Mobivity Holdings Corp 10-Q for FY2024 Q3
Mobivity Holdings Corp. (MFON)
About this 10-Q
Mobivity Holdings Corp filed this 10-Q on November 26, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $226.21K
- up 350.8% from $50.18K a year earlier
- Net loss
- $2.46M
- compared with a net loss of $3.78M a year earlier
- Diluted EPS
- -$0.03
- compared with -$0.06 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to __________
Commission
file number
(Exact Name of Registrant as Specified in Its Charter)
| (State
or Other Jurisdiction of Incorporation or Organization) |
(I.R.S.
Employer Identification No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 25, 2024, the registrant had shares of common stock, par value $ per share, issued and outstanding.
MOBIVITY HOLDINGS CORP.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mobivity Holdings Corp.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts $ | ||||||||
| Current assets from discontinued operations | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Right to use lease assets | ||||||||
| Intangible assets and software development costs, net | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
Liabilities from discontinued operations | ||||||||
| Accrued interest | ||||||||
| Accrued and deferred personnel compensation | ||||||||
| Deferred revenue and customer deposits | ||||||||
| Related party notes payable, net - current maturities | ||||||||
| Notes payable, net - current maturities | ||||||||
| Operating lease liability, current | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Related party notes payable, net - long term | ||||||||
| Notes payable, net - long term | ||||||||
| Operating lease liability | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Common stock, $ par value; shares authorized; and , shares issued and outstanding | ||||||||
| Equity payable | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 1 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | $ | |||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Bad Debt Expense | ( | ) | ||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income/(expense) | ||||||||||||||||
| Loss of settlement of debt | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Settlement Losses | ( | ) | ( | ) | ||||||||||||
| Foreign currency gain | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income/(expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive loss, net of income tax | ||||||||||||||||
| Foreign currency translation adjustments | ||||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares: | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 2 |
Mobivity Holdings Corp.
Condensed Consolidated Statement of Stockholders’ Deficit
(Unaudited)
| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( | ) | ||||||||||||||||||||||||||
| RSU’s issued - termination of director’s service | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common stock for PIPE financing | ||||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | — | $ | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | — | $ | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Common Stock | Equity | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||
| Shares | Dollars | Payable | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Fair value of options issued with related party debt | ||||||||||||||||||||||||||||
| Stock based compensation - Employees | — | |||||||||||||||||||||||||||
| Stock Based Compensation - Directors | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | $ | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Fair value of options issued with related party debt | ||||||||||||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation - Employees | — | |||||||||||||||||||||||||||
| Stock based compensation -Directors | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | $ | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Issuance of common stock for settlement of interest payable on related party debt | ( | ) | ||||||||||||||||||||||||||
| Interest Payable on related party debt recorded to equity payable | ||||||||||||||||||||||||||||
| Fair market value of options issued with related party debt | — | |||||||||||||||||||||||||||
| Stock based compensation - Employees | — | |||||||||||||||||||||||||||
| Stock Based Compensation - Directors | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | $ | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance | ( | ) | ( | ) | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements (unaudited).
| 3 |
Mobivity Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| 2024 | 2023 | |||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinued operations | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on Settlement of Debt - related party | ||||||||
| Bad debt expense | ||||||||
| Stock-based compensation | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Intangible Asset Impairment | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of Debt Discount | ||||||||
| Increase (decrease) in cash resulting from changes in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other current assets | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Prepaid Expenses | ( | ) | ( | ) | ||||
| Accrued interest | ||||||||
| Accrued and deferred personnel compensation | ( | ) | ||||||
| Other liabilities - current | ( | ) | ||||||
| Lease Operating Assets | ( | ) | ( | ) | ||||
| Deferred revenue and customer deposits | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities of continuing operations | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities of discontinuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| INVESTING ACTIVITIES | ||||||||
| Cash paid for patent activities | ( | ) | ( | ) | ||||
| Purchases of equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Proceeds from Related Party Debt | ||||||||
| Proceeds from conversion of common stock warrants | ||||||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of foreign currency translation on cash flow | ||||||||
| Net Change in cash | ||||||||
| Cash at beginning of period | $ | $ | ||||||
| Cash at end of period | ||||||||
| Supplemental disclosures | ||||||||
| Interest paid | $ | $ | ||||||
Non-cash investing and financing activities: | ||||||||
| Fair Value of Options issued with related party debt | $ | $ | ||||||
| Shares Issued for settlement of debt | ||||||||
| Shares issued for settlement of debt - related party | ||||||||
| Par Value of RSU’s issued - termination of director’s service | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 4 |
Mobivity Holdings Corp.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and Basis of Presentation
Mobivity Holdings Corp. (the “Company” or “us”, “our”, or “we”) is a Nevada corporation organized in 2008, which develops and operates proprietary platforms over which brick and mortar brands and digital first enterprises can conduct national and localized, data-driven marketing campaigns with unique targeting, incentivization and promotion to drive customer acquisition and loyalty. The company’s core technology platform, RecurrencyTM, enables:
| ● | Transformation of messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence. | |
| ● | Measurement, prediction, and ability to boost guest frequency and spend by channel. | |
| ● | Deployment and management of one-time use offer codes and attribution of sales accurately across every channel, promotion and media program. | |
| ● | Delivery of uniquely attributable 1:1 offers that power incentivized actions in digital environments like user acquisition, continued monetization, and activities taken in a digital environment. |
Our recurrency platform generates revenue in two ways. First, delivered as a Software-as-a-Service (“SaaS”) platform used by leading convenience and quick service restaurant brands to build and engage with their loyal customers. Second, through our Connected RewardsTM business, our platform enables and powers unique incentivized programs in digital environments. Through our Connected Rewards platform, we enable businesses to reward their users and customers with products in the real world for actions taken in a digital environment. Our customers include some of the largest mobile casual game publishers in the world and some of the largest convenience and quick service restaurant brands in the world. The programs we run for our customers include incentivized user acquisition where users are rewarded with a real-world product, like a free or discounted burger, for downloading a mobile game, and rewarded play where users receive real world products for accomplishing activities in game, like achieving a certain level or winning enough points. We charge our customers for each unique action where our rewards are delivered, these include a per install or per individual engagement fee.
On September 25, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with SMS Factory, Inc., a Florida corporation (“SMS Factory”). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company’s SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company’s SMS/MMS text messaging platform business (the “Business Assets”) effective as of September 25, 2024 (the “Closing Date”). Given that the effect of the Asset Purchase Agreement meets all the initial criteria of ASC Topic 205-20, Presentation of Financial Statements – Discontinued Operations for the classification of discontinued operations, the assets, liabilities, and operating results of Mobivity Holdings Corp have been classified as discontinued operations as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023. The consolidated financial statements for the prior periods have been adjusted to reflect comparable information.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on April 16, 2024.
In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of our condensed consolidated financial statements as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications did not affect previously reported net losses.
Acquisitions
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.
Cash
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts.
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed, and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate.
As
of September 30, 2024, and December 31, 2023 we recorded an allowance for doubtful accounts of $
Goodwill and Intangible Assets
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.
| 5 |
We
conducted our annual impairment tests of goodwill as of December 31, 2023. As a result of these tests, we had a total impairment charge
of $
Intangible
assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade
names, purchased technology, non-compete agreements, and software development costs. Intangible assets are amortized over the period
of estimated benefit using the straight-line method and estimated useful lives ranging from
The Company’s evaluation of its goodwill and intangible assets resulted in impairment charges for the nine months ended September 30, 2024 and 2023, respectively.
Software Development Costs
Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers. The Company accounts for software development costs in accordance with the Financial Accounting Standards Board (“FASB”) guidance for the costs of computer software to be sold, leased, or otherwise marketed (Accounting Standards Codification subtopic 985-20, Costs of Software to Be Sold, Leased, or Marketed, or “ASC Subtopic 985-20”). Software development costs are capitalized once the technological feasibility of a product is established, and such costs are determined to be recoverable. The technological feasibility of a product encompasses technical design documentation and integration documentation, or the completed and tested product design and working model. Software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. Technological feasibility is evaluated on a project-by-project basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that are considered “research and development” that are not capitalized are immediately charged to engineering, research, and development expense.
Capitalized costs for those products that are canceled or abandoned are charged to product development expenses in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to “Amortization Expense - Development” based on the straight-line method over a period.
The
Company evaluates the future recoverability of capitalized software development costs on an annual basis. For products that have been
released in prior years, the primary evaluation criterion is ongoing relations with the customer. The Company’s evaluation of its
capitalized software development assets resulted in
Impairment of Long-Lived Assets
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiary from the local (functional) currency into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.
Revenue Recognition and Concentrations
Our Recurrency platform is a hosted solution. We generate revenue from licensing our software to clients in our software as a service model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month-to-month basis with no contractual term and fees are collected by credit card. Revenue is recognized at the time that the services are rendered, and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue.
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted this standard effective January 1, 2018, applying the modified retrospective method. Upon adoption, the Company discontinued revenue deferral under the sell-through model and commenced recording revenue upon delivery to distributors, net of estimated returns. Generally, the new standard results in earlier recognition of revenues.
We determine revenue recognition under ASC 606 through the following steps:
| ● | identification of the contract, or contracts, with a customer; | |
| ● | identification of the performance obligations in the contract; | |
| ● | identification of the transaction price; | |
| ● | allocation of the transaction price to the performance obligations in the contract; and | |
| ● | recognition of revenue when, or as, we satisfy a performance obligation. |
During
the nine months ended September 30, 2024 and 2023, two customers accounted for
| 6 |
Comprehensive Loss
Comprehensive
loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.
We are required to record all components of comprehensive loss in the consolidated financial statements in the period in which they are
recognized. Net loss and other comprehensive loss, including foreign currency translation adjustments and unrealized gains and losses
on investments, are reported, net of their related tax effect, to arrive at a comprehensive loss. For the three months ended September
30, 2024 and 2023, the comprehensive loss was $
We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We recognize compensation expense using a straight-line amortization method over the respective vesting period.
Research and Development Expenditures
Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials.
Advertising Expense
Direct
advertising costs are expensed as incurred and consist primarily of trade shows, sales enablement, content creation, paid engagement
and other direct costs. Advertising expense was $
Income Taxes
We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained.
Basic net loss per share excludes any dilutive effects of options, shares subject to repurchase, and warrants. Diluted net loss per share includes the impact of potentially dilutive securities. During the three and nine months ended September 30, 2024 and 2023, we had securities outstanding which could potentially dilute basic earnings per share in the future. Stock-based compensation, stock options and warrants were excluded from the computation of diluted net loss per share when their effect would have been anti-dilutive.
Recent Accounting Pronouncements
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 requires that the if-converted method of computing diluted Earnings per Share. The Company adopted ASU 2020-06 on January 1, 2022.
3. Discontinued Operations
On September 25, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with SMS Factory, Inc., a Florida corporation (“SMS Factory”). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company’s SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company’s SMS/MMS text messaging platform business (the “Business Assets”) effective as of September 25, 2024 (the “Closing Date”).
The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the current assets and liabilities of discontinued operations as presented on the Company’s Consolidated Balance Sheets:
Schedule of Consolidated Balance Sheets and Statements of Loss
| As of September 30, 2024 | As of December 31,2023 | |||||||
| Assets | $ | |||||||
| Current assets | ||||||||
| Accounts receivable | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts Payable | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
The following table provides details about the major classes of line items constituting “Income (loss) from discontinued operations” as presented on the Company’s Consolidated Statements of Loss:
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Bad Debt Expense | ( | ) | ||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income/(expense) | ||||||||||||||||
| Loss on settlement of debt | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ||||||||||||||||
| Settlement Losses | ( | ) | ( | ) | ||||||||||||
| Foreign currency gain | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income/(expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss from Discontinued Operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The Company’s execution of the Asset Purchase Agreement has met the criteria to be reported as discontinued operations. In accordance with GAAP, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets, and results of discontinued operations are reported as a separate component of Consolidated net loss in the Consolidated Statements of Loss, for all periods presented, resulting in changes to the presentation of certain prior period amounts. Cash flows from discontinued operations are not reported separately in the Consolidated Statements of Cash Flows. The assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets for all periods presented.
4. Going Concern
We
had $
As
shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit
of $
| 7 |
4. Intangibles
Intangible assets
The following table presents details of our purchased intangible assets as of September 30, 2024 and December 31, 2023:
Schedule of Intangible Assets
| Balance at December 31, 2023 | Additions | Impairments | Amortization | Foreign Exchange and Other | Balance at September 30, 2024 | |||||||||||||||||||
| Patents and trademarks | $ | | $ | $ | $ | ( | ) | $ | $ | | ||||||||||||||
| Customer and merchant relationships | $ | ( | ) | |||||||||||||||||||||
| Trade names | $ | ( | ) | |||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The
intangible assets are being amortized on a straight-line basis over their estimated useful lives of
Amortization
expense for intangible assets was $
Amortization
expense for intangible assets was $
The estimated future amortization expense of our intangible assets as of September 30, 2024 was as follows:
Schedule of Finite Lived Intangible Assets Future Amortization Expense
| Year ending December 31, | Amount | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| Thereafter | $ | |||
| Total | $ | |||
5. Software Development Costs
The Company has capitalized certain costs for software developed or obtained for internal use during the application development stage as it relates to specific contracts. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities.
The following table presents details of our software development costs as of September 30, 2024 and December 31, 2023:
Schedule of Software Development Costs
Balance at December 31, 2023 | Additions | Amortization | Balance at September 30, 2024 | |||||||||||||
| Software Development Costs | $ | $ | $ | ( | ) | $ | ||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
Software
development costs are being amortized on a straight-line basis over their estimated useful life of
| 8 |
Amortization
expense for software development costs was $
Amortization
expense for software development costs was $
The estimated future amortization expense of software development costs as of September 30, 2024 is as follows:
Schedule of Amortization Expense of Software Development Costs
| Year ending December 31, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
6. Operating Lease Assets
The
Company entered into a lease agreement on February 1, 2021, for
The
Company entered in to a sublease on March 1, 2024 for its office facilities in Chandler, AZ through February 28, 2025. Monthly rental
payments including rental of office furniture and excluding taxes, are $
The following are additional details related to leases recorded on our balance sheet as of September 30, 2024:
Schedule of Additional Details Related to Leases
| Leases | Classification | Balance at September 30, 2024 | ||||
| Assets | ||||||
| Current | ||||||
| Operating lease assets | Operating lease assets | $ | ||||
| Noncurrent | ||||||
| Operating lease assets | Noncurrent operating lease assets | $ | ||||
| Total lease assets | $ | |||||
| Liabilities | ||||||
| Current | ||||||
| Operating lease liabilities | Operating lease liabilities | $ | ||||
| Noncurrent | ||||||
| Operating lease liabilities | Noncurrent operating lease liabilities | $ | ||||
| Total lease liabilities | $ | |||||
| 9 |
The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases, a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheet, our weighted-average remaining lease term, and weighted average discount rate:
Schedule of Lessee, Operating Lease Liability
| Year ending December 31, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total | $ | |||
| Weighted Average Remaining Lease Term (years) | ||||
| Operating leases | ||||
| Weighted Average Discount Rate | ||||
| Operating leases | % |
7. Notes Payable and Interest Expense
The following table presents details of our notes payable as of September 30, 2024 and December 31, 2023:
Schedule of Debt
| Facility | Maturity | Interest Rate | Balance at September 30, 2024 | Balance at December 31, 2023 | ||||||||||
| ACOA Note | % | |||||||||||||
| Related Party Secured Promissory Note | % | |||||||||||||
| Related Party Convertible Notes | various | % | ||||||||||||
| Related Party Unsecured Promissory Note | % | |||||||||||||
| Convertible Notes | Various | % | ||||||||||||
| Total Debt | ||||||||||||||
| Less current portion | ( | ) | ( | ) | ||||||||||
| Long-term debt, net of current portion | $ | $ | ||||||||||||
ACOA Note
On
November 6, 2017, Livelenz (a wholly owned subsidiary of the Company), entered into an amendment of the original agreement dated December
2, 2014, with the Atlantic Canada Opportunities Agency (“ACOA”). Under this agreement, the note will mature, and the commitments
will terminate, on February 1, 2024. The monthly principal payment amount of $
During
the nine months ended September 30, 2024 we repaid $
| 10 |
Related Party Notes
Secured Promissory Notes
On
June 30, 2021, we entered into a Credit Facility Agreement (the “Credit Agreement”) with Thomas Akin, one of the Company’s
directors (the “Lender”). The Credit Agreement was amended on November 11, 2022. The Company can borrow up to $
The
Credit Facility is secured by all of our tangible and intangible assets including intellectual property. This loan bears interest on
the unpaid balance at the rate of fifteen percent (
Under
the original terms of the Credit Agreement, the Company was to begin repaying the principal amount, plus accrued interest, in
On January 31, 2023, the Company then entered into Amendment No. 1 (the “Amendment”), which amends our existing Credit Facility Agreement[1], dated as of November 11, 2022, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until December 1, 2025. Principal payments have been deferred to a period beginning on January 1, 2024 and ending December 1, 2025, and further provides that any accrued interest on unpaid advances under the agreement is to be paid quarterly in shares of our common stock, at a price per share equal to the volume-weighted average price of our common stock quoted on the Over-The Counter Venture Market operated by OTC Markets Group Inc. (“OTCQB®”) over the ninety (90) trading days immediately preceding such date. The Amendment provides for corresponding amendments to the form of convertible notes to be issued under the Credit Agreement in the future and any outstanding convertible notes issued under the existing Credit Facility Agreement. The Amendment was considered a debt modification as the cash flows under the amended terms do not differ by at least 10% from the cash flows under the original agreement.
On January 31, 2024 amended terms were agreed upon and the Company then entered into Amendment No. 2 (the “Amendment”) signed on May 3,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until June 30, 2026. Principal payments have been deferred to a period beginning on July 31, 2024 and ending June 30, 2026.
On August 13, 2024 amended terms were agreed upon and the Company then entered into Amendment No. 3 (the “Amendment”) signed on May 3,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until June 30, 2026. Principal payments have been deferred to a period beginning on October 31, 2024 and ending September 30, 2026.
During
the nine months ended September 30, 2024, a total of $
As
of September 30, 2024, the Company had drawn a total of $
Related Party Convertible Notes
During
fourth quarter 2023 the Company issued 8 Convertible Notes payable to related parties for $
The
Convertible Note and all accrued interest thereon are convertible into shares of our common stock, from time to time, at the option of
the holder thereof, at a conversion price per share equal to the larger of either $
| 11 |
During
first quarter 2024 the Company issued 8 Convertible Notes payable to related parties for $
During
the second quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $
During
the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $
During
the nine months ended September 30, 2024 accrued interest of $
As
of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $
Unsecured Promissory Note
On
July 1, 2021, we entered into UP Notes in the aggregate principal amount of $
On
January 31, 2023, the Lender agreed to postpone the
On
January 31 2024, the Lender agreed to postpone the
During
the nine months ended September 30, 2024, a total of $
As
of September 30, 2024, the Company had an outstanding principal balance of $
Convertible Notes
During
fourth quarter 2023 the Company issued 10 Convertible Notes payable to related parties for $
The
Convertible Note and all accrued interest thereon are convertible into shares of our common stock, from time to time, at the option of
the holder thereof, at a conversion price per share equal to the larger of either $
During
the nine months ended September 30, 2024 the company recorded accrued interest of $
As
of September 30, 2024 the Convertible Notes had a principal balance of $
Interest Expense
Interest
expense was $
Interest
expense was $
| 12 |
8. Stockholders’ Equity
Common Stock and Equity Payable
2023
On January 31, 2023 a total of shares were issued to John Harris, a former director. The shares were issued based on the total Restricted Stock Units earned by Mr. Harris as director compensation that were fully vested as of March 29, 2022. Restricted stock expense is recorded on the date it vests and no expense was recognized during the six months ended June 30, 2023.
On
March 27, 2023 a total of shares of common stock were granted from equity payable to Thomas Akin as settlement of $
On
March 27, 2023 a total of shares of common stock were granted from equity payable to Talkot Fund LP as settlement of $
On
March 31, 2023 a total of $
On
March 31, 2023 a total of $
During
March of 2023,
On
June 30, 2023 a total of $
On
June 30, 2023 a total of $
During
August and September of 2023,
During the nine months ended September 30, 2023 a total of shares were issued from stock payable related to related party accrued interest.
As
of the September 30, 2023 we had an equity payable balance of $
2024
On
June 30, 2024 a total of $
On
June 30, 2024 a total of $
On
September 30, 2024 a total of $
On
September 30, 2024 a total of $
During
the nine months ended September 30, 2024 shares were issued for $
As
of the nine months ended September 30, 2024 we had an equity payable balance of $
| 13 |
Stock-based Plans
Stock Option Activity
Share Based Payment Arrangement Options Activity
| Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Forfeited/canceled | ( | ) | $ | — | ||||||||
| Expired | ( | ) | $ | |||||||||
| Outstanding at December 31, 2023 | $ | — | ||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Forfeited/canceled | ( | ) | $ | — | ||||||||
| Expired | ( | ) | $ | — | ||||||||
| Outstanding at September 30, 2024 | $ | |||||||||||
2023
On
May 11, 2023 the Company granted
On
July 14, 2023 the Company granted
On
July 17, 2023 the Company granted
On
August 25, 2023 he Company granted
2024
On
April 1, 2024, the Company granted
On
August 14, 2024, the Company granted
| 14 |
Stock-Based Compensation Expense from Stock Options and Warrants
Schedule of Stock-based Compensation Expense
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative | $ | $ | $ | ( | ) | $ | ||||||||||
| Sales and marketing | ||||||||||||||||
| Engineering, research, and development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Valuation Assumptions
Schedule of Stock Options Valuation Assumptions
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (years) | ||||||||
| Expected dividend yield | % | % | ||||||
| Expected volatility | % | % | ||||||
The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.
The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on the historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of the Company’s stock-based awards.
The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.
The expected volatility in 2024 and 2023 is based on the historical publicly traded price of our common stock.
Restricted stock units
Schedule of Restricted Stock Unit Activity
| Shares | ||||
| Outstanding at December 31, 2022 | ||||
| Awarded | ||||
| Released | ) | |||
| Canceled/forfeited/expired | ||||
| Outstanding at December 31, 2023 | ||||
| Awarded | ||||
| Released | ||||
| Canceled/forfeited/expired | ||||
| Outstanding at September 30, 2024 | ||||
| Expected to vest at September 30, 2024 | ||||
| Vested at September 30, 2024 | ||||
| Unvested at September 30, 2024 | ||||
| Unrecognized expense at September 30, 2024 | $ | |||
| 15 |
2023
On
March 31, 2023, the Company granted
On
June 30, 2023, the Company granted
On
September 30, 2023, the company granted
In
the nine months ended September 30, 2023 the Company recorded $
2024
On
March 31, 2024 the company granted
On
June 30,2024 the company granted
On
September 30, 2024 the company granted
In
the nine months ended September 30, 2024, the Company recorded $
Stock Based Compensation from Restricted Stock
Schedule of Stock-based Compensation Expense from Restricted Stock
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of September 30, 2024, there was unearned restricted stock unit compensation.
Warrants
The following table summarizes investor warrants as of September 30, 2024 and the years ended December 31, 2023 and 2022:
Schedule of Investor Warrants
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | ) | $ | — | — | ||||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at December 31, 2023 | $ | |||||||||||
| Granted | $ | — | — | |||||||||
| Exercised | $ | — | — | |||||||||
| Canceled/forfeited/expired | $ | — | — | |||||||||
| Outstanding at September 30, 2024 | $ | |||||||||||
| 16 |
2023
During
March 2023,
During
August and September of 2023,
2024
During
the first quarter of 2024,
During
the second quarter of 2024,
During
the third quarter of 2024,
9. Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. This hierarchy requires companies to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value.
The following table presents assets that are measured and recognized at fair value as of September 30, 2024 on a recurring and non-recurring basis:
Schedule of Fair Value Measurements Recurring and Nonrecurring
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||
| Goodwill (non-recurring) | $ | $ | $ | $ | ||||||||||||
| Intangibles, net (non-recurring) | $ | $ | $ | $ | ||||||||||||
The following table presents assets that are measured and recognized at fair value as of December 31, 2023 on a recurring and non-recurring basis:
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||
| Goodwill (non-recurring) | $ | $ | $ | $ | ||||||||||||
| Intangibles, net (non-recurring) | $ | $ | $ | $ | ||||||||||||
10. Commitments and Contingencies
Litigation
Marina Soliman v. Subway Franchisee Advertising Fund Trust, LTD, Second Circuit Court of Appeals, Case No. 22-1726 – this is putative class action alleging that Defendant initiated telephone solicitations through text messages in violation of the Telephone Consumer Protection Act, 47 U.S.C § 227 et al. (“TCPA”). The district court granted Defendant’s motion to dismiss. The matter has been under submission with the Court since October 24, 2023. In the event that the Court reverses and remands the matter, the Company intends to seek an individual settlement of the matter, and if one cannot be reached, the Company intends to vigorously defend the matter.
Ruhi Reimer vs. Checkers Drive-In Restaurants, Inc. - JAMS Ref No. 5410000618 – this is a single Claimant arbitration action filed against Mobivity’s business partner alleging that text messages were sent to the consumer in violation of the TCPA’s regulations relating to the National Do Not Call Registry. The parties are beginning discovery at this time and a Merits Hearing has been set for January 14, 2025. Based on our current understanding, we believe that the case is pretextual and was set up in advance by the Claimant and his attorneys. Because discovery has only just started, it is premature to assess whether there is any material risk of an adverse award.
Abboud v. Circle K Stores Case – United States District Court, Dist. Arizona, Case No 2:23-cv-01683-DWL – this is a putative TCPA class action alleging that Mobivity and its business partner initiated text messages in violation of the TCPA’s regulations relating to the National Do Not Call Registry. We believe that plaintiff has sued the wrong defendant and that the client’s other servicer is actually responsible for any text messages that were sent to the putative class. We are actively attempting to persuade Plaintiff’s counsel to drop Mobivity from the suit.
| 17 |
Operating Lease
As
of September 30, 2024, we have an operating lease asset balance for this lease of $
11. Related Party Transactions
Secured Promissory Notes
On
June 30, 2021, we entered into a Credit Facility Agreement with Thomas Akin, one of the Company’s directors (the “Lender”).
The Credit Facility Agreement was amended on November 11, 2022 to allow the Company to borrow up to $
As
of September 30, 2024, the Company had drawn a total of $
Unsecured Promissory Note
On
July 1, 2021, we entered into UP Notes in the aggregate principal amount of $
As
of September 30, 2024, the Company had an outstanding principal balance of $
Convertible Notes
During
first quarter of 2024, the Company issued 8 Convertible Notes payable to related parties for $
During
the second quarter of 2024 the Company 8 Convertible Notes payable to related parties for $
During
the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $
As
of September 30, 2024 the Convertible Notes issued to related parties had a principal balance of $
For more details regarding the three related party transactions, please refer to Note 7 - Notes Payable and Interest Expense.
12. Sales of Certain Contracts
Acquisition by SMS Factory
On September 25, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with SMS Factory, Inc., a Florida corporation (“SMS Factory”). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company’s SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company’s SMS/MMS text messaging platform business (the “Business Assets”) effective as of September 25, 2024 (the “Closing Date”).
In
consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a
period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each
Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $
The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.
13. Subsequent Events
Convertible Notes
During
October 2024, the Company issued one Convertible Notes to Thomas B. Akin for a total amount of $
Related Party Notes Payable
The Company entered into Amendment No. 4 (the “Amendment”) to Amended and Restated Credit Facility Agreement and Convertible Notes (the Credit Facility Agreement), signed on November 21,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until March 31, 2027. Principal payments have been deferred to a period beginning on April 30, 2025 and ending March 31, 2027.
| 18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made and are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” or “will,” and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption “Risk Factors” included in our 2023 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 17, 2024, and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Overview
Mobivity Holdings Corp. (the “Company” or “us”, “our”, or we”) develops and operates proprietary platforms over which brick and mortar brands and digital first enterprises can conduct national and localized, data-driven marketing campaigns with unique targeting, incentivization and promotion to drive customer acquisition and loyalty. The company’s core technology platform, RecurrencyTM, enables
| ● | Transformation of messy point-of-sale (POS) data collected from thousands of locations and digital environments into usable intelligence. | |
| ● | Measurement, prediction, and ability to boost guest frequency and spend by channel. | |
| ● | Deployment and management of one-time use offer codes and attribution of sales accurately across every channel, promotion and media program. | |
| ● | Delivery of uniquely attributable 1:1 offers that power incentivized actions in digital environments like user acquisition, continued monetization, and activities taken in a digital environment. |
Our recurrency platform generates revenue in 2 ways. First, delivered as a Software-as-a-Service (“SaaS”) platform used by leading convenience and quick service restaurant brands to build and engage with their loyal customers. Second, through our Connected RewardsTM business, our platform enables and powers unique incentivized programs in digital environments. Through our Connected Rewards platform, we enable businesses to reward their users and customers with products in the real world for actions taken in a digital environment. Our customers include some of the largest mobile casual game publishers in the world and some of the largest convenience and quick service restaurant brands in the world. The programs we run for our customers include incentivized user acquisition where users are rewarded with a real-world product, like a free or discounted burger, for downloading a mobile game, and rewarded play where users receive real world products for accomplishing activities in game, like achieving a certain level or winning enough points. We charge our customers for each unique action where our rewards are delivered, these include a per install or per individual engagement fee.
The Recurrency Platform
The Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights and power Connected Rewards interactions. Our technology analyzes transaction data to provide insights, delivers mobile rewards and powers redemption at all potential points of sale (i.e., mobile, in-store, in-app), and provides 100% attribution of the transaction. In Connected Rewards applications, Recurrency is integrated into mobile gaming platforms and mobile attribution partners to deliver the necessary data to deliver rewards for in-game actions.
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Company Strategy
Our objective is to build an industry-leading mobile marketing technology product that bridges between in-person and digital environments powering a unique and defensible alternative for digital-first businesses to engage and retain their customers by rewarding them with real-world products and offers. The key elements to our strategy are:
| ● | Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our ability to integrate our Recurrency platform into digital environments and deliver rewards based on activities taken in a digital environment. Because of our long history operating as a loyalty marketing solution we believe we have a defensible head start and ability to continue building products and features that will retain our competitive advantage. | |
| ● | Evolve our sales and customer support infrastructure to uniquely meet the needs of the quickly evolving digital marketing universe. We have quickly evolved our organization and business to fill a gap in the digital marketing landscape. Through continued innovation and emphasis on automation and predictive analytics we believe we will expand our niche and create further value for our Connected Rewards Customers. | |
| ● | Acquire complementary businesses and technologies. We will continue to search and identify unique opportunities which we believe will enhance our product features and functionality, revenue goals, and technology. We intend to target companies with some or all of the following characteristics: (1) an established revenue base; (2) strong and defensible technology services that further build out and differentiate our platform; (3) opportunities for substantial expense reductions through integration into our platform; and (4) strong sales teams. Our acquisitions have historically been consummated through the issuance of a combination of our common stock and cash. | |
| ● | Build our intellectual property portfolio. We currently have nine issued patents that we believe have significant potential application in the technology industry. We plan to continue our investment in building a strong intellectual property portfolio. |
While these are the key elements of our current strategy, there can be no guarantees that our strategy will not change or that our strategy will be successful or implemented at all.
Recent Events
2024 Related Party Convertible Notes
During the first quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $1,950,000. As an inducement we issued 3,249,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.
During the second quarter of 2024 the Company issued 8 Convertible Notes payable to related parties for $2,100,000. As an inducement we issued 3,499,997 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.
During the third quarter of 2024 the Company issued 4 Convertible Notes payable to related parties for $1,275,000. As an inducement we issued 2,124,999 warrants to purchase shares of our common stock at $.60 per share. Simple interest on the unpaid principal balance of this Note will accrue at the rate of 8.0% per annum. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity three years from the date the Convertible Note was issued.
2024 Related Party Notes Payable
The Company entered into Amendment No. 2 (the “Amendment”) to Amended and Restated Credit Facility Agreement and Convertible Notes (the Credit Facility Agreement), signed on May 3,2024, which amends the terms of the Credit Facility Agreement, between the Company and Thomas B. Akin, and any convertible notes issued thereunder. The Amendment amends the existing Credit Facility Agreement to extend the maturity of the agreement and related convertible notes thereunder until June 30, 2026. Principal payments have been deferred to a period beginning on July 31, 2024 and ending June 30, 2026.
Acquisition of Certain Contracts by SMS Factory
On September 25, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with SMS Factory, Inc., a Florida corporation (“SMS Factory”). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company’s SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company’s SMS/MMS text messaging platform business (the “Business Assets”) effective as of September 25, 2024 (the “Closing Date”).
In consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $303,000. The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.
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Results of Operations
Revenues
Revenues consist primarily of those generated by a suite of products under the Recurrency platform. The Recurrency platform is comprised of POS Data Capture, Analytics, Offers and Promotions, Predictive Offers, Personalized Receipt Promotions, Customized Mobile Messaging, Belly Loyalty, and other revenues.
Revenues for the three months ended September 30, 2024, were $226,208 an increase of $176,028 compared to $50,180 for the same period in 2023.
Revenues for the nine months ended September 30, 2024, were $900,008 an increase of $716,595 compared to $183,413 for the same period in 2023.
This decrease is primarily due to a decrease of in subscription revenue.
Cost of Revenues
Cost of revenues consists primarily of cloud-based software licensing fees, short code maintenance expenses, messaging-related expenses, and other expenses.
Cost of revenues for the three months ended September 30, 2024, was $120,125, an increase of $84,454, or 237%, compared to $35,671 for the same period in 2023.
Cost of revenues for the nine months ended September 30, 2024, was $541,161, an increase of $418,379, or 237%, compared to $122,782 for the same period in 2023.
This increase is primarily due to an decrease in SMS/MMS Messaging costs.
Bad Debt Expense
Bad Debt expense for the nine months ended September 30, 2024 was $14,849, an increase of $14,849, or 100%, compared to $0 for the nine months ended September 30, 2023. This increase is due to a decrease in past due invoices.
Bad Debt expense for the three months ended September 30, 2024 was a gain of $7,575 an decrease of $7,575, or 100%, compared to $0 for the three months ended September 30, 2023. This decrease is due to a decrease in past due invoices.
General and Administrative
General and administrative expenses consist primarily of salaries and personnel-related expenses, consulting costs, and other expenses.
General and administrative expenses decreased $1,122,415, or 83%, to $229,968, during the three months ended September 30, 2024, compared to $1,352,383 for the same period in 2023. The decrease in general and administrative expenses was primarily due to a decrease in stock related expense for the warrant exercise that occurred during the same period in 2023.
General and administrative expenses decreased $1,707,767, or 76%, to $542,990, during the nine months ended September 30, 2024, compared to $2,250,757 for the same period in 2023. The decrease in general and administrative expenses was primarily due to a decrease in stock related expense for the warrant exercise that occurred during the same period in 2023.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and personnel-related expenses, stock-based compensation expenses, consulting costs, and other expenses.
Sales and marketing expenses increased $65,195, or 49%, to $197,713 during the three months ended September 30, 2024, compared to $132,518 for the same period in 2023. The increase is primarily due to an increase in travel and tradeshow expenses.
Sales and marketing expenses increased $231,439, or 75% to $541,762 during the nine months ended September 30, 2024, compared to $310,323 for the same period in 2023. The increase is primarily due to an increase in travel and tradeshow expenses.
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Engineering, Research & Development
Engineering, research & development costs include salaries, stock-based compensation expenses, travel, consulting costs, and other expenses.
Engineering, research & development expenses increased $243,877, or 305%, to $323,752 during the three months ended September 30, 2024, compared to $79,875 for the same period in 2023. This increase is primarily due to an increase in payroll expenses.
Engineering, research & development expenses increased $643,831, or 328%, to $840,207 during the nine months ended September 30, 2024, compared to $196,376 for the same period in 2023. This increase is primarily due to an increase in payroll expenses.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation on our equipment and amortization of our intangible assets.
Depreciation and amortization expense decreased $426, or 41%, to $612 during the three months ended September 30, 2024 compared to $1,038 for the same period in 2023.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2023.
Depreciation and amortization expense decreased $1,210 or 30%, to $2,812 during the nine months ended September 30, 2024 compared to $4,022 for the same period in 2023.This decrease is primarily due to decrease in intangible assets due to impairment at the end of 2023.
Interest Expense
Interest expense increased $292,465, or 123%, to $529,841 during the three months ended September 30, 2024, compared to $237,376 in the same period in 2023. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.
Interest expense increased $709,712, or 99%, to $1,429,977 during the nine months ended September 30, 2024, compared to $720,265 in the same period in 2023. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.
Settlement Losses
Settlement losses consist of legal settlement for TCPA settlements.
Settlement losses for the three months ended September 30, 2024 and 2023 were $0 and $399, respectively.
Settlement losses for the nine months ended September 30, 2024 and 2023 were $0 and $870, respectively.
Loss on Settlement of Debt
Loss on Settlement of debt consists of the expense from the settlement of notes payable when they are settled into shares.
Loss on settlement of debt for the three months ended September 30, 2024 and 2023 was $6,514 and $7,699, respectively.
Loss on settlement of debt for the nine months ended September 30, 2024 and 2023 was $0 and $370, respectively.
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Foreign Currency
The Company’s financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three and nine months ended September 30, 2024, was $1 Canadian equals $0.74 U.S. Dollars, respectively. This compares to an average rate of $1 Canadian equals $0.74 during the same period in 2023. The Company’s functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:
| ● | The Company sells products primarily in U.S. Dollars; therefore, reported revenues are not highly impacted by foreign currency volatility. | |
| ● | A portion of the Company’s expenses are incurred in Canadian Dollars and therefore fluctuate in U.S. Dollars as the U.S. Dollar varies. A weaker U.S. Dollar results in an increase in translated expenses, and a stronger U.S. Dollar results in a decrease. | |
| ● | Changes in foreign currency rates also impact the translated value of the Company’s working capital that is held in Canadian Dollars. Foreign exchange rate fluctuations result in foreign exchange gains or losses based upon movement in the translated value of Canadian working capital into U.S. Dollars. |
The change in foreign currency was a gain of $1,358 and a loss of $91,825 for the three months ended September 30, 2024 and 2023, respectively.
The change in foreign currency was a gain of $216,687 and a gain of $123,190 for the nine months ended September 30, 2024 and 2023, respectively.
Liquidity and Capital Resources
As of September 30, 2024, we had current assets of $1,367,564, including $532,450 in cash, and current liabilities of $8,090,773, resulting in a working capital deficit of $6,723,209.
We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to sufficiently fund our current level of operations through the end of the next 12 months or beyond. We will require additional capital and will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. There can be no assurance we will be able to obtain access to capital as and when needed, or that the terms of any available financing will be commercially reasonable.
The Company entered in to a sublease on March 1, 2024 for its office facilities in Chandler, AZ through February 28, 2025. Monthly rental payments including rental of office furniture and excluding taxes, are $24,470. The Company has transition to a 100% remote work force and this has resulted in a decrease in monthly rental expense.
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Cash Flows
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (5,405,028 | ) | $ | (5,644,980 | ) | ||
| Investing activities | (13,327 | ) | (24,552 | ) | ||||
| Financing activities | 5,317,965 | 5,575,483 | ||||||
| Effect of foreign currency translation on cash flow | 216,445 | 125,243 | ||||||
| Net change in cash | $ | 116,055 | $ | 31,194 | ||||
Operating Activities
We used cash in operating activities totaling $5,405,028 during the nine months ended September 30, 2024 and used cash in operating activities totaling $5,644,980 during the nine months ended September 30, 2023. Key drivers of the cash used in operating activities are the net loss of $7,228,914, a net loss from discontinued operations of $4,207,458 changes to accounts receivable of $86,844, accrued interest of $1,009,822, stock-based compensation of $636,612, accounts payable of $471,102, and amortization of debt discount of $372,874.
Investing Activities
Investing activities during the nine months ended September 30, 2024, consisted of $4,559 of equipment purchases compared to $20,004 in the nine months ended September 30, 2023 and $8,768 of cash paid for patent activities comparted $0 compared to the same period in 2023.
Financing Activities
Financing activities during the nine months ended September 30, 2024 consisted of $5,325,000 of proceeds from related party convertible notes compared to $400,000 in the nine months ended September 30, 2023 In addition, there was $0 proceeds from conversion of warrants compared to $5,195,487 additional paid in capital from a warrant conversation to common stock in the nine months ended September 30, 2023. In the nine months ended September 30, 2024, payments of $7,035 were made on notes payable compared to $20,004 in the same period in 2023.
Critical Accounting Estimates
We have adopted various accounting policies to prepare the our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgments, and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the accompanying notes to the condensed consolidated financial statements. There were no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2024.
Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K. As such, we are not required to provide the information set forth in this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, with the participation of our Principal Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. “Disclosure controls and procedures,” as defined in Exchange Act Rule 13a-15(e), are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our Principal Executive Officer and Interim Chief Financial Officer, concluded that as of September 30, 2024 our disclosure controls and procedures were not effective.
As a small company with limited resources that are mainly focused on the development and sales of software products and services, the Company does not employ a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material misstatement to occur in future periods while it employs the current number of personnel in its finance department.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Marina Soliman v. Subway Franchisee Advertising Fund Trust, LTD, Second Circuit Court of Appeals, Case No. 22-1726 – this is putative class action alleging that the Company initiated telephone solicitations through text messages in violation of the Telephone Consumer Protection Act, 47 U.S.C § 227 et al. (“TCPA”). The district court granted the Company’s motion to dismiss. The matter has been under submission with the Court of Appeals since October 24, 2023. In the event that the Court reverses and remands the matter, the Company intends to seek an individual settlement of the matter, and if one cannot be reached, the Company intends to vigorously defend the matter.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), which could materially affect our business, financial condition or future results. There have been no material changes in the risk factors disclosed in the Form 10-K
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
During
the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
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Item 6. Exhibits
* Filed electronically herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
| Mobivity Holdings Corp. | ||
| Date: November 26, 2024 | By: | /s/ Bryce D. Daniels |
| Bryce D. Daniels | ||
President | ||
| (Principal Executive Officer) | ||
| Date: November 26, 2024 | By: | /s/ Skye Fossey-Tomaske |
| Skye Fossey-Tomaske | ||
Interim Chief Financial Officer (Principal Accounting Officer) | ||
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Exhibit 2.1
CERTAIN CONFIDENTIAL INFORMATION, IDENTIFIED BY BRACKETED ASTERISKS [***], HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of September 25, 2024, by and between Mobivity Holdings Corp., a Nevada corporation (“Seller”), and SMS Factory, Inc., a Florida corporation (“Buyer”).
RECITALS
A. Seller operates an SMS/MMS text messaging platform business (the “Business”) and also is a provider of technology connecting mobile gaming audiences to real world brands and offers (the “Excluded Business”).
B. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, the Customer Accounts (defined below) and Buyer desires to assume from Seller, and Seller desires to assign to Buyer, the Assumed Liabilities (defined below), in each case for consideration and in accordance with the terms and conditions of this Agreement.
C. Buyer and Seller desire to enter into this Agreement in order to set forth their mutual understandings and agreements with respect to the foregoing.
D. Capitalized terms used but not defined in the context of the Section in which such term first appears shall have the meanings set forth in Section 7.8.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I. PURCHASE AND SALE OF ASSETS.
Section 1.1. Purchase and Sale of Assets. Upon the terms and subject to the conditions set forth in this Agreement, Seller hereby sells, transfers, assigns, conveys, and delivers to Buyer, and Buyer hereby purchases and acquires from Seller, all of the Acquired Assets, free and clear of all Liens. “Acquired Assets” means all right, title, and interest in and to all of the Seller’s SMS/MMS text messaging customer accounts, used in the operation of the Business, but specifically excluding the Excluded Assets, including the following:
(a) The accounts, contracts, customer records and agreements to which Seller is a party relating to the Business, including those listed on Exhibit A. and all associated rights of Seller (the “Customer Accounts”). Exhibit A. shall list the name of each Customer Account, the contact person for each account and related contact details, whether a contract exists for said Customer Account and whether, as of the Closing Date, Seller has received a prepayment from that customer.
Section 1.2. Excluded Assets. “Excluded Assets” means all other assets of Seller not used or useful in the operation of the Business, including any assets related to or used in or necessary for the Excluded Business.
Section 1.3. Assumption of Liabilities. On and subject to the terms and conditions of this Agreement, Buyer agrees to assume and become responsible for the Assumed Liabilities as of the Closing. Buyer shall not assume or have any responsibility with respect to any Liability of Seller that is not an Assumed Liability. “Assumed Liabilities” means all obligations of Seller arising from and after Closing under the Contracts listed on Exhibit A.
Section 1.4. Excluded Liabilities. Notwithstanding anything to the contrary contained in Section 1.3. or elsewhere in this Agreement, Seller shall maintain sole responsibility of, and solely shall retain, pay, perform any Liabilities arising out of or relating to the operation of Seller’s Business prior to the Closing, any Liability of Seller under this Agreement or any other document executed in connection with the transactions contemplated hereby, including any Liability of Seller for expenses incurred by Seller or its affiliates in connection with this Agreement, or any Liability of Seller based upon Seller’s acts or omissions occurring after the Closing (collectively, the “Excluded Liabilities”).
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Section 1.5. Purchase Price. On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer will assume the Assumed Liabilities and will pay to Sellers an amount equal to the following (collectively, the “Purchase Price”):
For a period of two (2) years following the Closing Date (the “Measurement Period”), Buyer shall pay Seller two (2) times the Gross Profit earned from each Customer Account (collectively, the “Earn-out Payment”), in accordance with Section 1.7. For the purposes of this Agreement, “Gross Profit” is defined as the Gross Revenues collected by Buyer from each Customer Account, less:
| (i) | $0.001 for each SMS purchased by that customer; and |
| (ii) | $.01234 for each MMS purchased by that customer; and |
| (iii) | All applicable surcharges. |
In the event that a customer shall have prepaid their Customer Account to Seller prior to the Closing Date, Buyer shall apply such pre-payment to that Customers Account and such pre-payment so applied shall be a further reduction in the Earn-out Payment owing to Seller.
Section 1.6 Pre-Payment of the Purchase Price. At Closing, Buyer will pay Seller $303,000 in cash by wire transfer of immediately available funds to a bank account designated in writing by Seller as a pre-payment of the Earnout Payments (the “Earnout Pre-Payment”).
Section 1.7. Earn-out Payment. Semi-annually, commencing on the date which is six (6) months from the Closing Date, and continuing on the same date in the 12th, 18th and 24th month following the Closing, Buyer shall pay Seller the Earn-out Payment by wire transfer of immediately available funds to a bank account designated in writing by Seller. Buyer shall apply, as a reduction, the Earnout Pre-Payment against each Earnout Payment due Seller until the Earnout Pre-Payment is exhausted. If, at the end of the Measurement Period, any amount of the Earnout Pre-Payment has not been applied to Earnout Payments made to the Seller, Seller shall refund the excess Earnout Pre-Payment to Buyer within thirty (30) days of the end of the Measurement Period. Buyer agrees and acknowledges that it will (i) not take or omit to take any action with the primary purpose of decreasing Gross Profit during the Measurement Period (or any other period which would impact the Gross Profit during the Measurement Period), and (ii) not, directly or indirectly, take any action or omit to take any action with the primary purpose of avoiding or reducing the Earn-Out Payment payable to Seller.
Section 1.8. Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place on the date hereof by the remote exchange of electronic copies of documents and signatures, or at another date, time or place, as the parties may mutually agree. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”
Section 1.9. Closing Obligations.
(a) At the Closing, Seller shall deliver or cause to be delivered to Buyer:
(1) an assignment of all of the Acquired Assets that are intangible personal property, which assignment shall also contain Buyer’s undertaking and assumption of the Assumed Liabilities (the “Assignment and Assumption Agreement”), in substantially the form of Exhibit B., duly executed by Seller;
(2) a certificate of the Chief Executive Officer of Seller certifying and attaching all requisite resolutions or actions of Seller’s board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and any other document relating to the transactions contemplated hereby.
(b) At the Closing, Buyer shall deliver, or cause to be delivered, to Seller:
(1) the Earnout Pre-Payment;
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(2) the Assignment and Assumption Agreement, duly executed by Buyer; and
(3) a certificate of the Secretary of Buyer certifying and attaching all requisite resolutions or actions of Buyer’s board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and any other document relating to the transactions contemplated hereby.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer as follows, as of the date of this Agreement, except as set forth in the Disclosure Schedules:
Section 2.1. Organization. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Nevada and has all corporate power and authority necessary to own or lease its assets and to carry on the Business as currently conducted. Seller is duly qualified or licensed to do business and is in good standing in each of the jurisdictions where the nature of the Business makes such qualification necessary.
Section 2.2. Authority. Seller has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution, delivery and performance by Seller of this Agreement, and the consummation by Seller of the transactions contemplated hereby, have been duly and validly authorized by Seller’s board and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby or to perform its obligations hereunder. This Agreement has been duly and validly executed and delivered by Seller and, assuming this Agreement constitutes the legal, valid and binding agreement of Buyer, constitutes a legal, valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. Upon the execution and delivery by Seller of any other document to which Seller is a party in connection with this Agreement, each of such other documents will constitute the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.
Section 2.3. Non-Contravention; Filings and Consents.
(a) The execution, delivery and performance by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby do not and will not (with or without notice or lapse of time, or both):
(1) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws of Seller;
(2) contravene, conflict with or result in a violation or breach of any provision of any Law or Order;
(3) require any consent or approval under, violate, conflict with, result in any breach of or any loss of any benefit under, or constitute a change of control or Default under, or result in termination or give to others any right of termination, vesting, amendment, acceleration or cancellation of any Contract to which Seller is a party, or by which its properties or assets may be bound or affected or any Governmental Authority affecting, or relating in any way to the Business; or
(4) result in the imposition or creation of any Lien on, or with respect to, any of the Acquired Assets.
(b) The execution, delivery and performance of this Agreement by Seller and the consummation of the transactions contemplated hereby by Seller do not and will not require any Permit of, action by, filing with or notification to, any Governmental Authority. For purposes of this Agreement, “Governmental Authority” means any national, state or local, domestic or foreign or international, government or any judicial, legislative, executive, administrative or regulatory authority, tribunal, agency, body, entity or commission or other governmental, quasi-governmental or regulatory authority or agency, domestic or foreign or international.
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Section 2.4. Litigation.
(a) There is no complaint, claim, action, suit, litigation, proceeding or governmental or administrative investigation pending or, to the Knowledge of Seller, threatened against or affecting Seller with regard to the Business, including in respect of the transactions contemplated hereby, whether by any owner of a Customer Account or any Governmental Authority. Seller is not subject to any outstanding Order that prohibits Seller from selling/assigning the Customer Accounts to Buyer.
(b) To the Knowledge of Seller, no event has occurred, or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any complaint, claim, action, suit, litigation, proceeding or governmental or administrative investigation by any owner of a Customer Account or any Governmental Authority.
Section 2.5. Compliance with Laws; Permits.
(a) Since January 1, 2020, Seller has not been in conflict with, in Default or, with notice, lapse of time or both, would be in Default, with respect to or in violation of any material (i) statute, law, ordinance, rule, regulation or requirement of a Governmental Authority (each, a “Law”), including but not limited to the Telephone Consumer Protection Act and the California Consumer Privacy Act or (ii) order, judgment, writ, decree or injunction issued by any court, agency or other Governmental Authority (each, an “Order”) applicable to Seller or by which any property or asset of Seller is bound or affected.
(b) Since January 1, 2020, Seller has not received any written notice:
(1) of any Default or violation as described in clause (a) above;
(2) of any administrative, civil or criminal investigation or audit by any Governmental Authority relating to Seller; or
(3) from any Governmental Authority alleging that Seller is not in compliance with any Law or Order.
(c) Seller has all permits, licenses, orders, registrations, certificates, variances, authorizations, consents, approvals, franchises, and similar rights from Governmental Authorities required to conduct the Business as currently conducted (“Permits”) and such Permits are valid and in full force and effect. Seller is in compliance with the terms of such Permits and, as of the date of this Agreement, has not received written notice from any Governmental Authority threatening to revoke, or indicating that it is investigating whether to revoke, any such Permit.
Section 2.6. Customer Account Contracts.
(a) Exhibit A. lists as of the date hereof, and Seller has made available to Buyer true, correct and complete copies of each of the Customer Account contracts (each, a “Customer Account Contract”) to which Seller is a party.
(b) (i) each Customer Account Contract is valid and binding on Seller that is a party thereto and, to the Knowledge of Seller, each other party thereto, and is in full force and effect and enforceable in accordance with its terms, except to the extent enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally, and to general equitable principles, and unless expired or terminated in accordance with its terms; (ii) Seller and, to the Knowledge of Seller, each other party thereto, have performed and complied with all obligations required to be performed or complied with by them under each Customer Account Contract; and (iii) there is no Default under any Customer Account Contract by Seller or, to the Knowledge of Seller, by any other party, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a Default thereunder by Seller or, to the Knowledge of Seller, by any other party thereto.
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Section 2.7. Brokers; Certain Expenses. No agent, broker, investment banker, financial advisor or other firm or Person, whose fees and expenses shall be paid solely by Seller, is or shall be entitled to receive any brokerage, finder’s, financial advisor’s, transaction or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon agreements made by or on behalf of Seller.
Section 2.8. Independent Investigation; Non-reliance. Seller represents that no representations or warranties have been made to Seller by Buyer other than the representations and warranties contained in this Agreement and that, in entering into the transactions contemplated by this Agreement, Seller is not relying upon any information other than that contained in this Agreement and the results of its own independent investigation.
Section 2.9 Employees. To the Knowledge of Seller, no current employee and over the past two (2) years no former employee of Seller is a party to, or is otherwise bound by, a contract or similar arrangement with any of the Customer Accounts regarding SMS/MMS text messaging.
Section 2.10 Customer Account Records. Seller’s Customer Account files and records, all of which have been made available to Buyer, are materially complete and correct and represent actual bona fide transactions and have been maintained in accordance with sound business practices. Following the Closing, and continuing through the end of the Measurement Period, upon a reasonable request by Buyer, upon notice and during normal business hours, Seller shall make its Customer Account records available to Buyer for review.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as follows, as of the date of this Agreement:
Section 3.1. Organization. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Florida and has the requisite corporate power to carry on its business as now conducted.
Section 3.2. Authority. Buyer has all necessary corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Buyer and, assuming due authorization, execution and delivery of this Agreement by Seller, constitutes a legal, valid and binding agreement of Buyer, enforceable in accordance with its terms against Buyer.
Section 3.3. Consents and Approvals. The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby require no consent, approval, authorization or filing with or notice to any Governmental Authority other than any actions or filings the absence of which are not reasonably likely to prevent, materially delay or materially impair the ability of Buyer to consummate the transactions contemplated by this Agreement.
Section 3.4. Non-Contravention. The execution, delivery and performance of this Agreement by Buyer and the consummation of the transactions contemplated by this Agreement do not and will not (with or without notice or lapse of time or both) (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws of Buyer; (ii) assuming compliance with the matters referred to in Section 3.3., contravene, conflict with or result in a violation or breach of any Law or Order; or (iii) require any consent or approval under, violate, conflict with, result in any breach of any loss of any benefit under, or constitute a change of control or Default under, or result in termination or give to others any right of termination, vesting, amendment, acceleration or cancellation of any contract to which Buyer is a party, or by which its properties or assets may be bound or affected, with such exceptions, in the case of each of clauses (ii) and (iii) of this section, as would not reasonably be expected to prevent, materially delay or materially impair the ability of Buyer to consummate the transactions contemplated by this Agreement.
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Section 3.5. Independent Investigation; Non-reliance. Buyer represents that no representations or warranties have been made to Buyer by Seller other than the representations and warranties contained in Article II of this Agreement and that, in entering into the transactions contemplated by this Agreement, Buyer is not relying upon any information other than that contained in Article II of this Agreement and the results of its own independent investigation.
ARTICLE IV. COVENANTS.
Section 4.1. Non-Solicitation.
(a) During the period of twenty-four months following the Closing (the “Restricted Period”), Seller shall not, directly or indirectly solicit the trade of, or trade with, any customer whose Customer Account is a part of the Acquired Assets such that the customer reduces the amount of business that it does (or, but for that solicitation, would do) with Buyer. Notwithstanding the foregoing, nothing in the Article IV shall prohibit Seller from operating the Excluded Business.
(b) If Seller shall be in breach of subsection (a) above, then the time period set forth in that subsection shall, as it relates to the breaching party, be extended by the length of time during which the breaching party is in breach of any of those provisions.
(c) Seller acknowledges and agrees that Buyer would be irreparably damaged if any of the provisions of this Section 4.1. are not complied with in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that Buyer shall be entitled to an injunction or injunctions to prevent breaches of this Section 4.1. and shall have the right to specifically enforce Section 4.1. and its terms and provisions against Seller in addition to any other remedy to which Buyer may be entitled under this Agreement, at Law or in equity.
(d) It is the intent of the parties that each provision of this Section 4.1. be adjudicated valid and enforced to the fullest extent permissible under the Laws and public policies of each jurisdiction in which adjudication of the validity or enforcement of Section 4.1. is sought. In furtherance of the foregoing, each provision of Section 4.1. shall be severable from each other provision, and any provision of Section 4.1. that is prohibited or unenforceable in any jurisdiction shall be subject to the following: (i) if the prohibited or unenforceable provision is contrary to or conflicts with any requirement of any statute, rule or regulation in effect in the jurisdiction, then the requirement shall be incorporated into, or substituted for, the prohibited or unenforceable provision to the minimum extent necessary to make the provision valid or enforceable; (ii) the Governmental Authority or arbitrator considering the matter is authorized to (or, if that Governmental Authority or arbitrator is unwilling or fails to do so, then the parties shall) amend the unenforceable provision to the minimum extent necessary to make the provision valid or enforceable, and the parties consent to the entry of an order amending the provision to that extent for that purpose; and (iii) if any unenforceable provision cannot be or is not reformed and made valid or enforceable under this Section 4.1., then the prohibited or unenforceable provision shall be ineffective in that jurisdiction to the minimum extent necessary to make the remainder of Section 4.1. valid or enforceable in that jurisdiction. Any application of the foregoing provisions to any provision of Section 4.1. shall not (x) affect the validity or enforceability of any other provision of Section 4.1. or (y) prevent the prohibited or unenforceable provision from being adjudicated valid or enforced as written in any other jurisdiction.
Section 4.2. Press Releases. Buyer and Seller shall consult with each other before issuing any press release or making any other public statement with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such other public statement without the consent of the other party, which shall not be unreasonably withheld, except as such release or statement may be required by Law or any listing agreement with or rule of any national securities exchange or the OTC Markets.
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Section 4.3. Payment of All Taxes Resulting from Sale of Assets by Seller. Seller shall pay in a timely manner all taxes resulting from or payable in connection with the sale of the Acquired Assets pursuant to this Agreement, regardless of the Person on whom such taxes are imposed by Laws. Under no circumstances shall this Section 4.3. be interpreted to (a) obligate Seller to pay the income Taxes of any of its shareholders or (b) create any rights, as a third-party beneficiary or otherwise, in favor of any Person other than Buyer or Seller.
Section 4.4. Customer and Other Business Relationships. No later than thirty (30) days after the Closing Date, Seller shall communicate with all of its Customer Accounts informing each such customer that Seller will no longer be in the Business as of December 31, 2024, and further advising each such customer of the sale of the Acquired Assets hereby. Seller will use its commercially reasonable efforts and cooperate with Buyer in Buyer’s efforts to continue and maintain for the benefit of Buyer those business relationships of Seller relating to the Customer Accounts and Business existing prior to the Closing. Seller will collect the Customer Account accounts receivable in a manner that is not detrimental to any of such relationships. Seller will refer to Buyer all inquiries relating to the Business after Closing.
Section 4.5. Retention of and Audit Rights to Records. After the Measurement Period, Buyer shall retain for a period two (2) years following the expiration or earlier termination of this Agreement those records of Seller relating to the Business delivered to Buyer. Buyer shall provide reasonable access to Seller, during normal business hours and on at least three days’ prior written notice, to Buyers records relating to the calculation and payment of the Earn-out Payments.
ARTICLE V. INDEMNIFICATION.
Section 5.1. Indemnification by Seller. Seller shall defend, indemnify and hold harmless Buyer and its respective directors, officers, employees and agents from and against any and all claims (including without limitation any investigation, action or other proceeding) and Liabilities that constitute, or arise out of or in connection with:
(a) Any breach of a representation or warranty of Seller contained in Article II of this Agreement, any exhibit, or any certificate or instrument delivered by Seller pursuant to this Agreement;
(b) any default by Seller in the performance or observance of any of its covenants or agreements under this Agreement; or
(c) any third-party claim based upon, resulting from or arising out of the Business of Seller conducted on or prior to the Closing Date.
Section 5.2. Indemnification by Buyer. Buyer shall defend, indemnify and hold harmless Seller and its respective directors, officers, employees and agents from and against any and all claims (including without limitation any investigation, action or other proceeding) and Liabilities that constitute, or arise out of or in connection with:
(a) Any breach of a representation or warranty of Buyer contained in Article III of this Agreement, any exhibit, or any certificate or instrument delivered by Buyer pursuant to this Agreement;
(b) any default by Buyer in the performance or observance of any of its covenants or agreements under this Agreement, including the payment of any Earn-out Payments; or
(c) any third-party claim based upon, resulting from or arising out of the Business, Acquired Assets or Assumed Liabilities conducted after the Closing Date.
Section 5.3. Survival of Representations and Warranties. All representations, warranties, and covenants made in this Agreement or in connection with the transactions contemplated in this Agreement shall survive the Closing until the one (1) year anniversary of the Closing Date; provided, however, that the representations and warranties in Section 2.1. (Organization and Corporate Power), Section 2.2. (Corporate Authorization), Section 2.3. (Non-Contravention); and Section 2.7. (Brokers); (collectively, the “Fundamental Representations”), shall survive until 60 days after the expiration of the applicable statute of limitations.
Section 5.4. Sole Recourse. Buyer’s sole and exclusive recourse with respect to Seller’s indemnification obligations set forth in Section 5.1 shall be limited to and offset against any Earn-out Payments owed and/or paid by Buyer to Seller and Seller shall have no Liability beyond the amount of any Earn-out Payments and Pre-Paid Earnout Payments actually received.
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ARTICLE VI. [RESERVED.]
Article VII. MISCELLANEOUS.
Section 7.1. Entire Agreement; Assignment; Amendments. This Agreement (including the exhibits to this Agreement) constitute the entire agreement and supersede all oral agreements and understandings and all written agreements prior to the date hereof between or on behalf of the parties with respect to the subject matter hereof. This Agreement shall not be assigned by any party by operation of Law or otherwise without the prior written consent of the other parties hereto. This Agreement may be amended only by a writing signed by each of the parties, and any amendment shall be effective only to the extent specifically set forth in that writing.
Section 7.2. Severability; Expenses; Further Assurances. If any term, condition or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible. Except as otherwise specifically provided in this Agreement, each party shall be solely responsible for the expenses it may incur in connection with the negotiation, preparation, execution, delivery, performance and enforcement of this Agreement. The parties shall from time to time do and perform any additional acts and execute and deliver any additional documents and instruments that may be required by Law or reasonably requested by any party to establish, maintain or protect its rights and remedies under, or to effect the intents and purposes of, this Agreement.
Section 7.3. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) upon confirmation of receipt by the addressee, if such notice or communication is delivered via email to the email address specified in this Section 7.3. or (b) upon receipt at address of the addressee specified in this Section 7.3., if such notice or communication is delivered by U.S. mail, courier or other physical delivery service. The addresses for such notices and communications shall be as follows:
If to Buyer, to:
SMS Factory, Inc.
11231 Highway US1, #432
North Palm Beach, FL 33408
E-mail: yuval@smsfactory.com
Attention: Yuval Madar, President
with a copy (which will not constitute notice to Buyer) to:
Ansell Grimm and Aaron
1500 Lawrence Avenue
Ocean, NJ 07712
E-mail: Rhibberd@Ansell.law
Attention: Roy Hibberd, Esq.
If to Sellers, to:
Mobivity Holdings, Inc.
3133 West Frye Road, Suite 215
Chandler, Arizona 85226
E-mail: bryce.daniels@mobivity.com
Attention: Bryce Daniels
with a copy (which will not constitute notice to Seller) to:
Faegre Drinker Biddle & Reath LLP
90 S. Seventh Street
Minneapolis, MN 55402
E-mail: steve.conley@faegredrinker.com
Attention: Steve Conley
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or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. Rejection or other refusal to accept or the inability for delivery to be effected because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.
Section 7.4. Governing Law. This Agreement, and any dispute arising out of, relating to, or in connection with this Agreement, shall be governed by and construed in accordance with the Laws of the State of Florida, without giving effect to any choice or conflict of Law provision or rule (whether of the state of Florida or of any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the state of Florida.
Section 7.5. Headings. The descriptive headings in this Agreement are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.
Section 7.6. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement.
Section 7.7. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement. At the Closing, signature pages of counterparts may be exchanged by facsimile or by electronic transmittal of scanned images thereof, in each case subject to appropriate customary confirmations in respect thereof by the signatory for the party providing a facsimile or scanned image and that party’s closing counsel.
Section 7.8. Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
“Default” means any breach or violation of, default under, contravention of, or conflict with, any contract, Law, Order, or Permit, any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of, default under, contravention of, or conflict with, any contract, Law, Order, or Permit, or any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right of any Person to exercise any remedy or obtain any relief under, terminate or revoke, suspend, cancel, or modify or change the current terms of, or renegotiate, or to accelerate the maturity or performance of, or to increase or impose any Liability under, any contract, Law, Order, or Permit.
“Disclosure Schedules” means the Disclosure Schedules attached to this Agreement and incorporated as if fully set forth herein.
“Knowledge of Seller” means the actual knowledge of Bryce Daniels, Jennifer Taylor and Jeff Michaels.
“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.
“Lien” means, with respect to any property or asset, all pledges, liens, mortgages, charges, encumbrances, hypothecations, options, rights of first refusal, rights of first offer and security interests of any kind or nature whatsoever.
“Person” means an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint -stock company, trust, unincorporated association, joint venture or other entity or a Governmental Authority.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all at or on the date and year first above written.
| BUYER: SMS Factory, Inc. | ||
| By: | /s/ Yuval Madar | |
| Name: | Yuval Madar | |
| Title: | President | |
| SELLER: Mobivity Holdings Corp. | ||
| By: | /s/ Bryce Daniels | |
| Name: | Bryce Daniels | |
| Title: | Chief Executive Officer | |
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EXHIBIT A. LIST OF ACCOUNTS
[***]
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EXHIBIT B. ASSIGNMENT AND ASSUMPTION AGREEMENT
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Assignment and Assumption Agreement
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”), dated as of September 25, 2024, is made and entered into by and between Mobivity Holdings Corp., a Nevada corporation (“Seller”) and SMS Factory, Inc., a Florida corporation, (“Buyer”).
WHEREAS, capitalized terms used but not defined herein shall have the meanings assigned to those terms in the Asset Purchase Agreement (as defined herein);
WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement, dated of even date herewith (the “Asset Purchase Agreement”), pursuant to which, on the terms and subject to the conditions of the Asset Purchase Agreement, Seller has agreed to sell, transfer, assign, convey and deliver to Buyer, and Buyer has agreed to purchase, acquire and accept from Seller, all of Seller’s right, title and interest in, to and under the Acquired Assets; and
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has agreed to assume and timely perform, pay and discharge in accordance with its respective terms, the Assumed Liabilities.
NOW THEREFORE, in consideration of the mutual covenants, terms, and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:
| 1. | This Assignment is executed, delivered and accepted pursuant to, and is subject to, the Asset Purchase Agreement. The Asset Purchase Agreement shall at all times govern the rights and duties of the parties with respect to the Acquired Assets and all interested parties are hereby given notice of its existence. If there is any conflict between the terms and provisions of this Assignment and those of the Asset Purchase Agreement, the terms of the Asset Purchase Agreement shall control. |
| 2. | On the terms and subject to the conditions set forth in the Asset Purchase Agreement, Seller hereby sells, transfers, assigns, grants, conveys and delivers to Buyer, and Buyer hereby purchases, assumes, acquires and accepts from Seller, all of Seller’s right, title and interest in, to and under the Acquired Assets. Nothing herein contained shall be deemed to sell, transfer, assign, grant, convey or deliver the excluded Assets to Buyer, and Seller shall retain all right title and interest to, in and under the Excluded Assets. |
| 3. | Pursuant to the terms and subject to the conditions set forth in the Asset Purchase Agreement, Seller hereby contributes, conveys, transfers, and assigns, and Buyer hereby assumes and agrees to timely perform, pay, discharge, or otherwise satisfy, the obligations of the customer List of Accounts attached hereto as Exhibit A. |
| 4. | This Assignment shall be governed by the provisions of the Asset Purchase Agreement, unless the context otherwise requires, including but not limited to the representations, warranties, covenants, agreements and indemnities relating to the Acquired Assets, and the provisions concerning severability, construction, enforcement, governing law and jurisdiction. |
| 5. | This Assignment shall be binding upon and inure to the benefit of Buyer and Seller and their respective successors and permitted assigns. Nothing in this Assignment, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Assignment. |
| 6. | This Assignment may not be modified or amended except by a written instrument signed by the parties. In addition, no waiver of any provision of this Assignment shall be binding unless set forth in a writing signed by the party granting the waiver. Any waiver shall be limited to the circumstance or event specifically referenced in the written waiver document and shall not be deemed a waiver of any other term of this Assignment or of the same circumstance or event upon any recurrence thereof. |
| 7. | This Assignment may be executed in multiple counterparts, each of which shall be deemed to be an original hereof, but all of which, taken together, shall constitute one and the same agreement as of the date hereof. Any delivery of signature pages of counterparts by way of facsimile or by electronic transmittal of scanned images thereof shall constitute delivery hereof, in each case subject to appropriate customary confirmations in respect thereof by the signatory for the party providing a facsimile or scanned image. |
| 8. | Neither the failure of any party hereto to exercise any right, power or remedy provided under this Assignment or to insist upon compliance by any other party with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof, shall constitute a waiver by such party of its right to exercise any such right, power or remedy or to demand such compliance. |
(signatures on next page)
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IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed by their duly authorized representatives as of the date first above written.
| Seller: Mobivity Holdings Corp. | Buyer: SMS Factory, Inc. | |
| By: Yuval Madar, President | By: Bryce Daniels, CEO |
Signature
Page to Assignment and Assumption Agreement
| Page 15 |
EXHIBIT A. LIST OF ACCOUNTS
[***]
Exhibit 10.1
AMENDMENT NO. 4 TO
AMENDED AND RESTATED CREDIT FACILITY AGREEMENT and convertible noteS
THIS AMENDMENT NO. 4 TO AMENDED AND RESTATED CREDIT FACILITY AND CONVERTIBLE NOTES is dated as of November 21, 2024 (this “Amendment”), between Mobivity Holdings Corp., a Nevada corporation (“Borrower”) and Thomas B. Akin, an individual (“Lender”) (each, a “Party” and together, the “Parties”).
BACKGROUND
A. The Parties entered into that certain Amended and Restated Credit Facility Agreement dated as of November 11, 2022, as amended by that certain Amendment 1 to Amended and Restated Credit Facility Agreement and Convertible Notes, dated as of January 31, 2023, Amendment No. 2 to Amended and Restated Credit Facility Agreement, dated as of May 3, 2024 and Amendment No.3 to Amended and Restated Credit Facility Agreement and Convertible Notes, dated as of August 13, 2024 (the “Existing Credit Agreement”);
B. Advances under the Existing Credit Agreement were evidenced by the terms of one or more convertible notes (the “Existing Notes”), a form of which is attached to the Existing Credit Agreement;
C. The Parties now desire to amend the Existing Credit Agreement and the Existing Notes as provided herein; and
D. Unless otherwise defined herein, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Existing Credit Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, and intending to be legally bound, the Parties hereto agree as follows:
AGREEMENT
1. Amendments to Existing Credit Agreement. Upon satisfaction of the conditions set forth in Section 3 hereof, the Existing Credit Agreement is amended pursuant to this Amendment to:
| (a) | Amend and restate Section 2.3(b) in its entirety to read as follows: |
“Without limiting the foregoing Section 2.3(a), Borrower shall repay the principal amount of all Advances in 24 equal monthly installments commencing on April 30, 2025 and continuing thereafter on the first day of each month (or, if such first day is not a Business Day, on the Business Day immediately succeeding such first day). Interest on the unpaid Advances will accrue from the date of each Advance at a rate equal to fifteen percent (15%) per annum and shall be paid quarterly in kind in Common Stock of the Borrower at a price per share equal to the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the ninety (90) Trading Days immediately preceding such date. Interest will be calculated on the basis of 365 days in a year.”
| (b) | Amend Section 1 of Exhibit A to Existing Credit Agreement in its entirety to read as follows: |
“1. Payment Terms; Maturity. This Note shall bear interest on the unpaid principal amount at the rate of fifteen percent (15%) per annum and shall be paid quarterly in kind in Common Stock of the Borrower at a price per share equal to the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the ninety (90) Trading Days immediately preceding such date. The unpaid principal amount shall be paid in 24 equal monthly installments commencing on April 30, 2025 and continuing on the first day of each of the next 23 months thereafter (or, if such first day is not a Business Day, on the Business Day immediately succeeding such first day), with a final payment due on March 3, 2027 at which time all principal shall be due and payable. All payments of principal under this Note will be made in lawful money of the United States of America in immediately available funds at such place as may be designated by Lender to Borrower in writing.”
2. Amendments to Existing Notes. Upon satisfaction of the conditions set forth in Section 3 hereof, each Existing Note is amended pursuant to this Amendment to:
| (a) | Amend Section 1 in its entirety to read as follows: |
“1. Payment Terms; Maturity. This Note shall bear interest on the unpaid principal amount at the rate of fifteen percent (15%) per annum and shall be paid quarterly in kind in Common Stock of the Borrower at a price per share equal to the volume-weighted average price of the Common Stock quoted on the OTCQB ® Venture Market operated by OTC Markets Group Inc. over the ninety (90) Trading Days immediately preceding such date. The unpaid principal amount shall be paid in 24 equal monthly installments commencing on April 30, 2024 and continuing on the first day of each of the next 23 months thereafter (or, if such first day is not a Business Day, on the Business Day immediately succeeding such last day), with a final payment due on March 31, 2027 at which time all principal shall be due and payable. All payments of principal under this Note will be made in lawful money of the United States of America in immediately available funds at such place as may be designated by Lender to Borrower in writing.”
3. Conditions. Notwithstanding any other provision of this Amendment and without affecting in any manner the rights of the Lender hereunder, it is understood and agreed that the effectiveness of Sections 1 and 2 hereof is subject to the execution and delivery of this Amendment by Borrower and Lender.
| 2 |
4. No Modification. Except as expressly set forth herein, nothing contained herein shall be deemed to constitute a waiver of compliance with any term or condition contained in the Existing Credit Agreement, the Existing Notes or constitute a course of conduct or dealing among the parties. Except as amended or consented to hereby, the Existing Credit Agreement and Existing Notes remain unmodified and in full force and effect.
5. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Electronically delivered signature pages (PDFs, facsimile, etc.) shall be deemed to be the functional equivalent of originally executed signature pages for all purposes.
6. Successors and Assigns. This Amendment shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of Lenders. Neither Borrower’s rights or obligations hereunder nor any interest therein may be assigned or delegated without the prior written consent of the Lender.
7. Governing Law. This Amendment and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the law of the State of Arizona.
8. Severability. In case any provision in or obligation under this Amendment or any instrument or agreement required hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9. Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.
10. Reaffirmation. Borrower hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under the Existing Credit Agreement (after giving effect hereto), and (ii) ratifies and reaffirms the grant of security interest in the Collateral. Borrower hereby consents to this Amendment and acknowledges that the Existing Credit Agreement otherwise remains in full force and effect and is hereby ratified and reaffirmed. The execution of this Amendment shall not operate as a waiver of any right, power or remedy of the Lender or constitute a waiver of any provision of any of the Existing Credit Agreement or the Existing Notes, except as expressly set forth herein.
11. Entire Understanding. This Amendment sets forth the entire understanding of the Parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.
[Remainder of Page Intentionally Left Blank; Signature Pages Follow]
| 3 |
IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date set forth above.
| BORROWER: | ||
| MOBIVITY HOLDINGS CORP., | ||
| a Nevada corporation | ||
| By: | /s/ Skye Fossey-Tomaske | |
| Name: | Skye Fossey-Tomaske | |
| Title: | Interim Chief Financial Officer | |
| LENDER: | ||
| /s/Thomas B. Akin | ||
| Thomas B. Akin | ||
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Rule 13a-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Bryce D. Daniels, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobivity Holdings Corp. for the quarter ended September 30, 2024;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 26, 2024 | By: | /s/ Bryce D. Daniels |
| Bryce D. Daniels | ||
| President | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Rule 13a-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Skye Fossey-Tomaske, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mobivity Holdings Corp. for the quarter ended September 30, 2024;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 26, 2024 | By: | /s/ Skye Fossey-Tomaske |
| Skye Fossey-Tomaske | ||
| Principal Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Mobivity Holdings Corp., a Nevada corporation (the “Company”), for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Bryce D. Daniels, Principal Executive Officer of the Company, and Skye Fossey-Tomaske, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: November 26, 2024
| /s/ Bryce D. Daniels | |
Bryce D. Daniels President (Principal Executive Officer) | |
| /s/ Skye Fossey-Tomaske | |
Skye Fossey-Tomaske Interim Chief Financial Officer (Principal Financial and Accounting Officer) |