BBLR 10-Q/A
Bubblr Inc. (BBLR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Amendment No.1
| Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
| Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to__________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
(Former name, former address, and former fiscal year, if changed since last report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☐
|
||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
Securities registered pursuant to Section 12(b) of the Act: None
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 7, 2024, there were outstanding shares of the registrant’s Common Stock, $.01 par value.
EXPLANATORY NOTE
The SEC guidance indicates that Form 10-Q filings on or after the date of the Order may not present financial information that has been reviewed by BF Borgers. Each quarterly period presented must be reviewed by a qualified, independent, PCAOB-registered public accountant who is permitted to appear or practice before the Commission.
The Auditor reviewed the original filing’s quarterly period ending March 31, 2024. The Company’s new auditor, BCRG Certified Public Accountants, a qualified, independent, PCAOB registered public accountant, reviewed the financial information in Amendment No. 1.
In addition, pursuant to the rules of the SEC, Item 6 of Part II of the Original Filing has been amended to contain currently dated certifications from the Company’s President, Chief Executive Officer, and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
| 2 |
INDEX
| 3 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BUBBLR INC.
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
| F-1 |
BUBBLR INC.
Unaudited Consolidated Balance Sheets
March 31, 2024 and December 31, 2023
(Unaudited) March 31, | (Unaudited) December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Non-current Assets: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Loans payable, current | ||||||||
| Loans payable to related parties, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Loans payable to related parties, non-current | ||||||||
| Warrant derivative liability | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Series C Convertible Preferred Stock, $ par value, authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
BUBBLR INC.
Consolidated Statement of Operations and Comprehensive Loss
For the three months ended March 31, 2024, and 2023
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Sales | ||||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating Expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Professional fees | ( | ) | ||||||
| Sales and marketing | ||||||||
| Amortization and depreciation | ||||||||
| Research and development | ||||||||
| Total operating expense | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Other income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Disposal of fixed assets | ( | ) | ||||||
| Gain (loss) on change in fair value of warrant derivative liability | ( | ) | ( | ) | ||||
| Foreign currency transaction (loss) gain | ( | ) | ||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net loss before income tax | $ | ( | ) | $ | ( | ) | ||
| Provision for income tax | ||||||||
| Net loss after income tax | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss) | ||||||||
| Foreign currency translation gain (loss) | ( | ) | ||||||
| Total other comprehensive income (loss) | ( | ) | ||||||
| Net comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share, basic and diluted | $ | $ | ||||||
| Weighted average number of common shares outstanding, basic, and diluted | ||||||||
| F-3 |
BUBBLR INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the three months ended March 31, 2024, and 2023
(Unaudited)
Series C Preferred Stock | Common Stock | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Income (Loss) | Equity (Deficit) | |||||||||||||||||||||||||
| Balance -December 31, 2022 | | $ | $ | $ | $ | ( | ) | $ | $ | | ||||||||||||||||||||||
| Issuance of common shares for Services - Consulting | ||||||||||||||||||||||||||||||||
| Forfeit of restricted stock units | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common shares for Series C Preferred Shares Dividend | ||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance -March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Balance December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
| Vesting of Share Options | ||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Other comprehensive income | _ | |||||||||||||||||||||||||||||||
| Balance -March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| F-4 |
BUBBLR INC.
Consolidated Statement of Cashflows
For the Three months ended March 31, 2024 and 2023
(Unaudited)
Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Forfeit of restricted stock units | ( | ) | ||||||
| Vesting of stock-based compensation | ||||||||
| Change in fair value of warrant derivative liability | ||||||||
| Disposal of fixed assets | ||||||||
| Amortization of intangible asset | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in other receivables | ( | ) | ||||||
| Increase in accounts payable | ||||||||
| Increase in accrued liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Proceeds on the sale of fixed assets | ||||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Repayment of loans payable - related party | ( | ) | ||||||
| Proceeds from loans payable - related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Effects of exchange rate changes on cash | ( | ) | ||||||
| Net Change in Cash | ( | ) | ||||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-5 |
BUBBLR INC.
Notes to the Unaudited Consolidated Financial Statements
NOTE 1 - ORGANIZATION, BUSINESS AND LIQUIDITY
Organization and Operations
On
March 26, 2020, Bubblr Holdings Ltd. (a UK company formed on February 18, 2016) merged into U.S. Wireless Online, Inc. (“UWRL”),
a Wyoming corporation formed on
Bubblr, Inc. is an application software company that is currently developing its disruptive Ethical Web platform. This WEB.Ɛ platform will provide a holistic view of progress in developing digital products, services, and teams — designed to inform our ability to use our in-house code and that of our partners, lead advances in development criteria, and respond quickly to shifts in trends and applications.
Going Concern Matters
The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the
United States of America (“GAAP”), which contemplates the Company’s continuation as a going concern. The Company incurred
a net comprehensive loss of $
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings, and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings, and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be required to curtail or cease its operations.
Due to uncertainties related to these matters, there exists substantial doubt about the ability of the Company to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
Unaudited Interim Financial Statements
The accompanying interim unaudited condensed consolidated financial statements (“Interim Financial Statements”) of the Company and its 100%-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Regulation S-X. Accordingly, these Interim Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. These Interim Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Form 10-K. In the opinion of management, the Interim Financial Statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented.
The operating results and cash flows of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated interim financial statements have been prepared in accordance with GAAP. The Company’s fiscal year-end is December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Bubblr Holdings Ltd., Bubblr Ltd., and Bubblr CLN Ltd. All significant inter-company balances and transactions have been eliminated in consolidation.
| F-6 |
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.
Intangible Assets - Capitalized Product Development Costs
Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by Bubblr, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding.
The costs of product development that are capitalized once technological feasibility is determined (noted as Technology in progress in the Intangible Assets table, in Note 5 to Notes to Unaudited Consolidated Financial Statements) include sub-contractor expenses, payroll, employee benefits, and other headcount-related expenses associated with product development. The Company determines that technological feasibility for products is reached after all high-risk development issues have been resolved. Once the products are available for general release to the Company’s customers, the Company ceases capitalizing the product development costs and any additional costs, if any, are expensed. The capitalized product development costs are amortized on a product-by-product basis using the straight-line amortization. The amortization begins when the products are available for general release to our customers.
Segment Reporting
Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. Accordingly, the Company has one reportable segment, consisting of fees for App usage.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Net sales: | 2024 | 2023 | ||||||
| North America | $ | $ | ||||||
| Europe | ||||||||
| Totals | $ | $ | ||||||
| Long-lived assets, net (property and equipment and intangible assets): | March 31, 2024 | June 30, 2023 | ||||||
| North America | $ | $ | ||||||
| Europe | ||||||||
| Totals | $ | $ | ||||||
| F-7 |
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line basis over the estimated periods benefited. Patents, technology, and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.
Long-Lived Assets
Long-lived
assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is
based on comparing the undiscounted future cash flows to the recorded value of the asset. The asset is written down to its estimated
fair value if an impairment is indicated. The Company did
Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The
carrying value of the Company’s current assets and liabilities are deemed to be their fair value due to the short-term maturity
and realization. During the year ended December 31, 2022, the Company acquired warrant derivative liabilities, which are Level 3 financial
instruments adjusted to fair market value on reporting dates. At March 31, 2024 and December 31, 2023 the warrant liabilities balances
were $
The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation–Stock Compensation,” which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenses in the financial statements based on the fair values of the stock awards on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
| F-8 |
Pursuant to ASC 260, “Earnings Per Share,” basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Shares) | (Shares) | |||||||
| Series C Preferred Stock | ||||||||
| Warrants | ||||||||
| Total | ||||||||
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British Pounds (GBP). Local currency assets and liabilities are translated at the exchange rates on the balance sheet date, and local currency revenues and expenses are translated at weighted average exchange rates during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
| March 31, | December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Period-end GBP£: U.S.$ exchange rate | ||||||||||||
| Weighted average GBP£: U.S.$ exchange rate | ||||||||||||
Aggregate
transaction gains or losses, including gains or losses related to foreign-denominated cash and cash equivalents and the re-measurement
of certain inter-company balances, are included in the statement of operations as other income and expense. Gains on foreign exchange
transactions totaling $
| F-9 |
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount believed more likely than not to be realized.
As of March 31, 2024, and December 31, 2023, the Company did not have any amounts recorded pertaining to uncertain tax positions.
UK Taxes
We do not consider ourselves to be engaged in a trade or business in the UK and, as such, do not expect to be subject to UK corporate income taxation. We have subsidiaries based in the UK that are subject to the tax laws of that country. Under current law, those subsidiaries are taxed at the applicable corporate income tax rates. Should any UK subsidiaries be deemed to undertake business activities in the US, they would be subject to US corporate income tax in respect of their US activities only. Relief would then be available against the UK tax liabilities in respect of the overseas taxes arising from US activities. At present, this is not applicable as our UK subsidiaries only undertake activities in the UK. Our UK subsidiaries file separate UK income tax returns.
UK Tax Risk
Companies that are incorporated outside the UK may become subject to UK taxes in a number of circumstances, including circumstances in which (1) they are deemed resident in the UK for tax purposes by reason of their central management and control being exercised from the UK or (2) they are treated as carrying on a trade, investing or carrying on any other business activity in the UK, whether or not through a UK Permanent Establishment (“PE”).
In addition, the Finance Act 2015 introduced a new tax known as the diverted profits tax (“DPT”), which is charged at 25% of any “taxable diverted profit.”. The DPT has had an effect since April 1, 2015, and may apply in circumstances including (1) where arrangements are designed to ensure that a non-UK resident company does not carry on a trade in the UK through a PE; and (2) where a tax reduction is obtained through the involvement of entities or transactions lacking economic substance. We intend to operate in such a manner that none of our companies should be subject to the UK DPT and that none of our companies (other than those companies incorporated in the UK) should: (1) be treated as resident in the UK for tax purposes; (2) carry on a trade, invest or carry on any other business activity in the UK (whether or not through a UK PE).
However, this result is based on certain legal and factual determinations, and since the scope and the basis upon which the DPT will be applied by HM Revenue & Customs (“HMRC”) in the UK remains uncertain and since applicable law and regulations do not conclusively define the activities that constitute conducting a trade, investment or business activity in the UK (whether or not through a UK PE), and since we cannot exclude the possibility that there will be a change in law that adversely affects the analysis, HMRC might successfully assert a contrary position. The terms of an income tax treaty between the UK and the home country of the relevant Bubblr subsidiary, if any, could contain additional protections against UK tax.
Any arrangements between UK-resident entities of Bubblr and other entities of Bubblr are subject to the UK transfer pricing regime. Consequently, if any agreement between a UK resident entity of Bubblr and any other Bubblr entity (whether that entity is resident in or outside of the UK) is found not to be on arm’s length terms and, as a result, a UK tax advantage is being obtained, an adjustment will be required to compute UK taxable profits as if such an agreement were on arm’s length terms. Any transfer pricing adjustment could adversely impact the tax charge incurred by the relevant UK resident entities of Bubblr.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
| F-10 |
Reclassifications
Certain accounts have been reclassified in prior periods to conform to current period presentation. Compensation expense that was previously reported separately has been combined with general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented.
NOTE 3 – OTHER RECEIVABLES
Other receivables consisted of the following:
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Deposit | $ | $ | ||||||
| UK R&D credit | ||||||||
| UK VAT receivable | ||||||||
| Total other receivables | $ | $ | ||||||
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Motor Vehicles | Computer Equipment | Office Equipment | Total | |||||||||||||
| Cost | ||||||||||||||||
| At December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Additions | ||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ||||||||||
| At March 31, 2024 | ||||||||||||||||
| Less accumulated depreciation | ||||||||||||||||
| At December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Depreciation expense | ||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ||||||||||
| At March 31, 2024 | ||||||||||||||||
| Net book value | ||||||||||||||||
| At March 31, 2024 | ||||||||||||||||
| At December 31, 2023 | $ | $ | $ | $ | ||||||||||||
Depreciation
expense was $
NOTE 5 - INTANGIBLE ASSETS
The Company has the following intangible assets:
Intangible assets consisted of the following:
| Patents | Trademarks | Intellectual Property | Capitalized Acquisition Costs | Total | ||||||||||||||||
| Cost: | ||||||||||||||||||||
| At December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| At March 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Less accumulated amortization: | ||||||||||||||||||||
| At December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Amortization expense | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ||||||||||||||
| At March 31, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Net book value | ||||||||||||||||||||
| At March 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| At December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| ● | Patents |
A Patent on the Internet-Search Mechanism (“IBSM”) has been granted in the United States, South Africa, New Zealand, Canada, and Australia. The patent is pending in the European Union, and the United Kingdom.
Patents on Contextual Enveloping of Dynamic Hypertext Links and Real-Time Data Processing are pending in the United States
Patents
are reported at cost, less accumulated amortization, and accumulated impairment loss. Costs include expenditure that is directly attributable
to the acquisition of the asset. Once a patent provides economic benefit to the Company, amortization is provided on a straight-line
basis on all patents over their expected useful lives of
| F-11 |
| ● | Intellectual Property |
Intellectual
Property capitalizes the Company’s qualifying internal research and developments costs. Intellectual property is amortized
over its useful life of
| ● | Trademarks |
The Company has the following trademarks.
| Mark | Category | Proprietor | Country | Class(es) | Status | Reg. Date. | File No. | |||||||
| CITIZENS JOURNALIST | Words | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206382.EM.01 | |||||||
| CITIZENS JOURNALIST | Word | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206382.GB.01 | |||||||
| CITIZENS JOURNALIST | Words | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206382.GB.02 | |||||||
| CITIZENS JOURNALIST | Word | Bubblr Limited | United States | 9 38 41 42 | REGD-DEC USE | 08-Feb-2022 | 206382.US.01 | |||||||
| Words and Color Device | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206383.EM.01 | ||||||||
| Series of Logos | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206383.GB.01 | ||||||||
| Words and Color Device | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206383.GB.02 | ||||||||
| Words and Device | Bubblr Limited | United States | 9 38 41 42 | ACCEPTED | 206383.US.01 | |||||||||
| BAU NOT OK/BAU Not OK | Series of Marks | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 11-Oct-2019 | 208674.GB.01 | |||||||
| NEWZMINE/NewzMine | Series of Marks | Bubblr Limited | United Kingdom | 9 38 42 | REGISTERED | 25-Dec-2020 | 227753.GB.01 |
The Company capitalizes trademark costs where the likelihood of acceptance is expected. Each trademark has been determined to have an infinite useful life and is assessed each reporting period for impairment. If there has been a reduction in the value of the trademark or if the trademark is not successfully registered, the assets will be impaired and charged to expense in the period of impairment.
Amortization
expense was $
| F-12 |
NOTE 6 – ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Director fees | $ | $ | ||||||
| Dividends payable | ||||||||
| Other accruals | ||||||||
| Settlement payable | ||||||||
| Wages and salaries | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
NOTE 7 – LOANS PAYABLE TO RELATED PARTIES
The Company had the following loans payable to related parties:
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Loan 1 (May 23, 2022) – Loan payable to Stephen Morris | $ | $ | ||||||
| Loan 2 (September 7, 2022) – Loan payable to Stephen Morris | ||||||||
| September 8, 2022 – Loan payable to Director | ||||||||
| Total loan payable to related parties | ||||||||
| Less – current portion | ||||||||
| Total – noncurrent | $ | $ | ||||||
| ● | Loan 1 (May 23, 2022) - Stephen Morris, Founder, CTO and Chair. |
On
September 6, 2022, the Company entered into a second amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to add
$
| F-13 |
On
December 20, 2022, the Company entered into a third amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to reduce
the outstanding principal amount of the loan by $
On
December 27, 2023, Stephen Morris converted $
| ● | Loan 2 (September 7, 2022) - Stephen Morris, Founder, CTO and Chair. |
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for $
| ● | Related Party Loan – Professor Paul Morrissey, Director. |
On
September 8, 2022, the Company entered into a new loan agreement (the “Loan Agreement”) with Professor Paul Morrissey for
$
Total
interest expense was $
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company had the following related party transactions:
| ● | Loan payable to Stephen Morris | |
| ● | Loan payable to Director of the Company. |
Loans payable to related party transactions are disclosed in Note 7.
NOTE 9 - WARRANT LIABILITY
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instruments should be classified as a liability due to reset provisions and variability in exercise price resulting in there being no fixed value or explicit limit to the number of shares to be delivered upon exercise. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
| F-14 |
The Company determined our warrant liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of March 31, 2024. The Black Scholes model requires three basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model.
For the period ended March 31, 2024, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:
| Three Months Ended | ||||
| March 31, 2024 | ||||
| Expected term | ||||
| Expected average volatility | % | |||
| Expected dividend yield | % | |||
| Risk-free interest rate | % | |||
The following table summarizes the changes in the warrant liabilities during the three months ended March 31, 2024, and year ended December 31, 2023:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
| Warrant liability December 31, 2022 | $ | |||
| Addition of new warrants | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Warrant liability as of December 31, 2023 | $ | |||
| Addition of new warrants | $ | |||
| Change in fair value of warrant liability | ||||
| Warrant liability as of March 31, 2024 | $ | |||
NOTE 10 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized preferred shares with a par value of $per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
Series C Convertible Preferred Stock
On March 4, 2023, the Company filed a Certificate of Designation with the Wyoming Secretary of State, which established shares of the Company’s Series C Convertible Preferred Stock, with a Stated Value of $ per share.
The Company has the right to redeem the Series C Convertible Preferred Stock in accordance with the following schedule:
| ● | ||
| ● | The
Company shall pay an |
| F-15 |
The Series C Convertible Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forth in the Certificate of Designation).
On
March 4, 2022, the Company entered into a Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS
Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to $
On
March 4, 2022, the Company issued to GHS the first tranche of shares of Series C Convertible Preferred Stock, as well as commitment
shares of shares of Series C Convertible Preferred Stock and warrant shares (the “GHS Warrant”). Warrant shares
represent
GHS
delivered gross proceeds of $
On March 9, 2022, the Company entered a Securities Purchase Agreement with Proactive Capital Partners LP (“Proactive”), whereby Proactive agreed to purchase shares of Series C Preferred Stock.
The
Company agreed to issue Proactive commitment shares of shares of Series C Convertible Preferred Stock and warrant shares (the
“Warrant”). Warrant shares represent
On
March 9, 2022, the Company issued shares of Series C Convertible Preferred stock to Proactive Capital Partners LP as per the Securities
Purchase Agreement. Proactive delivered gross proceeds of $
On
April 24, 2022, the Company issued the second tranche of shares of Series C Convertible Preferred Stock and warrant shares
as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
May 25, 2022, the Company issued the third tranche of shares of Series C Convertible Preferred Stock and 281,074 warrant shares as
per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
September 24, 2022, the Company issued the fourth tranche of shares of Series C Convertible Preferred Stock and warrant shares
as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for £
As
a result of the above transactions, the Company received total net proceeds of $
As of March 31, 2024 and December 31, 2023, the Company had shares of Series C Preferred Stock issued and outstanding.
| F-16 |
Common Stock
The Company has authorized common shares with a par value of $ per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
During the three months ended March 31, 2023, the Company issued the following unregistered securities:
| ● |
shares for Consultancy services valued at $ |
|
| ● |
shares for Professional services valued at $ |
|
| ● |
shares for dividend due of Series C Preferred Stock valued at $ |
|
| ● |
shares for Investor Relations services valued at $ |
During the three months ended March 31, 2024, the Company did not issue unregistered securities.
As of March 31, 2024, and December 31, 2023, the Company had shares of common stock issued and outstanding.
The above securities were issued in reliance on the exemption from registration provided by Section 4.(a)(2) of the Securities Act of 1933, as amended, and/or in reliance on the exception from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.
Warrants
The Company identified conversion features embedded within warrants issued during the three months ended March 31, 2023. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision which could cause adjustments in redemption value and the number of shares issued upon exercise (see Note 9 - Warrant Liability).
A summary of activity during the three-month period ended March 31, 2024, follows:
| Warrants Outstanding | Weighted Average | |||||||||||
| Number of | Weighted Average | Remaining life | ||||||||||
| Warrants | Exercise Price | (years) | ||||||||||
| Outstanding, December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited/canceled | - | |||||||||||
| Outstanding, March 31, 2024 | $ | |||||||||||
| Exercisable Warrants, March 31, 2024 | $ | |||||||||||
The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2024:
| Warrants Outstanding | Warrants Exercisable | ||||||||||||||||
| Number of Warrants | Weighted Average Remaining Contractual life (in years) | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | |||||||||||||
| $ | $ | ||||||||||||||||
| $ | $ | ||||||||||||||||
| F-17 |
As of March 31, 2024, the intrinsic value of the warrants is $, as the price of the Company’s stock was below the warrant exercise price.
2022 Equity Incentive Plan
On
April 1, 2023, the
Number of Shares | Weighted-Average Exercise Price (per share) | |||||||
| Outstanding as of December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ||||||||
| Outstanding at March 31, 2023 | $ | |||||||
| Exercisable at March 31, 2024 | ||||||||
| Weighted-average fair value of options granted in the period | $ | |||||||
The total intrinsic value of options on March 31, 2023, is zero because the closing stock price was below the weighted average exercise value.
| Three Month | ||||
| March 31, 2024 | ||||
| Expected life in years | ||||
| Risk-free interest rate | % | |||
| Annual forfeiture rate | % | |||
| Volatility | % | |||
| Expected dividend yield | % | |||
| Number of Shares | Weighted-Average
| |||||||
| Non-vested as of December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Forfeited or expired | ||||||||
| Vested | ( | ) | ||||||
| Non-vested as of March 31, 2024 | $ | |||||||
| F-18 |
| Options | Options | |||||||
| Outstanding | Exercisable | |||||||
| Number of shares | ||||||||
| Weighted-average contractual life in years | ||||||||
| Weighted-average exercise price | $ | $ | ||||||
| Intrinsic value | $ | $ | ||||||
As
of March 31, 2024, the Company recognized $
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Lease
The
Company rents virtual space month-to-month at 21 West 46th St, New York, NY 10036. The monthly
rate is $
Investor Relations
On
February 14, 2023, the Company entered a Consulting Agreement with Beyond Media SEZC. The agreement is for twelve months. Beyond Media
will receive $ monthly in cash and will be issued shares of common stock valued at $
On
June 15, 2023, the Company entered a Consulting Agreement with Launchpad LLC. The agreement is for six months. Launchpad LLC will receive
$
Employment and Separation Agreements
| ● | Steven Saunders, Former Chief Commercial Officer, and Director |
On
January 31, 2023, the Company entered Separation Agreements with Steven Saunders. He is no longer an officer or director of our Company,
and all prior agreements are terminated. To satisfy all amounts due, Mr. Saunders and the Company agreed to a settlement totaling $
| ● | Rik Willard, Former Chief Executive Officer, and Director |
On
January 31, 2023, the Company entered into Separation Agreements with Rik Willard, our then-Chief Executive Officer. Mr. Willard is no
longer an officer or director of our Company, and all prior agreements are terminated in their entirety. To satisfy all amounts due,
Mr. Willard and the Company agreed to a settlement total sum of $
| ● | Stephen Morris, Founder, Chief Technical Officer, and Director |
On
April 1, 2023, the Company entered into an Amended Employment Agreement with Stephen Morris, Founder, Chief Technical Officer, and Chair.
The Company will compensate Mr. Morris with $
| F-19 |
On April 1, 2023, the . The options were fully vested as Mr. Morris completed two years and three months of service.
On
December 31, 2023, the Company entered into a Second Amended Employment Agreement with Stephen Morris to reduce his base pay from $
to $ per annum and forfeit $
| ● | David Chetwood, Chief Financial Officer, and Director |
On
April 1, 2023, the Company entered into an Amended Employment Agreement, effective February 10, 2023, with David Chetwood, Chief Financial
Officer, and Director. The Company will compensate Mr. Chetwood with a base pay of $
On May 12, 2023, the , under the 2022 Incentive Plan. As of March 31, 2024, there were non-vested share options, which we will recognize over the next 13 months.
On
December 31, 2023, the Company entered into a Second Amended Employment Agreement with David Chetwood to reduce his base pay from $
to $ per annum and forfeit $
| ● | Timothy Burks, Chief Executive Officer, and Director |
On April 1, 2023, the
On July 1, 2023, the , under the 2022 Incentive Plan. As of March 31, 2024, there were non-vested share options, which we will recognize over the next 15 months.
On
December 31, 2023, the Company entered into an Amended Employment Agreement with Timothy Burks to reduce his base pay from $ to
$ per annum and forfeit $
| ● | Paul Morrissey, Director |
On April 6, 2023, the
On July 6, 2023, the , under the 2022 Incentive Plan. As of March 31, 2024, there were non-vested share options, which we will recognize over the next 15 months.
On
December 31, 2023, the Company entered into an Amended Non-Executive Director Agreement with Morrissey to reduce his director fee from
$ to $ per annum and forfeit $
NOTE 12 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 7, 2024 when the financial statements were available to be issued. The Company has concluded no subsequent events have occurred that require disclosure.
| F-20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Some of the statements contained in this Quarterly Report on Form 10-Q of Bubblr, Inc. (hereinafter the “Company,” “Bubblr,” “BBLR,” “Ethical Web.AI,” “we,” “us” or “our”) discuss future expectations, contain projections of our plan of operation or financial condition or state other forward-looking information. In this Annual Report, forward-looking statements are generally identified by the words such as “anticipate,” “plan,” “believe,” “expect,” “estimate”, and the like. Forward-looking statements involve future risks and uncertainties, and there are factors that could cause actual results or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on numerous factors and is derived using numerous assumptions. A reader should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report. Key factors that may cause actual results to differ from projections include, for example:
| ● | our strategies, prospects, plans, expectations, forecasts, or objectives; | |
| ● | our ability to achieve marketable products and the costs and timing thereof; | |
| ● | acceptance of our products by our target market and our ability to compete in such market; | |
| ● | our ability to raise additional financing when needed and the terms and timing thereof; | |
| ● | our ability to expand, protect and maintain our intellectual property rights; | |
| ● | our future operations, financial position, revenues, costs, expenses, uses of cash, capital requirements, our need for additional financing or the period for which our existing cash resources will be sufficient to meet our operating requirements; | |
| ● | our analysis of the target market for our platform; | |
| ● | the impact of COVID-19 and/or other future pandemics and other adverse public health developments on our operations and our industry; | |
| ● | regulatory developments in the United States and other countries; | |
| ● | our compliance with all applicable laws, rules, and regulations, including those of the Securities and Exchange Commission, or SEC; | |
| ● | our ability to compete in the United States and internationally with larger and more substantial companies; | |
| ● | general economic, business, political and social conditions; | |
| ● | our reliance on and our ability to retain (and if necessary, timely recruit and replace) our officers, directors and key employees and their ability to timely and competently perform; | |
| ● | our ability to generate significant revenues and achieve profitability; | |
| ● | our ability to manage the growth of our business; | |
| ● | our commercialization of our platform and marketing capabilities and strategies; | |
| ● | our ability to expand, protect and maintain our intellectual property position; | |
| ● | the success of competing third-party platforms; | |
| ● | our ability to fully remediate our identified internal control material weaknesses; | |
| ● | our ability to comply with regulatory requirements relating to our business, and the costs of compliance with those requirements; |
| 4 |
| ● | the specific risk factors discussed under the heading “Risk Factors” set forth in this Annual Report; and | |
| ● | various other matters, many of which are beyond our control. |
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-K to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of our public disclosure practices. Additionally, the discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Form 10-Q.
Business
Except as otherwise indicated herein or as the context otherwise requires, references in this Quarterly Report to “Bubblr,” the “Company,” “Ethical Web.AI,” “we,” “us,” and “our” refer to Bubblr, Inc. and its wholly-owned subsidiaries, including Bubblr Limited and Bubblr Holdings Limited, which are a non-trading company and IP holding company, respectively, both formed and existing under the laws of the United Kingdom.
Overview
Bubblr, Inc., d/b/a Ethical Web.AI is an artificial intelligence or AI company that has patent protected intellectual properties. We compete with a number of large companies who include AI in their suite of product offerings – companies such as Amazon, AI Brain, C3.ai, Data Robot, Inc., Google, IBM, Open AI and Anthropic. All of those companies have far greater financial resources and more populated human assets in the development of AI technology, training data and algorithms than our Company has.
The AI industry also has numerous smaller companies that compete in the AI space without owning any protected intellectual property and that rely heavily, if not totally, on access or linkage to third party search engines and AI.
Here is a simple explanation of Generative AI
Generative artificial intelligence (AI) is a branch of computer science focused on creating programs that can generate new, original content. This technology harnesses the power of AI to produce outputs that a human might otherwise create, ranging from written text to complex code and from stunning images to original music compositions. At its core, generative AI works by synthesizing new forms from familiar elements, drawing from a vast array of data on which it has been trained.
For the uninitiated, it might help to think of generative AI as a sophisticated assistant capable of crafting entirely new creations based on a set of learned patterns and examples. For instance, you could ask this AI to draft an essay, compose a piece of music, or even generate a computer program. It is not just rehashing what it has seen before; it is creating something new from the pieces it knows.
The concept of generative AI is not novel—it has been around for some time. Consider Google Translate, which has been translating text since 2006, and Siri, Apple’s voice assistant introduced in 2011. These are early examples of generative AI in action, responding to human queries with generated language that seeks to be as close as possible to natural human speech or text. As these technologies have evolved, they have become more integrated into our daily lives, often functioning in the background, and smoothing out our interactions with the digital world.
Recent advancements have been groundbreaking. OpenAI’s GPT-4, released in 2023, claimed capabilities surpassing the performance of most humans in standardized tests like the LSAT. This is a testament to how far AI has come in understanding and generating human-like text. GPT-4 can write essays, debug code, create summaries, and even compose music, demonstrating a breadth of capabilities that were once thought to be solely within the realm of human expertise.
The process that allows generative AI to perform these feats is called language modelling. This process involves the AI examining a sequence of words (the context) and predicting what comes next. This is not done through a simple count of word frequencies, but through the use of neural networks—complex mathematical models that can learn patterns in data. By training on a massive corpus of text data from diverse sources like Wikipedia, books, and websites, these neural networks learn to anticipate the next word in a sequence with a high degree of accuracy.
| 5 |
Training a generative AI model involves a careful and resource-intensive process. The AI is fed enormous amounts of text, and during training, it tries to predict parts of the text that are intentionally omitted. This training is iterative and can take months or even years as the model constantly refines its predictions to match reality more closely. Once trained, the model has parameters—essentially, learned weights and biases that guide its predictions. These parameters are fine-tuned through additional training to specialize in the AI for particular tasks, a process known as fine-tuning.
Despite the impressive capabilities of generative AI, there are significant considerations and challenges. The technology’s rapid development has sparked discussions about its energy usage, potential to displace jobs, and ability to perpetuate or even create biases and misinformation. For example, the training of large models like GPT-4 requires substantial computational resources, which translates to significant energy consumption and associated carbon emissions. Moreover, as generative AI continues to excel at tasks traditionally performed by humans, there’s concern over job displacement, particularly in fields like customer service, content creation, and programming.
Generative AI also raises questions about the authenticity of content and the propagation of biases. Since the AI learns from existing data, any historical biases present in that data can be reflected in the AI’s outputs. This has led to the development of methods to align AI’s behavior with ethical standards and societal values. OpenAI, for instance, has focused on making GPT helpful, honest, and harmless by fine-tuning it with human feedback to avoid toxic, biased, or offensive content.
In sum, generative AI is a transformative technology with the potential to change how we interact with machines and automate the creation of content. It is a field that is evolving rapidly, offering tremendous benefits while also posing new challenges that society must address responsibly. As we continue to harness its power, it is crucial to balance innovation with ethical considerations, ensuring that generative AI serves as a tool for positive change rather than a source of harm.
Finally, it is not cheap. Building the training data for Chat GPT 4 was estimated to cost $100 million. It costs even more to process the queries. It is not Skynet, and it will not take over the world. It is simply an incredibly powerful tool to massively enhance productivity for most office-based professionals.
Our Current Business
Bubblr, Inc., d/b/a Ethical Web.AI, stands at the forefront of a technological revolution committed to remedying the fragmented landscape of the current Internet through its advanced, ethically focused artificial intelligence software platforms. Our Company, fortified by robust patent protections, embodies integrity and innovation in technology, aspiring to mend the dysfunctional aspects of online experiences while promoting digital wellness and ethical engagement.
Our product ecosystem, at the heart of our value proposition, features two trailblazing solutions poised to redefine user interaction within the digital realm:
| 1. | Community-Centric Super App Platform: Our innovative SaaS open-source platform empowers communities to conceive and customize their local ‘super apps.’ Our platform’s distinguishing architecture is a testament to our commitment to consumer privacy and local economic enrichment. These super apps, beyond safeguarding user anonymity, emerge as cost-effective marketing conduits for local businesses and as crucial revenue engines for communities. This expansive platform, nearing its full operational capacity, anticipates its commercial launch shortly, with substantial revenue contributions forecasted for 2024. | |
| 2. | AI Seek: AI Seek is our transformative generative AI application that surpasses the capabilities of existing technologies such as Chat GPT-4. AI Seek champions user anonymity and affordability, being 25% more cost-efficient. Initially introduced to the consumer market, our strategic roadmap encompasses licensing this technology to academic institutions. This initiative not only diversifies universities’ revenue streams, but also arms them with sophisticated tools to authenticate student submissions by detecting AI-generated content, thereby safeguarding academic integrity. |
| 6 |
Ethical Web AI thrives on a business model characterized by low operational costs, yet significant revenue and margin potential, reflective of the SaaS open-source framework’s inherent scalability and profitability. In comparison to peer entities, many of which boast market capitalizations exceeding $1 billion, our Company signifies a compelling investment proposition given our ethical technology differentiation, robust intellectual property suite, and foreseeable market demand.
Bubblr’s Mission
Mission
At Ethical Web AI, our mission transcends the norms of technological advancement; we are dedicated to fostering a new era of the internet, rooted in the principles of ethical engagement, consumer privacy, and communal prosperity. We champion these ideals by demonstrating the commercial viability and success of our products, which are designed not merely as tools of technology but as extensions of community values and enablers of equitable digital ecosystems.
Our suite of heavily patent-protected products upholds the sanctity of user anonymity, standing as testaments to the possibility of achieving commercial success without relying on invasive online advertising tactics. These offerings are emblematic of our commitment to real decentralization, a principle that forms the bedrock of our design philosophy and operational paradigm.
We endeavor to decentralize profits and authority, channeling control back into the hands of local communities that engage with our technology. This approach disrupts traditional power structures in the digital economy, dismantling monopolistic barriers and facilitating an environment where businesses, irrespective of their scale, can compete fairly and thrive collectively. Such a landscape not only contributes to local economic vibrancy, but also empowers communities, providing them with substantial new revenue streams, thereby promoting self-sufficiency and innovation at a grassroots level.
Our mission then, in essence, is to promulgate the principles of the ethical web throughout the digital world. By showcasing the success of our business model, we intend to inspire a ripple effect, catalyzing an industry-wide shift towards practices that honor consumer privacy, champion true decentralization, and promote equitable access and opportunity for all entities within the digital space.
In this journey, we remain steadfast in our belief that technology should be a force for communal good, a platform for fair economic participation, and a space that respects and protects individual privacy. Through our innovative products and their principled underpinnings, Ethical Web AI is pioneering this transformative vision for a balanced and conscientious digital future.
Products
The AI Seek App
In the dynamic realm of artificial intelligence, the advent of generative AI applications has marked a significant milestone, challenging even formidable industry giants like Google. One such revelation has been the emergence of Chat GPT models, which, despite their advanced capabilities, have shown certain limitations in adaptability, cost-effectiveness, and data contemporaneity. Ethical Web AI, leveraging its innovative spirit and strategic intellectual property assets, has introduced AI Seek, a state-of-the-art generative AI app crafted to transcend these limitations and offer a superior, consumer-friendly alternative.
| 7 |
Technological Edge and Consumer Anonymity
AI Seek, built on the foundations of our proprietary patents, presents a significant upgrade over existing technologies such as Chat GPT-4. Our version stands out not only in terms of enhanced performance but also in its cost structure, being 25% more affordable. Upholding our commitment to user privacy, AI Seek operates with complete consumer anonymity. This commitment is reflected in its no-registration process, absence of cookies, and a staunch policy against behavioral data tracking, setting a new standard for user privacy in the AI space.
Contemporaneous Data Integration
One of AI Seek’s groundbreaking features is its patented ability to incorporate up-to-date information beyond the constraints of the app’s initial training data. This functionality starkly contrasts with models like Chat GPT-4, which possesses data only up until September 2021. Especially for queries requiring current financial figures or trending data, AI Seek proves invaluable, offering precise, real-time insights. This feature significantly enriches the user experience, particularly for professionals and entities requiring the latest information.
Dynamically generated hypertext links
Another groundbreaking feature of AI Seek, which is patented and unique, is that each prompt query result is delivered in a unique web page which includes dynamically generated hypertext links. These hypertext links may include multimedia such as videos and images along with text links to other salient web pages, making it a far superior research tool.
Commercial Strategy and University Collaboration
While AI Seek’s initial phase focuses on direct consumer engagement, our strategic vision extends to licensing partnerships with educational institutions. The plan involves universities adopting a branded version of AI Seek, thereby opening a new revenue channel by offering this advanced tool to their students, faculty, and benefactors. Furthermore, this strategy assists academic institutions in maintaining integrity standards by enabling them to assess the extent of AI-generated content in student submissions, thereby limiting the possibility of plagiarism and misattribution.
Revenue Generation and User Feedback
AI Seek, though in its infancy, has already begun to generate revenue, with a small dedicated user base of individuals. The continuous engagement and constructive feedback from these early adopters have been instrumental in refining the app’s functionalities. With a marketing campaign set to launch this year, we anticipate a significant uptick in adoption, forecasting that each app instance could contribute at least $15 monthly.
In conclusion, AI Seek represents not just a product but a pivotal step toward reshaping the interaction between humans and artificial intelligence. By balancing superior technology with ethical practices and user empowerment, AI Seek is poised to lead the new wave of generative AI applications, carving a niche for itself in the market.
The licensed version will just take 20% of the net margin generated by each University. Our initial estimate indicates this will remain significant.
Ethical Web AI Licensed Open-Source Platform
In the rapidly evolving digital landscape, Ethical Web AI is pioneering a transformative approach to online interactions and transactions with its Licensed Open-Source Platform. This platform, a direct innovation from our first granted patent, US Patent No. 10977387, entitled “Internet Search Mechanism,” stands as a beacon of technological advancement and community empowerment.
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Innovation Valuation and Global Recognition
Our unique internet search mechanism, granted by the USPTO in April 2021, has not only been recognized in the United States but has also been awarded patents in four other key territories. In an independent valuation, the potential of this patented technology was highlighted, estimating its worth at an impressive $4.7 billion in a hypothetical acquisition scenario by an internet conglomerate. This value underscores the platform’s transformative potential in reshaping the internet’s commercial landscape.
Technological Advancement and Open-Source Capabilities
The complexity and breadth of the platform are testament to recent advancements in technology, enabling its rich feature set and extensive scalability. At its core, the platform offers open-source app templates, allowing licensees to construct community-centric super apps tailored to their local needs and economic contexts. Unlike conventional single-purpose applications like Uber Eats or Hotels.com, these super apps present a comprehensive marketplace, accommodating an unlimited array of products and services within a single digital ecosystem.
Revolutionizing Commercial Interactions
What distinguishes our platform further is its revolutionary approach to e-commerce. Businesses, rather than surrendering a high percentage of their transaction value, are charged a fixed monthly listing fee determined by the community licensees. This structure not only fosters a fair, competitive environment for smaller enterprises but also ensures that more revenue remains within local economies.
Anonymity, User Control, and the Future of Search
These community super apps are set to redefine internet search and e-commerce, areas that have seen little fundamental change in the past quarter-century. One of the platform’s innovative features is the “concierge search,” where users can anonymously leave requests for goods or services not immediately available, enabling future transaction fulfilment.
Furthermore, Ethical Web AI takes user privacy and control seriously. Our platform ensures user anonymity and places consumers in full control of communication channels, transforming the way they interact with online marketplaces.
Community Impact and Invitation to Explore
Beyond commercial benefits, our platform represents a new avenue for significant community revenue, fostering local development and self-sustainability. We invite interested parties to explore the diverse potential of our platform through five distinct use-case scenarios detailed on our website. Each illustrates the platform’s versatility and its adaptability to various market sectors.
Conclusion
In conclusion, the Ethical Web AI Licensed Open-Source Platform is more than a technological breakthrough; it is a new paradigm for online commerce, community growth, and digital privacy. By decentralizing the Internet marketplace, we are building a more equitable, prosperous digital future for communities and especially small businesses alike.
Intellectual Property
We have created a new search mechanism, “AN INTERNET-BASED SEARCH MECHANISM,” which has been granted a patent in South Africa (2016/06947), New Zealand (725014), the United States of America (‘Utility Patent No. US 10977387), Canada (2962520), and we have patents pending on the same processes in Australia (2015248619), the European Union (15723990.6) and the United Kingdom (PCT/GB2015/051130), creating an alternative economic ecosystem to tackle the current broken model and better serve all main participant groups. This utility patent defines a profoundly unique way for internet users to search the internet for goods or services rather than text-based search engine solutions. The technical manifestation of this utility patent is the Ethical Web ATI Open-Source Platform.
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We have filed a sister patent that is specifically for searching for information rather than goods or services. US Patent Application No. 17/980298 was filed in the USA in November 2022. It is titled “Contextual enveloping via dynamically generated hypertext links.” This utility patent defines a radically unique way for consumers to search for information only, which again is radically different from traditional search engines. The technical manifestation of this patent is the AI Seek AI LLM (Large Language Model) as it works exceptionally well with AI LLMs such as Chat GPT 4 and Claude 2. It is the confident opinion of our patent agents, Murgatroyd’s, that this patent will be granted in November 2024.
We have also recently filed another patent with the U.S. Patent Office (application number 18/376,101), which currently has a generic title of “computer-implemented method and system.” Again, this is a utility patent that resolves a significant issue with existing foundation AI LLM, such as Chat GPT and Claude 2, whereby they are unable to provide information that needs contemporaneous data. This is because the established AI LLMs have a training data database that is limited to some point in the past. For example, Chat GPT’s training data only goes up to September 2021. Claude 2 will be updating their training data to January 2023. This utility patent uses an internally trained AI LLM that identifies those search prompts that require contemporaneous data (for example, stock prices and sports data) and augments the prompt with the necessary contemporaneous data to radically improve AI LLM’s output to include references to the necessary contemporaneous data. The technical manifestation of this patent is delivered in version 4 and beyond of our AI Seek consumer app.
Competition
The space for online marketplaces and ad networks is rapidly evolving. The Advertising Technology (Ad-tech) industry includes all kinds of tools, software platforms (Google, Facebook), agencies, data-brokers, etc. It facilitates targeted advertisements that have become exponentially more invasive over the past decade due to massive amounts of personal data collection. It is a complex and opaque ecosystem that tracks, profiles, discriminates (both personal and business) and manipulates for profit. It is a multi-billion-dollar industry that is now facing litigation, investigations, and new regulations to curb its practices.
We face intense competition from companies with much larger capital resources than us, and, as a result, we could struggle to attract users and gain market share. Many of our existing or future competitors have greater financial resources and greater brand name recognition than we do and, as a result, may be better positioned to adapt to changes in the industry or the economy as a whole. We will strive to advance our technology in each of these sectors ahead of our competitors to gain market share. We also face intense competition in attracting and retaining qualified employees. Our ability to continue to compete effectively will depend upon our ability to attract new employees, retain, and motivate our existing employees and to compensate employees competitively. We face significant competition in several aspects of our business, and such competition might increase, particularly in the market for networks and online marketplaces. A key advantage against better resourced competitors is provisioning our technology and related acquisitions as an Open Source SAAS platform. This pushes all of the consumer and merchant marketing responsibility to the registered partners.
Our competitors may announce new products, services, or enhancements that better address changing industry standards or the needs of users, such as mobile access or different market focus. Any such increased competition could cause pricing pressure, loss of business or decreased user activity, any of which could adversely affect our business and operating results.
We believe that we have competitive strengths and protection via our IP which is defensible under the umbrella protection of our granted patents.
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Government Regulation
We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business online, many of which are evolving and could be interpreted in ways that could harm our business. In the United States and abroad, laws and regulations relating to the liability of providers of online services for activities of their users and other third parties are being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, or the content provided by users. Further, some countries impose regulations regarding or require licenses to conduct various aspects of our business, including employee recruiting and news related services. Any court ruling or other governmental action that imposes liability on providers of online services for the activities of their users or other third parties could harm our business. In addition, rising concern about the use of social networking technologies for illegal conduct, such as the unauthorized dissemination of national security information, money laundering or supporting terrorist activities, may in the future produce legislation or other governmental action that could require changes to our website platform, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our platform.
In the area of information security and data protection, most states have enacted laws and regulations requiring notification to users when there is a security breach of personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. The costs of compliance with these laws and regulations may increase in the future as a result of amendments or changes in interpretation. Furthermore, any failure on our part to comply with these laws and regulations may subject us to significant liabilities.
We are also subject to federal, state, and foreign laws and regulations regarding privacy and protection of data. Our privacy policies describe our practices concerning the use, storage, transmission, and disclosure of personal information, including visitor and user data. Any failure by us to comply with these terms or privacy-related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of privacy and data protection laws and regulations and their application to online services are unclear, evolving and in a state of flux. For example, in October 2015, the highest court in the European Union invalidated reliance on the US-EU Safe Harbor regime as one of the legally recognized mechanisms under which the personal data of European citizens could be transferred to the United States. There is a risk that these laws and regulations may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner that is not consistent with our current data protection practices or that new laws or regulations will be enacted. In addition, because our platform will be accessible worldwide, certain foreign governments may claim that we are required to comply with their laws and regulations, including with respect to the storage, use and disclosure of user information, even in jurisdictions where we have no local entity, employees, or infrastructure. Complying with these varying domestic and international requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our users’ privacy and data could result in a loss of user confidence in our services and ultimately in a loss of users, which could adversely affect our business.
Employees
As of May 7, 2024, we have five full-time employees. Our employees are not represented by any labor union.
Legal Proceedings
From time to time, we may become party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation if determined adversely to us.
Smaller Reporting Company
The Company is a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company,” these exemptions will continue to be available to us.
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Implications of Being an Emerging Growth Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 or “JOBS Act.”
As an emerging growth company, we may take advantage of reduced or “scaled” disclosure requirements that are otherwise applicable to public companies. These reduced or scaled disclosure requirements include, but are not limited to:
| 1. | being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report; | |
| 2. | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; | |
| 3. | being able to take advantage of the reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and | |
| 4. | being exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We elected to take advantage of certain of the reduced disclosure obligations in this Annual Report and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies that are not emerging growth companies.
The JOBS Act also provides that an emerging growth company may take advantage of an extended transition period to comply with new or revised accounting standards. We have irrevocably elected to not avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Compliance after Termination of Emerging Growth Company Status
After our emerging growth company status is terminated, we will not be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 1. and 4., above. However, in the event we are a “smaller reporting company,” as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, after our emerging growth company status has terminated, we will still be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 2. and 3., above, for as long as we continue to have smaller reporting company status.
Available Information
We make available, free of charge, on or through our website, at www.ethicalweb.ai, our Annual Report on Form 10-K, which includes our audited financial statements, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC maintains a website that contains these reports and other information at www.sec.gov. Our website and the information contained therein or connected thereto are not intended to be, and are not incorporated into this Annual Report on Form 10-K.
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Results of Operation
Revenues
| Three Months Ended March 31, 2024 and 2023 | ||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||
| Sales | $ | 1,504 | $ | - | $ | 1,504 | 100 | % | ||||||||
| Total revenue | $ | 1,504 | $ | - | $ | 1,504 | 100 | % | ||||||||
In the three months ended March 31, 2024, revenues were $1,504.We did not achieve revenues from operations in 2023. We will not achieve higher revenues unless we are able to develop, market, support, and deliver our products and service offerings. There can be no assurances we can achieve significant revenues despite our efforts.
Operating Expenses
| Three Months Ended March 31, | ||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||
| General and administrative | $ | 310,068 | $ | 16,289 | $ | 293,779 | 1,804 | % | ||||||||
| Professional fees | 8,028 | (225,570 | ) | 233,598 | (104 | ) | ||||||||||
| Sales and marketing | 18,173 | 312,463 | (294,290 | ) | (94 | ) | ||||||||||
| Amortization and depreciation | 53,991 | 59,627 | (5,636 | ) | (9 | ) | ||||||||||
| Research and development | 47,865 | 39,152 | 8,713 | 22 | ||||||||||||
| Total operating expenses | $ | 438,125 | 201,961 | $ | 236,164 | 117 | % | |||||||||
General and administrative
General and administrative expenses consist mainly of compensation and costs associated with non-specific costs of running the business. These include, but are not limited to, office costs, computer software, and telecoms.
The increase in general and administrative costs was primarily due to accrued compensation, director fees for new executives, and stock options awarded offset by the forfeiture of restricted stock units reducing expenses in the three months ended March 31, 2023.
Professional fees
Professional fees consist of costs in relation to legal, accounting, and consultants.
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The decrease in professional fees was primarily due to the forfeiture of restricted stock units reducing expenses in the three months ended March 31, 2023.
Sales and Marketing
Sales and marketing costs are costs incurred specifically in relation to fees and expenses for investor relations, advertising, marketing, press releases, and public relations. The decrease was due to a decrease in funding in the three months ended March 31, 2024 and new investor relations services contracts paid for by issuing shares of common stock in the three months ended March 31, 2023.
Amortization and depreciation
A sizable portion of the amortization and depreciation costs are from the amortization of patents and intellectual property. The patents and intellectual property are held in the UK subsidiary, Bubblr Ltd.
Research and Development
Costs incurred in relation to the development of the Company’s platform include costs associated with development staff and specialist software for product development and deployments.
Other Income (Expense), Net
| Three Months Ended March 31, | ||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||
| Other income | $ | 1,478 | $ | 98 | $ | 1,380 | 1,408 | % | ||||||||
| Interest expense | (3,592 | ) | (1,129 | ) | (2,463 | ) | 218 | |||||||||
| Disposal of fixed assets | (9,355 | ) | - | (9,355 | ) | 100 | ||||||||||
| Gain on change in fair value of warrant derivative liability | (1,251 | ) | (72,519 | ) | 71,268 | (98 | ) | |||||||||
| Foreign currency transaction (gain) loss | (10,904 | ) | 21,175 | (32,079 | ) | (151 | ) | |||||||||
| $ | (23,624 | ) | $ | (52,375 | ) | $ | 28,751 | (55 | )% | |||||||
Other Income
The Company earns interest income from its cash reserves and advances receivable.
Interest Expense
Interest expense consists of interest on borrowings, a Company vehicle, and related party loans.
Gain on change in fair value of warrant derivative liability.
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 11) for derivative accounting consideration under ASC 815, Derivatives and Hedging. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense items.
The market price of the common stock has decreased from the initial award of warrants in the period ending March 31, 2024. If the warrants were exercised at March 31, 2024, at their respective exercise price determined at issue, the Company would realize a gain due to the difference between the cash received on conversion and the issue cost to the Company of $0.04 per share, the fair value market price of the common stock at March 31, 2024.
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Foreign currency translation gain (loss)
The gains and losses in foreign currency translation are due to fluctuations in the exchange rates of the U.S. dollar and British pound sterling.
Net Loss after income tax
The net loss after income tax was $460,867 and $254,336 for the three months ended March 31, 2024, and 2023, respectively.
Liquidity and Capital Resources
The following table provides selected financial data about our Company on March 31, 2024, and December 31, 2023.
| Three Months | Year Ended | |||||||||||||||
| Ended March 31, 2024 | December 31, 2023 | Change | ||||||||||||||
| Current Assets | $ | 89,888 | $ | 95,171 | $ | (5,283 | ) | (6 | )% | |||||||
| Current Liabilities | 1,768,409 | 1,487,471 | 280,938 | 19 | ||||||||||||
| Working Capital Deficit | $ | (1,678,521 | ) | $ | (1,392,300 | ) | $ | (286,221 | ) | 21 | % | |||||
Current Assets
Current assets consist of cash and other receivable which is primarily a R&D credit in the UK.
Current Liabilities
Current Liabilities consist of accounts payable, accrued liabilities, and loans.
The increase in current liabilities was primarily due to increases of $24,759 in accounts payable, $30,000 in accrued director fees, $138,448 in accrued wages and salaries, and $101,426 in additional related-party loans in the three-month period ended March 31, 2024.
Working Capital Deficit
The working capital deficit increased by $286,221.
Liquidity
During the last two years, and through the date of this Report, we have faced an increasingly challenging liquidity situation that has limited our ability to execute our operating plan. We will need to obtain capital to continue operations. There is no assurance that we can secure such funding on acceptable terms.
As no revenues are generated from our current operations, we will require additional debt or capital to continue operating and expanding our business. Sources of additional financing or arrangements with third parties may include equity or debt financing, bank loans, related-party loans, or revolving credit facilities. We may not be successful in locating suitable financing transactions in the period required or at all, and we may not obtain the capital we require by other means. Unless we can attract additional investment, our operating as a going concern is in doubt.
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We voluntarily file annual, quarterly, and current reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board (“PCAOB”) have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costly. To meet the needs to comply with the requirements of the Exchange Act, we will need an investment of capital.
If we cannot obtain sufficient additional capital, we may have to cease filing our SEC reports and cease operations completely. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, and stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.
Cash Flow
Three Months Ended March 31, | ||||||||||||||||
| 2024 | 2023 | Change | % | |||||||||||||
| Cash used in Operating activities | $ | (118,164 | ) | $ | (158,381 | ) | $ | 40,217 | (25 | )% | ||||||
| Cash provided (used) in Investing Activities | 1,394 | (11,138 | ) | 12,532 | (113 | ) | ||||||||||
| Cash provided by Financing Activities | 92,465 | 203,119 | (110,654 | ) | (54 | ) | ||||||||||
| Cash on Hand | $ | 951 | $ | 35,115 | $ | (34,164 | ) | (97 | )% | |||||||
Operating Activities
The decrease in net cash used in operating activities was primarily due to increased accrued liabilities.
Investing Activities
Net cash used in investing activities was on Patents and Trademarks offset by the sale of a motor vehicle fixed asset.
Financing Activities
The reduction in net cash provided by financing activities was primarily due to a decrease in related party loans in 2024.
Cash on Hand
The Company is currently exploring future fundraising options, including equity, debt, the sale of/or the licensing of the Company’s Patent(s) and/or IP, with a holdback of the Company’s rights to use the IP to secure funding for operations. If we cannot secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
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Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe our most critical accounting policies and estimates relate to the following:
| ● | Foreign Currency Translations | |
| ● | Intangible Assets | |
| ● | Long-lived Assets | |
| ● | Income Taxes | |
| ● | Stock-based Compensation | |
| ● | Common Stock Purchase Warrants and Derivative Financial Instruments | |
| ● | Convertible Financial Instruments | |
| ● | Fair Value of Financial Instruments |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British Pounds (GBP). Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at weighted average rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line basis over the estimated periods benefited. Patents, technology, and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.
Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on comparing the undiscounted future cash flows to the recorded value of the asset. The asset is written down to its estimated fair value if an impairment is indicated.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax bases of assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. These criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718 Compensation - Stock Compensation which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenses in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Stock Options awarded as compensation per the Company’s 2022 Equity Incentive Plan are deemed to be unissued until vested. Stock Option compensation is recognized as an expense over the vesting period. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense, and any previously recognized costs are reversed in the period of forfeiture.
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Recent Accounting Pronouncements
For discussion of recently issued and adopted accounting pronouncements, please see Note 2 to the unaudited consolidated financial statements as of and for the quarters ended March 31, 2024, and 2023 included herein.
Off-Balance Sheet Arrangements
As of March 31, 2024, there were no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. However, our chief executive officer and our chief financial officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period being reported by this Form 10-Q and have concluded that we have material weaknesses and significant deficiencies in our internal control over financial reporting as described below. Accordingly, our disclosure controls and procedures were not effective or sufficient to accomplish their objectives at the reasonable assurance level as of March 31, 2024.
Management’s Report of Internal Control over Financial Reporting
Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. An evaluation was performed of the effectiveness of our internal control over financial reporting. The evaluation was based on the framework in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Based on our evaluation under the criteria set forth in the 2013 Internal Control-Integrated Framework, our management concluded that as of March 31, 2024, our internal control over financial reporting was not effective because of the identification of material weaknesses described as follows:
| ● | We did not have controls designed to validate the completeness and accuracy of underlying data used in the determination of accounting transactions. Accordingly, we have a material weakness because there is a reasonable possibility that a material misstatement to the interim or annual consolidated financial statements would not be prevented or detected on a timely basis. | |
| ● | We have limited written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act, which is applicable to us. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. | |
| ● | We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, separate individuals should perform the initiation of transactions, the custody of assets, and the recording of transactions. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. | |
| ● | We have insufficient personnel with the requisite expertise in the key functional areas of finance and accounting. | |
| ● | We do not have a functioning audit committee and only one outside director on our board of directors, resulting in ineffective oversight in establishing and monitoring required internal controls and procedures. |
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our Management is committed to improving its internal controls when we have adequate resources. We will appoint independent directors and establish an audit committee in 2024. Due to these material weaknesses, misstatements that could be material to the annual or interim consolidated financial statements could occur that would not be prevented or detected during our financial close and reporting process.
Our Company plans to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have been unable to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management, and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. Remediation efforts may be materially affected if we do not secure such funds.
Changes in Internal Control over Financial Reporting
In the three months ended March 31, 2024, there were no material changes in our internal control over financial reporting that materially affected or are reasonably likely to affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceedings. We are unaware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 1A: Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.
In the three months ended March 31, 2024, the Company did not issue unregistered securities.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
See Exhibit Index below for exhibits required by Item 601 of Regulation S-K.
| Exhibit Number | Description of Exhibit | |
| 31.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** |
| |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Extensible Business Reporting Language (XBRL). | |
| **Provided herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BUBBLR, INC. | |
| Date: July 16, 2024 | /s/ Steven Morris |
| Steven Morris | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: July 16, 2024 | /s/ David Chetwood |
| David Chetwood | |
Chief Financial Officer (Principal Accounting and Financial Officer) |
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