as an additional bonus warrants to purchase up to 1,000,000 shares of common stock at an exercise price of
$.50 per share from the date of issuance. We also agreed to grant him the right to lend us up to an additional $3.75 million on
the same terms and conditions on or before May 15, 2015 and in the event such additional optional loan is converted into common
stock on or before June 30, 2015, we will also issue bonus warrants to Mr. Berg to purchase up to 1,000,000 shares of common stock
at an exercise price of $.50 per share over a period of five years from the date of issuance. All bonus warrants contain cashless
exercise provisions. The 2,000,000 bonus warrants described above assumes full funding of the $7.5 million optional loans and
100% conversion on or before the dates described above. In the event the amount of optional loans is less than an aggregate of
$3.75 million converted prior to March 31, 2015 and an additional $3.75 million converted prior to June 30, 2015, then the bonus
warrants to purchase an aggregate of 2,000,000 shares will be proportionately reduced. In summary, in the event all $10 million
is provided to us, including an additional $7.5 million on a timely basis, subject to our right of acceptance or rejection in
our sole discretion, and all loans are timely converted on or before the dates described above, we will have issued 20 million
shares of common stock, 10 million warrants to purchase shares of common stock at an exercise price of $1.00 per share, plus five
year bonus warrants to purchase 3,000,000 shares of our common stock at an exercise price of $.50 per share with cashless exercise
provisions pertaining to the bonus warrants. Also, in the event the $10 million of funding is completed, Mr. Berg has the right
to appoint one independent member to the board, which nominee will be subject to normal background checks. |
(b) Rule
463 of the Securities Act is not applicable to the Company.
(c) In the
three months ended June 30, 2015, there were no repurchases by the Company of its Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS.
Exhibit Number |
|
Exhibit Title |
3.1 |
|
Certificate of Incorporation filed March 26, 1998 (1) |
3.2 |
|
Amendment to Certificate of Incorporation filed June 10, 1999 (1) |
3.3 |
|
Amendment to Certificate of Incorporation approved by stockholders in 2005 (1) |
3.4 |
|
Amendment to Certificate of Incorporation dated September 11, 2008 (11) |
3.5 |
|
Amendment to Certificate of Incorporation dated October 7, 2009 (11) |
3.6 |
|
Amendment to Certificate of Incorporation dated May 18, 2012 (11) |
3.7 |
|
Amendment to Certificate of Incorporation dated September 10, 2013 (17) |
3.8 |
|
Amended By-Laws (1) |
3.9 |
|
2014 Amendment to By-Laws (19) |
4.1 |
|
Registration Rights Agreement (18) |
10.1 |
|
Employment Agreement - Michael Trepeta (2) |
10.2 |
|
Employment Agreement - Dean Julia (2) |
10.3 |
|
Amendments to Employment Agreement - Michael Trepeta (5)(7) |
10.4 |
|
Amendments to Employment Agreement - Dean L. Julia (5)(7) |
10.5 |
|
Joint Venture Agreement with Atrium Enterprises Ltd. (6) |
10.6 |
|
Agreement with Aon Consulting (6) |
10.7 |
|
Amendment to Exhibits 10.3 and 10.4 dated April 7, 2010 (10) |
10.8 |
|
Office Lease for Garden City, NY (11) |
10.9 |
|
Amendment to Employment Agreement - Dean L. Julia (11) |
10.10 |
|
Amendment to Employment Agreement - Michael D. Trepeta (11) |
10.11 |
|
Convertible Promissory Note (12) |
10.12 |
|
Registration Rights Agreement dated June 12, 2012 by and between the company and TCA (13) |
10.13 |
|
Equity Agreement dated June 12, 2012 by and between the company and TCA (13) |
10.14 |
|
Amendment to Dean L. Julia's Employment Agreement (16) |
10.15 |
|
Amendment to Michael D. Trepeta's Employment Agreement (16) |
10.16 |
|
Common Stock Purchase Agreement with Aspire Capital (18) |
10.17 |
|
Termination of TCA Registration Rights Agreement and Equity Agreement (18) |
10.18 |
|
Employment Agreement - Sean Trepeta (19) |
10.19 |
|
Employment Agreement - Paul Bauersfeld (19) |
10.20 |
|
Employment Agreement - Thomas Arnost (20) |
10.21 |
|
December 2013 Agreement with Thomas Arnost modifying secured debt purchased by Arnost from TCA (19) |
10.22 |
|
Letter Agreement dated December 9, 2014 with Thomas Arnost to extend expiration date of secured note to December 31, 2015 (19) |
10.23 |
|
Letter Agreement dated July 8, 2013 with Thomas Arnost to provide letter of credit for $1,350,000 (19) |
10.24 |
|
Letter Agreement dated July 8, 2013 with SNW Properties to provide letter of credit for $1,350,000 (19) |
10.25 |
|
Letter Agreement dated December 15, 2014 with Carl E. Berg (19) |
11.1 |
|
Statement re: Computation of per share earnings. See Statement of Operations and Notes to Financial Statements |
14.1 |
|
Code of Ethics/Code of Conduct (21) |
21.1 |
|
Subsidiaries of the Issuer (15) |
31.1 |
|
Rule 13a-14(a) Certification in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (*) |
31.2 |
|
Rule 13a-14(a) Certification in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (*) |
32.1 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*) |
32.2 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*) |
99.1 |
|
2005 Employee Benefit and Consulting Services Compensation Plan (2) |
99.2 |
|
Form of Class A Warrant (2) |
99.3 |
|
Form of Class B Warrant (2) |
99.4 |
|
Amendment to 2005 Plan (4) |
99.5 |
|
Form of Class C Warrant (8) |
99.6 |
|
2009 Employee Benefit and Consulting Services Compensation Plan (3) |
99.7 |
|
Form of Class D Warrant (3) |
99.8 |
|
Form or Class E Warrant (9) |
99.9 |
|
Form of Class F Warrant (9) |
99.10 |
|
Form of Class G Warrant (9) |
99.11 |
|
Form of Class H Warrant (9) |
99.12 |
|
Form of Class AA Warrant (11) |
99.13 |
|
Form of Class BB Warrant (11) |
99.14 |
|
Form of Class CC Warrant (19) |
101.INS |
|
XBRL Instance Document (*) |
101.SCH |
|
Document, XBRL Taxonomy Extension (*) |
101.CAL |
|
Calculation Linkbase, XBRL Taxonomy Extension Definition (*) |
101.DEF |
|
Linkbase, XBRL Taxonomy Extension Labels (*) |
101.LAB |
|
Linkbase, XBRL Taxonomy Extension (*) |
101.PRE |
|
Presentation Linkbase (*) |
* Filed herewith.
(1) |
Incorporated by reference to Registrant's Registration Statement on Form 10-SB as filed with the Commission on February 10, 2005. |
(2) |
Incorporated by reference to Registrant's Registration Statement on Form 10-SB/A filed with the Commission March 18, 2005. |
(3) |
Incorporated by reference to Form 10-K filed for the fiscal year ended December 31, 2009. |
(4) |
Incorporated by reference to the Registrant's Form 10-QSB/A filed with the Commission on August 18, 2005. |
(5) |
Incorporated by reference to the Registrant's Form 10-KSB for its fiscal year ended December 31, 2005. |
(6) |
Incorporated by reference to the Registrant's Form I 0-KSB for its fiscal year ended December 31, 2006. |
(7) |
Incorporated by reference to the Registrant's Form 8-K dated September 21, 2007. |
(8) |
Incorporated by reference to the Registrant's Form 10-QSB for its quarter ended September 30, 2006. |
(9) |
Incorporated by reference to the Registrant's Form 10-K for its fiscal year ended December 31, 2010. |
(10) |
Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 2011. |
(11) |
Incorporated by reference to the Registrant's Form 10-K for its fiscal year ended December 31, 2012. |
(12) |
Incorporated by reference to the Registrant's Form 8-K dated June 14, 2012. |
(13) |
Incorporated by reference to the Registrant's Form 8-K dated June 15, 2012. |
(14) |
Incorporated by reference to the Registrant's Form 8-K dated June 6, 2013. |
(15) |
Incorporated by reference to the Registrant's Form 10-K for its fiscal year ended December 31, 2013. |
(16) |
Incorporated by reference to Form 8-K filed June 6, 2013. |
(17) |
Incorporated by reference to Form 8-K filed September 11, 2013. |
(18) |
Incorporated by reference to Form 8-K filed April 1, 2014. |
(19) |
Incorporated by reference to Form 8-K filed with the SEC on December 19, 2014. |
(20) |
Incorporated by reference to Form 8-K dated December 2, 2014. |
(21) |
Incorporated by reference to the Registrant's Form 10-K for its fiscal year ended December 31, 2014. |
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
MOBIQUITY TECHNOLOGIES, INC. |
|
|
|
Date: August 14, 2015 |
By: |
/s/ Dean L. Julia |
|
|
Dean L. Julia, |
|
|
Co-Principal Executive Officer |
|
|
|
Date: August 14, 2015 |
By: |
/s/ Michael D. Trepeta |
|
|
Michael D. Trepeta, |
|
|
Co-Principal Executive Officer |
|
|
|
Date: August 14, 2015 |
By: |
/s/ Sean McDonnell |
|
|
Sean McDonnell, |
|
|
Principal Financial Officer |
EXHIBIT 31.1(a)
CERTIFICATION OF CO-PRINCIPAL EXECUTIVE
OFFICER
I, Dean L. Julia, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobiquity
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and
I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 14, 2015 |
/s/ DEAN L. JULIA |
|
DEAN L. JULIA, |
|
CO-PRINCIPAL EXECUTIVE OFFICER |
EXHIBIT 31.1(b)
CERTIFICATION OF CO-PRINCIPAL EXECUTIVE
OFFICER
I, Michael D. Trepeta, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobiquity
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and
I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 14, 2015 |
/s/ MICHAEL D. TREPETA |
|
MICHAEL D. TREPETA, |
|
CO-PRINCIPAL EXECUTIVE OFFICER |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER
I, Sean McDonnell, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobiquity
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 14, 2015 |
/s/ SEAN MCDONNELL |
|
SEAN MCDONNELL, PRINCIPAL FINANCIAL OFFICER |
EXHIBIT 32.1(a)
CERTIFICATION OF CO-PRINCIPAL EXECUTIVE
OFFICER
PURSUANT TO 18U.S.C. SECTION 1350
In connection with the Quarterly
Report of Mobiquity Technologies, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2015 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dean L. Julia, Co-Principal
Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley
Act, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of operations of the Company.
|
/s/ DEAN L. JULIA |
|
DEAN L. JULIA |
|
CO-PRINCIPAL EXECUTIVE OFFICER |
|
Date: August 14, 2015 |
EXHIBIT 32.1(b)
CERTIFICATION OF CO-PRINCIPAL EXECUTIVE
OFFICER
PURSUANT TO 18U.S.C. SECTION 1350
In connection with the Quarterly
Report of Mobiquity Technologies, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2015 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael D. Trepeta,
Co-Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of operations of the Company.
|
/s/ MICHAEL D. TREPETA |
|
MICHAEL D. TREPETA |
|
CO-PRINCIPAL EXECUTIVE OFFICER |
|
Date: August 14, 2015 |
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER
PURSUANT TO 18U.S.C. SECTION 1350
In connection with the Quarterly
Report of Mobiquity Technologies, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2015 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sean McDonnell, Principal
Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley
Act, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of operations of the Company.
|
/s/ SEAN MCDONNELL |
|
SEAN MCDONNELL |
|
PRINCIPAL FINANCIAL OFFICER |
|
Date: August 14, 2015 |
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