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As filed with the Securities and Exchange
Commission on November 24, 2021
Registration No. 333-260364
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 3
to
FORM
S-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
MOBIQUITY TECHNOLOGIES,
INC.
(Exact name of registrant as specified in its charter)
New York | 7373 | 11-3427886 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
35 Torrington Lane , Shoreham , NY | 11786 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area
(
516
)
246-9422
Dean L. Julia
Chief Executive Officer
Mobiquity Technologies, Inc.
35 Torrington Lane
Shoreham, NY 11786
(516) 246-9422
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
|
|
Approximate date of commencement of proposed
sale to the public:
From time to time after this registration statement
is declared effective.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:
þ
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer: ☐ | Accelerated filer: ☐ | Non-accelerated filer : ☒ | Smaller reporting company: ☒ |
Emerging growth 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 7(a)(2)(B) of the Securities Act.
☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered | Proposed Maximum Aggregate Offering Price (1) | Amount of Registration Fee | ||||||
Units (2) | $ | 12,650,004 | $ | 1,172.66 | ||||
Common stock, par value $0.0001 per share, included in the units | – | (4) | – | (4) | ||||
Warrants to purchase common stock, par value $0.0001 per share, included in the units | – | (4) | – | (4) | ||||
Common stock, par value $0.0001 per share, underlying the warrants included in the units (3) | $ | 15,180,005 | $ | 1,407.19 | ||||
Representative’s Warrant to purchase common stock | – | (5) | – | (5) | ||||
Common stock issuable upon exercise of Representative’s Warrants to purchase common stock (6) | $ | 412,500 | $ | 38.24 | ||||
TOTAL | $ | 28,242,509 | $ | 2,618.09 | (7) | |||
(1) | Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended (the “Securities Act”). |
(2) | Each unit consists of one share of common stock, par value $0.0001 per share, and one warrant to purchase one share of common stock, par value $0.0001 per share. Includes 275,000 shares of common stock and/or warrants to purchase 275,000 shares of common stock, which may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any. |
(3) | The warrants are exercisable at a per share exercise price equal to 120% of the public offering price per share of common stock. The proposed maximum aggregate public offering price of the shares of common stock issuable upon exercise of the warrants was calculated to be $15,180,005 (which is 120% of $12,650,004 since each investor will receive a warrant to purchase one share of common stock for each share of common stock purchased in this offering). Pursuant to Rule 416, the registrant is also registering an indeterminate number of additional shares of common stock that are issuable by reason of the anti-dilution provisions of the warrants. |
(4) | Included in the price of the units. No fee required pursuant to Rule 457(g) under the Securities Act. |
(5) | No fee required pursuant to Rule 457(g) under the Securities Act. |
(6) | The Representative’s Warrants are exercisable at a per share exercise price equal to 125% of the public offering price per share. As estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the representative’s warrants is $412,500 which is equal to 125% of $330,000 (3% of $11,000,004 of shares of common stock sold in this offering ). Pursuant to Rule 416, the registrant is also registering an indeterminate number of additional shares of common stock that are issuable by reason of the anti-dilution provisions of the Representative’s Warrants. |
(7) | Previously paid $2,759.32. |
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the registration statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said
Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement contains two prospectuses,
as set forth below.
· | Public Offering Prospectus. A prospectus to be used for the public offering of 1,833,334 units of the Registrant (the “Public Offering Prospectus”) through the underwriter named on the cover page of the Public Offering Prospectus. | |
· | Each unit consists of one share of common stock, par value $0.0001 per share, and one warrant to purchase one share of common stock, par value $0.0001 per share. | |
· | Resale Prospectus. A prospectus to be used for the resale by the selling shareholders set forth therein of 281,250 shares of common stock of the Registrant (the “Resale Prospectus”). |
The Resale Prospectus is substantively identical
to the Public Offering Prospectus, except for the following principal points:
· | they contain different outside and inside front covers and back covers; | |
· | they contain different Offering sections in the Prospectus Summary section beginning on page 5; | |
· | they contain different Use of Proceeds sections on page 24; | |
· | a Selling Shareholder section is included in the Resale Prospectus; | |
· | the Dilution section from the Public Offering Prospectus on page 27 is deleted from the Resale Prospectus; | |
· | the Capitalization section from the Public Offering Prospectus on page 29 is deleted from the Resale Prospectus; | |
· | the Underwriting section from the Public Offering Prospectus on page 69 is deleted from the Resale Prospectus and a Selling Shareholders Plan of Distribution is inserted in its place; and | |
· | the Legal Matters section in the Resale Prospectus on page 76 deletes the reference to counsel for the underwriter. |
The Registrant has included in this Registration
Statement a set of alternate pages after the back cover page of the Public Offering Prospectus (the “Alternate Pages”) to
reflect the foregoing differences in the Resale Prospectus as compared to the Public Offering Prospectus. The Public Offering Prospectus
will exclude the Alternate Pages and will be used for the public offering by the Registrant. The Resale Prospectus will be substantively
identical to the Public Offering Prospectus except for the addition or substitution of the Alternate Pages and will be used for the resale
offering by the selling shareholders.
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The information in this prospectus is not complete and
may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION DATED
NOVEMBER 24, 2021
MOBIQUITY TECHNOLOGIES, INC.
1,833,334 UNITS
Mobiquity Technologies, Inc. is offering 1,833,334
units on a firm commitment basis, each unit consisting of one share of common stock, par value $0.0001 per share, and a warrant to purchase
one share of common stock. It is currently estimated that the offering price will be between $5.00 and $6.00 per unit, with an estimated
offering price of $6.00 per unit. The warrants included in the units are exercisable immediately, at an exercise price of $7.20 per share
(equal to 120% of the public offering price per unit) and expire five years from the date of issuance.
The
units will have no stand-alone rights and will not be issued or certificated as stand-alone securities. Purchasers will receive only
shares of common stock and warrants. The shares of common stock and warrants may be transferred separately, immediately upon issuance.
The offering also includes the shares of common stock issuable from time to time upon exercise of the warrants.
Our common stock is currently quoted on the OTCQB
market, operated by OTC Markets Group, under the symbol “MOBQ.” On November 19, 2021, the last quoted price of our common
stock as reported on the OTCQB was $7.80 per share. There is a limited public trading market for our common stock. The final offering
price per unit may be at a discount to the trading price of our common stock on the OTCQB. This price will fluctuate based on the demand
for our common stock.
The final public offering price per unit will
be determined through a negotiation between us and the underwriters in the offering and will take into account the recent market price
of our common stock, the general condition of the securities market at the time of the offering, the history of, and the prospects for,
the industry in which we compete, and our past and present operations and our prospects for future revenues. The assumed public offering
price used throughout this prospectus may not be indicative of the actual final offering price.
We are
also seeking to register the issuance of warrants to purchase 55,000 shares of Common Stock (the “Representative’s Warrants”)
to the Underwriters,
as a portion of the underwriting compensation payable in connection with this offering
,
as well as the 55,000 shares of Common Stock issuable upon exercise by the Underwriters of the Representative’s Warrants at an
exercise price of $7.50 per share (125% of public offering price).
We have applied to list our common stock and
warrants (forming part of the units offered hereby) on the NASDAQ Capital Market under the symbols “MOBQ” and “MOBQW,”
respectively.
There is no assurance that our listing application will be approved by the Nasdaq
Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering.
We will receive proceeds from the sale of the
units being registered in this offering. See “Use of Proceeds” for more information about how we will use the proceeds from
this offering.
An investment in our securities is speculative
and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described in this prospectus
before purchasing our securities. See “Risk Factors” beginning on page 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL, ACCURATE,
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Per Unit | Total | ||||||
Public offering price (1) | $ | $ | |||||
Underwriting discounts and commissions (2) | $ | $ | |||||
Proceeds, before expenses, to us | $ | $ | |||||
_____________________
(1) | The public offering price and underwriting discount and commissions in respect of each unit correspond to a public offering price per share of common stock of $ and a public offering price per accompanying warrant of $0.01. |
(2) | This table depicts broker-dealer commissions of 8.00% of the gross offering proceeds. See “Underwriting” on page 66 for additional disclosure regarding underwriting discounts and commissions, overallotments, and reimbursement of expenses. |
We have granted the underwriters an option
for a period of 45 days from the date of this prospectus to purchase up to an additional 275,000
shares
of common stock and/or warrants to purchase 275,000 shares of common stock
at the public offering price, less the underwriting
discount, solely to cover over-allotments, if any.
We anticipate that delivery of the securities
to purchasers in the offering will be made on or about [__], 2021.
Spartan Capital Securities LLC | Revere Securities LLC |
The date of this prospectus
is ____________, 2021.
TABLE OF CONTENTS
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AVAILABLE INFORMATION
This prospectus constitutes a part of a registration
statement on Form S-1 (together with all amendments and exhibits thereto, the “Registration Statement”) filed by us with the
Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”).
As permitted by the rules and regulations of the SEC, this prospectus omits certain information contained in the Registration Statement,
and reference is made to the Registration Statement and related exhibits for further information with respect to Mobiquity Technologies,
Inc. and the securities offered hereby. With regard to any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the SEC, in each instance reference is made to the copy of such document
so filed. Each such statement is qualified in its entirety by such reference.
You should rely only on information contained
in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We have not, and the underwriters
have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus
or in any free writing prospectus. Neither the delivery of this prospectus nor the sale of our securities means that the information contained
in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus
is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation
is unlawful or in any state or other jurisdiction where the offer is not permitted.
The information in
this prospectus is accurate only as of the date on the front cover of this prospectus and the information in any free writing prospectus
that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business,
financial condition, results of operations and prospects may have changed since those dates.
No person is authorized
in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any
matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information
or representation is given or made, such information or representation may not be relied upon as having been authorized by us.
Neither we nor any
of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction
where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any
restrictions relating to, this offering and the distribution of this prospectus.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. You should read this
entire prospectus and should consider, among other things, the matters set forth under “
Risk Factors
,”
“
Management’s Discussion and Analysis of Financial Condition and Results of Operations
”
and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus before making your investment
decision. This prospectus contains forward-looking statements and information relating to Mobiquity Technologies, Inc. See “
Cautionary Note Regarding Forward-Looking Statements
” on page 23.
Our Company
We are a next-generation marketing
and advertising technology and data intelligence company who operates through our proprietary software platforms in the programmatic advertising
space, which has grown to over a $100 billion industry in approximately the last decade. Programmatic advertising is the automated buying
and selling of digital advertising space using algorithms and software applications, in contrast to manual advertising which relies on
human interaction and negotiation between publishers and marketers.
Our Mission
Our mission is to help advertisers
target the delivery of their messages to the right person at the right time using our proprietary single-source end-to-end programmatic
advertising and data intelligence technology platforms more efficiently and effectively than a stacked multi-vendor system.
The
Programmatic
Advertising
and Data Markets
According to Statista, in 2020, global programmatic
advertising spending reached an estimated $129 billion, with spending expected to surpass $150 billion by the end of 2021. In today’s
competitive advertising landscape, marketers are increasingly using programmatic advertising and automation solutions to target audiences
based on user data. Statista has forecasted that the marketing automation software market is on track to reach $17 billion by
2025, almost a threefold increase as compared to 2019.
According
to
MarketsandMarkets
, the so-called big data market will grow to $229.4 billion by 2025. The proliferation of
data from businesses in every industrial category, and all company sizes, has created a massive amount
of data that is forcing many companies to adopt
solution to manage data consumption, analysis and distribution. This modern era
of data is essential for organizations to be efficient, stay competitive, and ultimately grow their
businesses.
Our
Opportunity
We perceived a problem in the advertising
technology industry as it has rapidly grown over the last 10 years. We viewed the technology in the industry to be highly fragmented and
thus inefficient. Many advertisers have had to mix multiple vendors’ different technologies, or bolt-on third-party technology to
legacy technology, in an effort to create an integrated solution. This has led to the lack of a central source to address problems with
an integrated system that arise.
We saw the opportunity to provide
end-to-end global programmatic advertising solutions, integrating the required components from a single source that work together because
they are built together, in an effective and cost-efficient way.
Our
Solutions
Programmatic Advertising Platform
Our advertising technology operating
system (or ATOS) platform is a single-vendor end-to-end solution that blends artificial intelligence (or AI) and machine learning (or
ML)-based optimization technology that automatically serves advertising and manages digital advertising campaigns. Our ATOS platform engages
with approximately 20 billion advertisement opportunities per day.
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As an
automated programmatic ecosystem, ATOS increases speed and performance, by providing dynamic technology that scales in real-time. It is
this proprietary cloud-based architecture that keeps costs down and allows us to pass along savings to our customers. Also, by offering
more of the features inherent in a digital advertising campaign, and removing the need for third-party integration of those features,
we believe that our ATOS platform can generally be 30-40% more time efficient, and generally 20-30% more cost efficient than other Demand-Side
Platforms (or DSPs). Our ATOS platform also decreases the effective cost basis for users by integrating all the necessary capabilities
at no additional cost: DSP and bidding technologies, AdCop™ Fraud Protection, rich media and ad serving, attribution, reporting
dashboard and DMP are all included.
Data Intelligence Platform
Our data intelligence platform provides precise
data and insights on consumer’s real-world behavior and trends for use in marketing and research. Our management believes, based
on its internal research in the industry, that we provide one of the most accurate and scaled solution for data collection and analysis,
utilizing multiple internally developed proprietary technologies.
We provide our data
intelligence platform to our customers on a managed services basis, and also offer a self-service alternative through our
MobiExchange product, which is a software-as-a-service (or SaaS) fee model. MobiExchange is a data-focused technology solution that
enables users to rapidly build actionable data and insights for its own use or for resale. MobiExchange’s
easy-to-use, self-service tools allow anyone to reduce the complex technical
and financial barriers typically associated with turning offline data, and other
business data, into actionable digital products and services. MobiExchange provides out-of-the
box private labeling, flexible branding, content management, user management, user communications, subscriptions,
payment, invoices, reporting, gateways to third party platforms, and help desk, among other things.
Our Revenue Sources
We target
brands, advertising agencies and other advertising technology companies as our audience for our ATOS platform products. Our sales and
marketing strategy is focused on providing a de-fragmented operating system that facilitates a considerably more efficient and effective
way for advertisers and publishers to transact with each other. Our goal is to become the programmatic display advertising industry standard
for small and medium sized advertisers. We generate revenue from our ATOS platform through three verticals:
· | managed services, where we handle all aspects of the programmatic display advertising campaign for an additional fee; |
· | seats, which allows a brand or agency to log into our ATOS platform and run their own campaigns at predetermined margins; and |
· | full white-label solutions, which allows our customers to license our ATOS technology as a SaaS for a fee to use on their own platform. |
Our data
intelligence revenue is driven by managed services for advertising agencies, brands, market researchers, university research
departments, healthcare, financial, sports, pet, civil planning, transportation and other data and
technology companies and our MobiExchange self-service product. Often-times sales to users of our data intelligence platform will
lead to those users using our ATOS platform as well.
Risk Factors
Investing in our securities involves risks.
You should carefully consider the risks described in the “
Risk Factors
” section beginning
on page 7 before making a decision to invest in our securities. If any of these risks actually occur, our business, financial
condition and/or results of operations would likely be materially adversely affected. In each case, the trading price of our
securities would likely decline, and you may lose all or part of your investment. The following is a summary of some of the
principal risks we face:
· | We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2020 and 2019. |
3 |
· | We cannot predict our future capital needs and we may not be able to secure additional financing. |
· | The Company’s financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic. |
· | The reliability of our product solutions is dependent on data from third-parties and the integrity and quality of that data. |
· | Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection. |
· | We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share. |
· | The market for programmatic advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected. |
· | If we fail to innovate and make the right investment decisions in our offerings and platform, we may not attract and retain advertisers and publishers and our revenue and results of operations may decline. |
· | We need to protect our intellectual property or our operating results may suffer. |
· | Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection. |
· | Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our operations. |
· | Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, and make payments on our indebtedness. |
· | We currently have identified significant deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements. |
· | There is a very limited public trading market for our common stock and; therefore, our investors may not be able to sell their shares and the price of our common stock may fluctuate substantially. Further, there is currently no trading market for our warrants and there can be no assurances that a trading market will develop. |
Corporate Information
We are based in New York and were incorporated
in New York on March 16, 1998.
Our principal executive offices are located at
35 Torrington Lane, Shoreham, NY 11786. Our telephone number is (516) 246-9422, and our website is www.mobiquitytechnologies.com.
Our website and the information contained therein,
or connected thereto, are not intended to be incorporated into this Registration Statement on Form S-1.
4 |
THE OFFERING
Units Being Offered by the Company | 1,833,334 units (or 2,108,334 units if the Underwriters’ exercise the over-allotment option to purchase additional units in full), each unit consisting of one share of common stock and a warrant to purchase one share of common stock. The Units will not be certificated and the shares of our common stock and the warrants are immediately separable at closing and will be issued and tradeable separately, but will be purchased together as a unit in this offering. |
Description of warrants included in units offered by us | The warrants included in the units are exercisable immediately, at an exercise price of $7.20 per share (equal to 120% of the public offering price per unit) and expire five years from the date of issuance. This prospectus also relates to the shares of common stock issuable upon exercise of the warrants. |
Over-allotment option | We have granted the Representative an option to purchase up to an additional 275,000 shares of common stock and/or warrants to purchase up to 275,000 shares of common stock (equal to 15% of the number of shares of common stock and warrants underlying the Units sold in the offering), from us in any combination thereof, at the public offering price less the underwriting discount and commissions solely to cover over-allotments, if any. The Representative may exercise this option in full or in part at any time and from time to time until 45 days after the date of this prospectus. |
Securities Being Offered by the Selling Shareholders | 281,250 shares of our common stock are being offered by the Selling Shareholders in a Resale Prospectus. |
Shares of Common Stock Outstanding Prior to the Offering | 3,685,689 shares of our common stock. |
Shares of Common Stock Outstanding Immediately Following this Offering | 5,519,023 shares of our common stock (or 5,794,023 shares if the underwriters exercise of their over-allotment option to purchase additional units in full), assuming no exercise of the warrants being offered in this offering. |
Offering Price Per Unit Being Offered by the Company | $6.00 per unit (based on an assumed public offering price per unit of $6.00). The actual offering price per unit will be as determined among the underwriters and us based on market conditions at the time of pricing and may be issued at a discount to the current market price of our common stock. Therefore, the recent market price used throughout this prospectus may not be indicative of the final offering price. |
Representative’s Warrant | The registration statement of which this prospectus is a part also registers for sale warrants (the “Representative’s Warrants”) to purchase 55,000 shares of common stock (3% of the shares of common stock sold in this offering) to the underwriters, as a portion of the underwriting compensation payable in connection with this offering. The Representative’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the five year period commencing 180 days following the effective date of the registration statement of which this prospectus is a part at an exercise price of $7.50 (125% of the public offering price of the units). Please see “Underwriting—Representative’s Warrants” for a description of these warrants. |
OTCQB Trading Symbol and Proposed NASDAQ Trading Symbol | Our shares of common stock trade on the OTCQB market under the symbol “MOBQ”. We have applied to list our common stock and warrants comprising of the units on the Nasdaq Capital Market under the symbols “MOBQ” and “MOBQW,” respectively. No assurance can be given that our application for a Nasdaq Capital Market listing will be approved. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering. |
We will not be issuing physical units in this offering. At closing, we will issue to investors only the shares of common stock and warrants underlying the units offered hereby. | |
Risk Factors | An investment in our securities is highly speculative and involves a high degree of risk. See “ Risk Factors ” beginning on page 7. |
Voting Rights | Shares of our common stock are entitled to one vote per share. There are no other classes of stock entitled to vote and, therefore, all holders of our common stock, including our officers and directors, are entitled to the same voting rights. |
Lock-Ups | We, our officers and directors, and certain holders of our capital stock will enter into lock-ups restricting the transfer of shares of, or relating to, our capital stock for 180 days after the date of this prospectus. |
5 |
Unless we indicate otherwise, all information
in this prospectus:
· | is based on 3,685,689 shares of common stock issued and outstanding as of November 19, 2021 ; |
· | assumes no exercise by the underwriters of their option to purchase up to an additional 275,000 shares of common stock and/or warrants to purchase up to 275,000 shares of common stock to cover over-allotments, if any ; |
· | excludes 304,930 shares of our common stock issuable upon exercise of outstanding stock options by the members of our board of directors and third parties at a weighted average exercise price of $46.16 per share as of November 19, 2021; |
· | excludes 904,136 shares of our common stock issuable upon exercise of outstanding warrants held by investors at a weighted average price of $47.68 per share as of November 19, 2021; |
· | excludes 2,108,334 shares of common stock issuable upon the full exercise of the warrants (included as part of the units and over-allotment option) offered hereby; |
· | excludes 55,000 shares of our common stock issuable upon the exercise of warrants we expect to grant to the underwriters in this offering at an exercise price of $7.50 per share as of November 19, 2021; |
· | excludes 923,833 shares of our common stock issuable upon conversion of outstanding convertible debt at a weighted average price of $4.97 as of November 19, 2021; |
· | excludes 1,100,000 shares of our common stock reserved for future grants pursuant to the exercise of options or other equity awards under our stock incentive plans, including 825,000 options which are being granted on the date of this Prospectus at an exercise price equal to 110% of the public offering price of this offering, and |
· | excludes 168,324 shares issuable upon conversion of outstanding Preferred Stock as of November 19, 2021. |
6 |
RISK FACTORS
An investment in our securities is highly speculative,
involves a high degree of risk and should be made only by investors who can afford a complete loss. You should carefully consider the
following risk factors, together with the other information in this prospectus, including our financial statements and the related notes,
before you decide to buy our securities. If any of the following risks actually occurs, then our business, financial condition or results
of operations could be materially adversely affected, the trading of our common stock and warrants could decline, and you may lose all
or part of your investment therein. In addition to the risks outlined below, risks and uncertainties not presently known to us or that
we currently consider immaterial may also impair our business operations. Potential risks and uncertainties that could affect our operating
results and financial condition include, without limitation, the following:
Risks Relating to our Business Operations
We have a history of operating losses and
our m
anagement has concluded that factors raise substantial doubt about our ability to continue
as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in
its
audit report for the fiscal years ended December 31, 2020 and 2019.
To date, we have not been profitable and have
incurred significant losses and cash flow deficits. For the fiscal years ended December 31, 2020 and 2019, we reported net losses of
$15,029,395 and $43,747,375, respectively, and negative cash flow from operating activities of $4,750,443 and $8,342,506, respectively.
For the nine months ended September 30, 2021, we reported a net loss of $9,000,988 and had negative cash flow from operating activities
of $5,060,535. As of September 30, 2021, we had an aggregate accumulated deficit of $194,904,072. Our operating losses for the past
several years are primarily attributable to the transformation of our company into an advertising technology corporation. We can provide
no assurances that our operations will generate consistent or predictable revenue or be profitable in the foreseeable future. Our m
anagement
has concluded that
our historical recurring losses from operations and negative cash flows from operations as well as our
dependence on private equity and other financings
raise substantial doubt about our ability
to continue as a going concern, and our auditor has included an explanatory paragraph relating to our ability to continue as a going
concern in
its audit report for the fiscal year ended December 31, 2020 and 2019.
Our consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment
of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational
commitments. In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired. Our
ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital
and financing, including funds to be raised in this offering. If our ability to generate cash flow from operations is delayed or reduced
and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering is successful.
For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
—Ability to Continue as a Going Concern.”
We cannot predict our future capital needs
and we may not be able to secure additional financing.
From January 2013 through September 2021, we raised
a total of over $40 million in private equity and debt financing to support our transformation from an integrated marketing company to
a technology company. Since we might be unable to generate recurring or predictable revenue or cash flow to fund our operations, we will
likely need to seek additional (perhaps substantial) equity or debt financing even following this offering to provide the capital required
to maintain or expand our operations. We expect that we will also need additional funding for developing products and services, increasing
our sales and marketing capabilities, and acquiring complementary companies, technologies and assets (there being no such acquisitions
which we have identified or are pursuing as of the date of this prospectus), as well as for working capital requirements and other operating
and general corporate purposes. We cannot predict our future capital needs with precision, and we may not be able to secure additional
financing on terms satisfactory to us, if at all, which could lead to termination of our business.
7 |
If we elect to raise additional funds or additional
funds are required, we may seek to raise funds from time to time through public or private equity offerings, debt financings or other
financing alternatives. Additional equity or debt financing may not be available on acceptable terms, if at all. If we are unable to raise
additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing operational development and
commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed.
If we raise additional funds by issuing equity
securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations
and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such
as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration
and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams
or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working
capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects
could be materially and adversely affected, and we may be unable to continue our operations. Failure to secure additional financing on
favorable terms could have severe adverse consequences to us.
The Company’s financial condition and
results of operations have been and may continue to be adversely affected by the COVID-19 pandemic.
Since March 2020, COVID -19 has caused a material
and substantial adverse impact on our general economy and our business operations. It has caused there to be a substantial decrease in
our sales, cancellations of purchase orders and has resulted in accounts receivables not being timely paid as anticipated. Further, it
has caused us to have concerns about our ability to meet our obligations as they become due and payable. In this respect, our business
is directly dependent upon and correlates closely to the marketing levels and ongoing business activities of our existing clients. If
material adverse developments in domestic and global economic and market conditions adversely affect our clients’ businesses, such
as COVID-19, our business and results of operations could (and in the case of COVID-19) equally suffer. Our results of operations are
affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the
industries and markets that they serve. COVID-19 future widespread economic slowdowns in any of these markets, particularly in the United
States, may negatively affect the businesses, purchasing decisions and spending of our clients and prospective clients, and payment of
accounts receivable due us, which could result in reductions in our existing business as well as our new business development and difficulties
in meeting our cash obligations as they become due. In the event of continued widespread economic downturn caused by COVID-19, we will
likely continue to experience a reduction in projects, longer sales and collection cycles, deferral or delay of purchase commitments for
our data products, processing functionality, software systems and services, and increased price competition, all of which could substantially
adversely affect revenue and our ability to remain a going concern.
In the event we remain a going concern, the impacts
of the global emergence of Coronavirus disease (COVID-19) on our business, sources of revenues and then general economy, are currently
not fully known. We are conducting business as usual with some modifications to employee work locations, and cancellation of certain marketing
events, among other modifications. We lost a purchase order in excess of one million dollars with major US sports organization. We have
observed other companies taking precautionary and preemptive actions to address COVID-19 and companies may take further actions that alter
their normal business operations. We will continue to actively monitor the situation and may take further actions that alter our business
operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees,
customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may
have on our business, including the effects on our customers and prospects, although we do anticipate it to continue to negatively impact
our financial results during fiscal years 2021 and 2022.
Forecasts of our revenue is difficult
.
When purchasing our products and services, our
clients and prospects are often faced with a significant commitment of capital, the need to integrate new software and/or hardware platforms
and other changes in company-wide operational procedures, all of which result in cautious deliberation and evaluation by prospective clients,
longer sales cycles and delays in completing transactions. Additional delays result from the significant up-front expenses and substantial
time, effort and other resources necessary for our clients to implement our solutions. For example, depending on the size of a prospective
client’s business and its needs, a sales cycle can range from two weeks to 12 months. Because of these longer sales cycles, revenues
and operating results may vary significantly from period to period. As a result, it is often difficult to accurately forecast our revenues
for any fiscal period as it is not always possible for us to predict the fiscal period in which sales will actually be completed. This
difficulty in predicting revenue, combined with the revenue fluctuations we may experience from period to period, can adversely affect
and cause substantial fluctuations in our stock price.
8 |
The reliability of our product solutions
is dependent on data from third-parties and the integrity and quality of that data
.
Much of the data that we use is licensed from third-party
data suppliers, and we are dependent upon our ability to obtain necessary data licenses on commercially reasonable terms. We could suffer
material adverse consequences if our data suppliers were to withhold their data from us. For example, data suppliers could withhold their
data from us if there is a competitive reason to do so; if we breach our contract with a supplier; if they are acquired by one of our
competitors; if legislation is passed restricting the use or dissemination of the data they provide; or if judicial interpretations are
issued restricting use of such data. Additionally, we could terminate relationships with our data suppliers if they fail to adhere to
our data quality standards. If a substantial number of data suppliers were to withdraw or withhold their data from us, or if we sever
ties with our data suppliers based on their inability to meet our data standards, our ability to provide products and services to our
clients could be materially adversely impacted, which could result in decreased revenues.
The reliability of our solutions depends upon the
integrity and quality of the data in our database. A failure in the integrity or a reduction in the quality of our data could cause a
loss of customer confidence in our solutions, resulting in harm to our brand, loss of revenue and exposure to legal claims. We may experience
an increase in risks to the integrity of our database and quality of our data as we move toward real-time, non-identifiable, consumer-powered
data through our products. We must continue to invest in our database to improve and maintain the quality, timeliness and coverage of
the data if we are to maintain our competitive position. Failure to do so could result in a material adverse effect on our business, growth
and revenue prospects.
Our business practices with respect to data
and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements
or industry standards relating to consumer privacy, data protection and consumer protection.
Federal, state and international laws and regulations
govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations,
self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating
to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner
that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot assure you that our
practices have complied, comply, or will comply fully with all such laws, regulations, requirements and obligations. Any failure, or perceived
failure, by us to comply with federal, state or international laws or regulations, including laws and regulations regulating privacy,
data security, marketing communications or consumer protection, or other policies, self-regulatory requirements or legal obligations could
result in harm to our reputation, a loss in business, and proceedings or actions against us by governmental entities, consumers, retailers
or others. We may also be contractually liable to indemnify and hold harmless performance marketing networks or other third parties from
the costs or consequences of noncompliance with any laws, regulations, self-regulatory requirements or other legal obligations relating
to privacy, data protection and consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle
as part of operating our business. Any such proceeding or action, and any related indemnification obligation, could hurt our reputation,
force us to incur significant expenses in defense of these proceedings, distract our management, increase our costs of doing business
and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition of monetary liability. Furthermore,
the costs of compliance with, and other burdens imposed by, the data and privacy laws, regulations, standards and policies that are applicable
to the businesses of our clients may limit the use and adoption of, and reduce the overall demand for, our products.
A significant breach of the confidentiality of
the information we hold or of the security of our or our customers’, suppliers’, or other partners’ computer systems
could be detrimental to our business, reputation and results of operations. Our business requires the storage, transmission and utilization
of data. Although we have security and associated procedures, our databases may be subject to unauthorized access by third parties. Such
third parties could attempt to gain entry to our systems for the purpose of stealing data or disrupting the systems. We believe we have
taken appropriate measures to protect our systems from intrusion, but we cannot be certain that advances in criminal capabilities, discovery
of new vulnerabilities in our systems and attempts to exploit those vulnerabilities, physical system or facility break-ins and data thefts
or other developments will not compromise or breach the technology protecting our systems and the information we possess. Furthermore,
we face increasing cyber security risks as we receive and collect data from new sources, and as we and our customers continue to develop
and operate in cloud-based information technology environments. In the event that our protection efforts are unsuccessful, and we experience
an unauthorized disclosure of confidential information or the security of such information or our systems are compromised, we could suffer
substantial harm. Any breach could result in one or more third parties obtaining unauthorized access to our customers’ data or our
data, including personally identifiable information, intellectual property and other confidential business information. Such a security
breach could result in operational disruptions that impair our ability to meet our clients’ requirements, which could result in
decreased revenues. Also, whether there is an actual or a perceived breach of our security, our reputation could suffer irreparable harm,
causing our current and prospective clients to reject our products and services in the future and deterring data suppliers from supplying
us data. Further, we could be forced to expend significant resources in response to a security breach, including repairing system damage,
increasing cyber security protection costs by deploying additional personnel and protection technologies, and litigating and resolving
legal claims, all of which could divert the attention of our management and key personnel away from our business operations. In any event,
a significant security breach could materially harm our business, financial condition and operating results.
9 |
Significant system disruptions, loss of data
center capacity or interruption of telecommunication links could adversely affect our business and results of operations.
Our product platforms are hosted and managed
on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data technology. Significant
system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business, results
of operations and financial condition. Our business is heavily dependent upon highly complex data processing capability. The ability or
our platform hosts and managers to protect these data centers against damage or interruption from fire, flood, tornadoes, power loss,
telecommunications or equipment failure or other disasters is beyond our control and is critical to our ability to succeed.
We rely on information technology to operate
our business and maintain competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.
We depend on the use of information technologies
and systems. As our operations grow in size and scope, we will be required to continuously improve and upgrade our systems and infrastructure
while maintaining or improving the reliability and integrity of our infrastructure. Our future success also depends on our ability to
adapt our systems and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance,
features and reliability of our solutions in response to competitive services and product offerings. The emergence of alternative platforms
will require new investment in technology. New developments in other areas, such as cloud computing, could also make it easier for competition
to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems or replace
or introduce new technologies and systems as quickly as we would like or in a cost-effective manner.
Our technology and associated business processes
may contain undetected errors, which could limit our ability to provide our services and diminish the attractiveness of our offerings.
Our technology may contain undetected errors, defects
or bugs. As a result, our customers or end users may discover errors or defects in our technology or the systems incorporating our technology
may not operate as expected. We may discover significant errors or defects in the future that we may not be able to fix. Our inability
to fix any of those errors could limit our ability to provide our solution, impair the reputation of our brand and diminish the attractiveness
of our product offerings to our customers. In addition, we may utilize third party technology or components in our products, and
we rely on those third parties to provide support services to us. Failure of those third parties to provide necessary support services
could materially adversely impact our business.
We need to protect our intellectual property
or our operating results may suffer
.
Third parties may infringe our intellectual property
and we may suffer competitive injury or expend significant resources enforcing our rights. As our business is focused on data-driven results
and analytics, we rely heavily on proprietary information technology. Our proprietary portfolio consists of various intellectual property
including source code, trade secrets, and know-how. The extent to which such rights can be protected is substantially based on federal,
state and common law rights as well as contractual restrictions. The steps we have taken to protect our intellectual property may
not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. If
we do not enforce our intellectual property rights vigorously and successfully, our competitive position may suffer which could harm our
operating results.
We could incur substantial costs and disruption
to our business as a result of any claim of infringement of another party’s intellectual property rights, which could harm
our business and operating results.
From time to time, third parties may claim that
one or more of our products or services infringe their intellectual property rights. We analyze and take action in response to such claims
on a case-by-case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming
due to the complexity of our technology and the uncertainty of intellectual property litigation, which could divert the attention of our
management and key personnel away from our business operations. A claim of intellectual property infringement could force us to enter
into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, or could subject us to
significant damages or to an injunction against development and sale of certain of our products or services.
10 |
We face intense and growing competition,
which could result in reduced sales and reduced operating margins, and limit our market share.
We compete in the data, marketing and research
business and in all other facets of our business against small, medium and large companies throughout the United States. Some examples
include companies such as LiveRamp, Beeswax and TradeDesk. If we are unable to successfully compete for new business our revenue growth
and operating margins may decline. The market for our advertising and marketing technology operating system platform is competitive. We
believe that our competitors’ product offerings in that our competitor’s products do not provide the end-to-end solutions
our product solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions. However, barriers
to entry in our markets are relatively low. With the introduction of new technologies and market entrants, we expect competition to intensify
in the future. Some of these competitors may be in a better position to develop new products and strategies that more quickly and effectively
respond to changes in customer requirements in our markets. The introduction of competent, competitive products, pricing strategies or
other technologies by our competitors that are superior to or that achieve greater market acceptance than our products and services could
adversely affect our business. Our failure to meet a client’s expectations in any type of contract may result in an unprofitable
engagement, which could adversely affect our operating results and result in future rejection of our products and services by current
and prospective clients. Some of our principal competitors offer their products at a lower price, which may result in pricing pressures.
These pricing pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our product
and service offerings to achieve or maintain more widespread market acceptance.
Many of our competitors are substantially larger
than we are and have significantly greater financial, technical and marketing resources, and established direct and indirect channels
of distribution. As a result, they are able to devote greater resources to the development, promotion and sale of their products than
we can.
We can provide no assurance that our business
will be able to maintain a competitive technology advantage in the future.
Our ability to generate revenues is substantially
based upon our proprietary intellectual property that we own and protect through trade secrets and agreements with our employees to maintain
ownership of any improvements to our intellectual property. Our ability to generate revenues now and in the future is based upon maintaining
a competitive technology advantage over our competition. We can provide no assurances that we will be able to maintain a competitive technology
advantage in the future over our competitors, many of whom have significantly more experience, more extensive infrastructure and are better
capitalized than us.
No assurances can be given that we will be
able to keep up with a rapidly changing business information market.
Consumer needs and the business information industry
as a whole are in a constant state of change. Our ability to continually improve our current processes and products in response to these
changes and to develop new products and services to meet those needs are essential in maintaining our competitive position and meeting
the increasingly sophisticated requirements of our customers. If we fail to enhance our current products and services or fail to develop
new products in light of emerging industry standards and information requirements, we could lose customers to current or future competitors,
which could result in impairment of our growth prospects and revenues.
The market for programmatic advertising campaigns
is relatively new and evolving. If this market develops slower or differently than we expect, our business, growth prospects and financial
condition would be adversely affected.
A substantial portion of our revenue has been derived
from customers that programmatically purchase and sell advertising inventory through our platform. We expect that spending on programmatic
ad buying and selling will continue to a significant source of revenue for the foreseeable future, and that our revenue growth will largely
depend on increasing spend through our platform. The market for programmatic ad buying is an emerging market, and our current and potential
customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing our growth potential. Because our
industry is relatively new, we will encounter risks and difficulties frequently encountered by early-stage companies in similarly rapidly
evolving industries, including the need to:
· | Maintain our reputation and build trust with advertisers and digital media property owners; |
11 |
· | Offer competitive pricing to publishers, advertisers, and digital media agencies; |
· | Maintain quality and expand quantity of our advertising inventory; |
· | Continue to develop, launch and upgrade the technologies that enable us to provide our solutions; |
· | Respond to evolving government regulations relating to the internet, telecommunications, mobile, privacy, marketing and advertising aspects of our business; |
· | Identify, attract, retain and motivate qualified personnel; and |
· | Cost-effectively manage our operations, including our international operations. |
If the market for programmatic ad buying deteriorates
or develops more slowly than we expect, it could reduce demand for our platform, and our business, growth prospects and financial condition
would be adversely affected.
In addition, revenue may not necessarily grow at
the same rate as spend on our platform. Growth in spend may outpace growth in our revenue as the market for programmatic advertising matures
due to a number of factors including quantity discounts and product, media, customer and channel mix shifts. A significant change in revenue
as a percentage of spend could reflect an adverse change in our business and growth prospectus. In addition, any such fluctuations, even
if they reflect our strategic decisions, could cause our performance to fall below the expectations of securities analysts and investors,
and adversely affect the price of our common stock.
Our failure to maintain and grow the customer
base on our platform may negatively impact our revenue and business.
To sustain or increase our revenue, we must regularly
add both new advertiser customers and publishers, while simultaneously keeping existing customers to maintain or increase the amount of
advertising inventory purchased through our platform and adopt new features and functionalities that we add to our platform. If our competitors
introduce lower cost or differentiated offerings that compete with or are perceived to compete with ours, our ability to sell access to
our platform to new or existing customers could be impaired. Our agreements with our customers allow them to change the amount of spending
on our platform or terminate our services with limited notice. Our customers typically have relationships with different providers and
there is limited cost to moving budgets to our competitors. As a result, we may have limited visibility as to our future advertising revenue
streams. We cannot assure you that our customers will continue to use our platform or that we will be able to replace, in a timely or
effective manner, departing customers with new customers that generate comparable revenue. If a major customer representing a significant
portion of our business decides to materially reduce its use of our platform or to cease using our platform altogether, it is possible
that our revenue could be significantly reduced.
We rely substantially on a limited number
customers for a significant percentage of our sales.
During the nine-month period ending on September
30, 2021, sales of our products to four customers generated 35.93% of our revenues. Our contracts with our customers generally do
not obligate them to a specified term and they can generally terminate their relationship with us at any time with a minimal amount of
notice. If we lose any of our customers, or any of them decide to scale back on purchases of our products, it will have a material adverse
effect on our financial condition and prospects. Therefore, we must engage in continual sales efforts to maintain revenue, sustain our
customer relationships and expand our client base or our operating results will suffer. If a significant client fails to renew a contract
or renews the contract on terms less favorable to us than before, our business could be negatively impacted if additional business is
not obtained to replace or supplement that which was lost. We require financial resources to expand our internal and external sales capabilities,
and plan to use a portion of the net proceeds from the offering of our shares under this prospectus for such purpose. We cannot assure
that we will be able to sustain our customer relationships and expand our client base. The loss of any of our current customers or our
inability to expand our customer base will have a material adverse effect on our business plans and prospects.
12 |
If we fail to innovate and make the right
investment decisions in our offerings and platform, we may not attract and retain advertisers and publishers and our revenue and results
of operations may decline.
Our industry is subject to rapid and frequent changes
in technology, evolving customer needs and the frequent introduction by our competitors of new and enhanced offerings. We must constantly
make investment decisions regarding our offerings and technology to meet customer demand and evolving industry standards. We may make
wrong decisions regarding these investments. If new or existing competitors have more attractive offerings or functionalities, we may
lose customers or customers may decrease their use of our platform. New customer demands, superior competitive offerings or new industry
standards could require us to make unanticipated and costly changes to our platform or business model. If we fail to adapt to our rapidly
changing industry or to evolving customer needs, demand for our platform could decrease and our business, financial condition and operating
results may be adversely affected.
We may not be able to integrate, maintain
and enhance our advertising solutions to keep pace with technological and market developments.
The market for digital video advertising solutions
is characterized by rapid technological change, evolving industry standards and frequent introductions of new products and services. To
keep pace with technological developments, satisfy increasing publisher and advertiser requirements, maintain the attractiveness and competitiveness
of our advertising solutions and ensure compatibility with evolving industry standards and protocols, we will need to anticipate and respond
to varying product lifecycles, regularly enhance our current advertising solutions and develop and introduce new solutions and functionality
on a timely basis. This requires significant investment of financial and other resources. For example, we will need to invest significant
resources into expanding and developing our platforms in order to maintain a comprehensive solution. Ad exchanges and other technological
developments may displace us or introduce an additional intermediate layer between us and our customers and digital media properties that
could impair our relationships with those customers.
If we fail to detect advertising fraud, we
could harm our reputation and hurt our ability to execute our business plan.
As we are in the business of providing services
to publishers, advertisers and agencies, we must deliver effective digital advertising campaigns. Despite our efforts to implement fraud
protection techniques in our platforms, some of advertising and agency campaigns may experience fraudulent and other invalid impressions,
clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by computers designed to simulate
human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given digital advertising
campaign and could harm our reputation. It may be difficult for us to detect fraudulent or malicious activity because we do not own content
and rely in part on our digital media properties
to control such activity. Industry self-regulatory bodies, the U.S.
Federal Trade Commission and certain influential members of Congress have increased their scrutiny and awareness of, and have taken recent
actions to address, advertising fraud and other malicious activity. If we fail to detect or prevent fraudulent or other malicious activity,
the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels
of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund or future credit demands
or withdrawal of future business.
The loss of advertisers and publishers as
customers could significantly harm our business, operating results and financial condition.
Our customer base consists primarily of advertisers
and publishers. We do not have exclusive relationships with advertising agencies, companies that are advertisers, or publishers, such
that we largely depend on agencies to work with us as they embark on advertising campaigns for advertisers. The loss of agencies as customers
and referral sources could significantly harm our business, operating results and financial condition. If we fail to maintain satisfactory
relationships with an advertising agency, we risk losing business from the advertisers represented by that agency.
Furthermore, advertisers and publishers may change
advertising agencies. If an advertiser switches from an agency that utilizes our platform to one that does not, we will lose revenue from
that advertiser. In addition, some advertising agencies have their own relationships with publishers that are different that our relationships,
such that they might directly connect advertisers with such publishers. Our business may suffer to the extent that advertising agencies
and inventory suppliers purchase and sell advertising inventory directly from one another or through intermediaries other than us.
13 |
Our sales efforts with advertisers and publishers
require significant time and expense.
Attracting new advertisers and publishers requires
substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current
relationships.
Our solutions, including our programmatic solutions,
and our business model often requires us to spend substantial time and effort educating our own sales force and potential advertisers,
advertising agencies, supply side platforms and digital media properties about our offerings, including providing demonstrations and comparisons
against other available solutions. This process is costly and time-consuming. If we are not successful in targeting, supporting and streamlining
our sales processes, our ability to grow our business may be adversely affected.
Changes in consumer sentiment or laws, rules
or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate
net revenues and could adversely affect our ability to collect data on consumer shopping behavior.
The collection and use of electronic information
about user is an important element of our data intelligence technology and solutions. However, consumers may become increasingly resistant
to the collection, use and sharing of information, including information used to deliver advertising and to attribute credit to publishers
in performance marketing programs, and take steps to prevent such collection, use and sharing of information. For example, consumer complaints
and/or lawsuits regarding advertising or other tracking technologies in general and our practices specifically could adversely impact
our business. In addition to this change in consumer preferences, if retailers or brands perceive significant negative consumer reaction
to targeted advertising or the tracking of consumers’ activities, they may determine that such advertising or tracking has the potential
to negatively impact their brand. In that case, advertisers may limit or stop the use of our solutions, and our operating results and
financial condition would be adversely affected.
Government regulation of the Internet, e-commerce
and m-commerce is evolving, and unfavorable changes or failure by us to comply with these laws and regulations could substantially harm
our business and results of operations.
We are subject to general business regulations
and laws as well as regulations and laws specifically governing the Internet, e-commerce and m-commerce in a number of jurisdictions around
the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services.
These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights,
distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations
governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority
of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised
by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing
the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another
and may conflict with other rules or our practices. We cannot assure you that our practices have complied, comply or will comply fully
with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result
in damage to our reputation, a loss in business, and proceedings or actions against us by governmental entities or others. Any such proceeding
or action could hurt our reputation, force us to spend significant resources in defense of these proceedings, distract our management,
increase our costs of doing business, and cause consumers and retailers to decrease their use of our marketplace, and may result in the
imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences
of noncompliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek to
censor content available on our websites and mobile applications or may even attempt to completely block access to our marketplace. Adverse
legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or
in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected and we
may not be able to maintain or grow our net revenues as anticipated.
14 |
We may be required to invest significant
monies upfront in capital intensive project(s) which we may be unable to recover
.
Failure to recover significant, up-front capital
investments required by certain client contracts could be harmful to the Company’s financial condition and operating results. Certain
of our client contracts require significant investment in the early stages, which we expect to recover through billings over the life
of the contract. These contracts may involve the construction of new computer systems and communications networks or the development and
deployment of new technologies. Substantial performance risk exists in each contract with these characteristics, and some or all elements
of service delivery under these contracts are dependent upon successful completion of the development, construction and deployment phases.
Failure to successfully meet our contractual requirements under these contracts over their life increases the possibility that we may
not recover our capital investments in these contracts. Failure to recover our capital investments could be detrimental to the particular
engagement as well as our operating results.
We are subject to payment-related risks and,
if our customers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.
We may be involved in disputes with agencies and
their advertisers over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our
platform. If we are unable to collect or make adjustments to bills to customers, we could incur write-offs for bad debt, which could have
a material adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed
reserves for such contingencies and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a
materially negative effect on our business, financial condition and operating results. Even if we are not paid by our customers on time
or at all, we are still obligated to pay for the advertising inventory we have purchased for the advertising campaign, and as a consequence,
our results of operations and financial condition would be adversely impacted.
If we default on our credit obligations,
our operations may be interrupted and our business and financial results could be adversely affected.
Publishers extend us credit terms for the purchase
of advertising inventory. We currently have outstanding payables to existing publishers. If we are unable to pay our publishers in a timely
fashion, they may elect to no longer sell us inventory to provide for sale to advertisers. Also, it may be necessary for us to incur additional
indebtedness to maintain operations of the Company. If we default on our credit obligations, our lenders and debt financing holders may,
among other things:
· | require repayment of any outstanding obligations or amounts drawn on our credit facilities; |
· | terminate our credit; |
· | stop delivery of ordered equipment; |
· | discontinue our ability to acquire inventory that is sold to advertisers; |
· | require us to accrue interest at higher rates; or |
· | require us to pay significant damages. |
If some or all of these events were to occur, our
operations may be interrupted and our ability to fund our operations or obligations, as well as our business, financial results, and financial
condition, could be adversely affected.
15 |
Our failure to recruit or the loss of management
and highly trained and qualified personnel could adversely affect our operations.
Our future success depends in large part on our
current senior management team and our ability to attract and retain additional high-quality management and operating personnel. Our senior
management team’s in-depth knowledge of and deep relationships with the participants in our industry are extremely valuable to us.
Our business also requires skilled technical and marketing personnel, who are in high demand and are often subject to competing offers.
Our failure to recruit and retain qualified personnel could hinder our ability to successfully develop and operate our business, which
could have a material adverse effect on our financial position and operating results.
The complexity of our data products, processing
functionality, software systems and services require highly trained professionals to operate, maintain, improve and repair them. While
we presently have a sophisticated, dedicated and experienced team of associates who have a deep understanding of our business, some of
whom have been with Mobiquity for years, the labor market for these individuals has historically been, and is currently, very competitive
due to the limited number of people available with the necessary technical skills and understanding, compensation strategies, general
economic conditions and various other factors. As the business information and marketing industries continue to become more technologically
advanced, we anticipate increased competition for qualified personnel. The loss of the services of highly trained personnel like the Company’s
current team of associates, or the inability to recruit and retain additional, qualified associates, could have a material adverse effect
on our business, financial position or operating results.
Our substantial amount of indebtedness may
adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on
our indebtedness.
Our substantial level of indebtedness increases
the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due
with respect to our indebtedness. Our indebtedness could have other important consequences to you as a shareholder. For example, it could:
· | make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments could result in an event of default under our debt financing agreements; |
· | make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
· | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes; |
· | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
· | place us at a competitive disadvantage compared to our competitors that have less debt; and |
· | limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes. |
Any of the above listed factors could materially
adversely affect our business, financial condition and results of operations.
Our subsidiary Advangelists, LLC is party
to litigation, the outcome of which could have a material adverse effect on us if it is not settled on terms favorable to us, or at all
and the plaintiff is successful in its claims.
In July 2020, Fyber Monetization, an Israeli company
in the business of digital advertising, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in the
Magistrate’s Court in Tel Aviv, Israel. In its statement of claim, Fyber alleged that Advangelists owes Fyber license fees of $584,945
invoiced in June through November 3, of 2019 under a February 1, 2017 license agreement for the use of Fyber’s RTB technology and
e-commerce platform with connects digital advertising media buyers and media sellers. Advangelists has disputed the claims and is defending
this lawsuit. Due to uncertainties inherent in litigation, we cannot predict the outcome on this action with any certainty. If we do not
settle this action on terms favorable to us, or at all and Fyber is successful in its claim against Advangelists, the obligation to pay
substantial monetary damages could have a material adverse effect on our financial condition and funds available to us pursue our business
plans.
16 |
Risks Relating to An Investment in Our Securities
Once our common
stock and warrants are listed on the Nasdaq Capital Market, there can be no assurance that we will be able to comply with Nasdaq Capital
Market’s continued listing standards.
Our common stock is thinly
traded. Our common stock currently trade on the over-the-counter OTCQB market. As a condition to consummating this offering, our common
stock and warrants offered in this prospectus must be listed on the Nasdaq Capital Market or another national securities exchange. Accordingly,
in connection with the filing of the registration statement of which this prospectus forms a part, we intend to apply to list our common
stock and warrants (forming part of the units offered hereby) on the Nasdaq Capital Market under the symbols “MOBQ” and “MOBQW,”
respectively. Assuming that our common stock and warrants are listed and after the consummation of this offering, there can be no assurance
any broker will be interested in trading our stock and warrants. Therefore, it may be difficult to sell your shares of common stock or
warrants if you desire or need to sell them. Our underwriters are not obligated to make a market in our common stock or warrants, and
even if it makes a market, it can discontinue market making at any time without notice. Neither we nor the underwriters can provide any
assurance that an active and liquid trading market in our common stock will develop or, if developed, that such market will continue.
Once our common stock
and warrants (forming part of the units offered hereby) are approved for listing on the Nasdaq Capital Market, there is no guarantee
that we will be able to maintain such listing for any period of time by perpetually satisfying Nasdaq Capital Market’s continued
listing requirements. Our failure to continue to meet these requirements may result in our common stock being delisted from Nasdaq Capital
Market.
The market
price of our common stock and warrants (forming part of the units offered hereby) is likely to be highly volatile because of several
factors, including a limited public float.
The
market price of our common stock has been volatile in the past and the market price of our common stock and our warrants is likely to
be highly volatile in the future. You may not be able to resell shares of our common stock or our warrants (forming part of the units
offered hereby) following periods of volatility because of the market’s adverse reaction to volatility.
Other
factors that could cause such volatility may include, among other things:
· | actual or anticipated fluctuations in our operating results; | |
· | the absence of securities analysts covering us and distributing research and recommendations about us; | |
· | we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held; | |
· | overall stock market fluctuations; | |
· | announcements concerning our business or those of our competitors; | |
· | actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms; | |
· | conditions or trends in the industry; | |
· | litigation; | |
· | changes in market valuations of other similar companies; | |
· | future sales of common stock; | |
· | departure of key personnel or failure to hire key personnel; and | |
· | general market conditions. |
Any of these factors could
have a significant and adverse impact on the market price of our common stock and/or warrants. In addition, the stock market in general
has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance
of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and/or warrants,
regardless of our actual operating performance.
Our future sales of common stock by management
and other stockholders may have an adverse effect on the then prevailing market price of our common stock.
In the event a public market for our common stock
is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities
in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has
satisfied a six-month holding period in a fully reporting company under the Securities Exchange Act of 1934, as amended, may, sell their
restricted common stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for
there to be adequate common public information. Affiliated persons may also sell their common shares held for at least six months, but
affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations.
Non-affiliated persons who hold their common shares for at least one year will be able to sell their common stock without the need for
there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common
stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock.
17 |
A significant portion of our total outstanding
shares are eligible to be sold into the market in the near future, which could cause the market price of our common shares to drop significantly,
even if our business is doing well.
In this offering, we have registered 1,833,334
shares (as well as 281,250 shares for selling shareholders for resale by them), which is a substantial increase to approximately 1,410,000
shares of common stock free trading before this offering for a total of approximately 3,243,334 shares freely tradable after the Offering
(excluding shares held by Selling Shareholders). Any increase in freely trading shares, or the perception that such shares will or
could come onto the market could have an adverse effect on the trading price of the stock. No prediction can be made as to the effect,
if any, that sales of these shares, or the availability of such shares for sale, will have on the market prices prevailing from time
to time. Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market may adversely affect
prevailing market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities
or impair our shareholders’ ability to sell on the open market.
Additionally, the substantial increase of our
shares that are eligible to be sold into the market in the near future could cause the market price of our common shares to drop significantly,
even if our business is doing well.
Our common stock
and
our warrants (forming part of the units offered hereby)
may be subject to the “penny stock” rules in the future. It
may be more difficult to resell securities classified as “penny stock.”
Our common stock and warrants may be subject
to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future.
While our common stock and warrants will not be considered “penny stock” following this offering since they will be listed
on the Nasdaq Capital Market, if we are unable to maintain that listing and our common stock and warrants are no longer listed on the
Nasdaq Capital Market, unless we maintain a per-share price above $5.00, our common stock and warrants will become “penny stock.”
These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to
persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers
must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior
to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information
about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly
account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination
that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.
Legal remedies available to an investor in “penny
stocks” may include the following:
· | If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment. |
· | If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages. |
18 |
These requirements may have the effect of reducing
the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional
burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities,
which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers
to sell our common stock or our warrants and may affect your ability to resell our common stock and our warrants.
Many brokerage firms will discourage or refrain
from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual
investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.
For these reasons, penny stocks may have a limited
market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock or our warrants will not
be classified as a “penny stock” in the future.
We do not intend to pay dividends for the
foreseeable future and thus you must rely on stock appreciation for any return on your investment.
We do not anticipate paying cash dividends on our
common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available
to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future
dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations,
cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant.
There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to
the amount of any such dividend. As a result, you must rely on stock appreciation and a liquid trading market for any return on your investment.
If an active and liquid trading market does not develop, you may be unable to sell your shares of common stock at or above the price in
this offering at the time you would like to sell.
Our principal stockholders, directors and
executive officers have a material level of control over us, which could delay or prevent a change in our corporate control favored by
our other stockholders.
As of the date of this Prospectus, our principal
stockholders, directors and executive officers beneficially own, in the aggregate, more than 50% of our outstanding common stock. The
interests of our current directors and executive officers may differ from the interests of other stockholders. As a result, these current
directors and officers could have the ability to exercise material influence over all corporate actions requiring stockholder approval,
irrespective of how our other stockholders may vote, including the following actions:
· | approval of certain mergers and other significant corporate transactions, including a sale of substantially all of our assets and material financing transactions; |
· | election of directors; |
· | adoption of or amendments to stock option plans; |
· | amendment of charter documents; or |
· | issuance of “blank check” preferred stock. |
Our certificate of incorporation grants our
board of directors the authority to issue a new series of preferred stock without further approval by our shareholders, which could adversely
affect the rights of the holders of our common shares.
Our board of directors has the power to fix and
determine the relative rights and preferences of preferred stock. Our board of directors also has the power to issue preferred stock without
further shareholder approval, subject to applicable listing regulations. As a result, our board of directors could authorize the issuance
of new series of preferred stock that would grant to holders thereof certain rights in preference to the rights of our common stock holders
to:
19 |
· | our assets upon liquidation; |
· | receive dividend payments ahead of holders of common shares; |
· | the redemption of the shares, together with a premium, prior to the redemption of our common shares; |
· | vote to approve matters as a separate class or have more votes per share relative to shares of common stock. |
In addition, our board of directors could authorize
the issuance of new series of preferred stock that is convertible into our common shares, or may also authorize the sale of additional
shares of authorized common stock, which could decrease the relative voting power of our common shares or result in dilution to our existing
shareholders.
If you invest in our securities in this offering,
your ownership will be immediately diluted.
If you invest in our securities in this offering,
your ownership interest will be immediately diluted to the extent of the difference between the assumed public offering price per share
of common stock and the as adjusted net tangible book value per share after giving effect to this offering.
The net tangible book value (deficit) of our
Company as of September 30, 2021 was $(6,601,083). The proforma net tangible book value (deficit) of our Company (see Capitalization)
as of September 30, 2021 was $(6,512,703), after giving effect on a pro forma basis to reflect the (i) conversion of a note in the
principal amount of $89,100 in the fourth quarter through November 15, 2021 into 13,103 common shares and (ii) the issuance of 2,500
common shares as consulting services, as if such transactions had occurred on September 30, 2021. After deducting the book value of $5,803,909
attributable to the Series AAA Preferred Stock and Series E Preferred Stock, the net tangible book value (deficit) of our Common Stock
on September 30, 2021 was $(12,405,712) or approximately $(3.37) per share of common stock. Net tangible book value (deficit) per common
share is determined by dividing the net tangible book value of our Company (total tangible assets less total liabilities less book value
of Preferred Stock) by the number of outstanding shares of our common stock. After giving effect to the issuance and sale in this offering
of 1,833,334 units (
of which shares of common stock form a part)
at an assumed public offering
price of $6.00 per unit after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable
by us, the as adjusted net tangible book value (deficit) on September 30, 2021, would have been approximately $(2,715,708), or $(0.49)
per share of common stock. This represents an immediate dilution in the as adjusted net tangible book value of $6.49 per share of common
stock to investors purchasing our units in this offering.
As a public company, we are subject to complex
legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance.
As a public company, we are subject to numerous
legal and accounting requirements, and the maintenance listing requires if we become listed on NASDAQ, that do not apply to private companies.
The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the
overall scope of the operations of a small company. Our management team is relatively inexperienced in complying with these requirements,
and our management resources are limited, which may lead to errors in our accounting and financial statements and which may impair our
operations. This inexperience and lack of resources may also increase the cost of compliance and may also increase the risk that we will
fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability
to file required periodic reports on a timely basis or comply with NASDAQ listing requirements, resulting in loss of market confidence
and/or governmental or private actions against us, or delisting from NASDAQ. We cannot assure you that we will be able to comply with
all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis
our privately held and larger public competitors.
We could become subject to shareholder litigation,
thereby diverting our resources that may have a material effect on our profitability and results of operations.
The market for our common shares may be characterized
by significant price volatility when compared to seasoned issuers, and we expect that our share price may continue to be more volatile
than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation.
Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.
20 |
Our management will have broad discretion
as to the use of proceeds from this offering, and we may not use the proceeds effectively.
Our management will have broad discretion in the
application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations
or enhance the value of our common stock. You will not have the opportunity, as part of your investment decision, to assess whether these
proceeds are being used appropriately. Our failure to apply these funds effectively could have a material adverse effect on our business
and cause the price of our common stock to decline.
We currently have identified significant
deficiencies in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial
statements.
We have concluded that we have not maintained
effective internal control over financial reporting through the years ended December 31, 2020 and December 31, 2019. The Company determined
that it has deficiencies over financial statements recording in areas of recording revenue and expenses in proper cut off as well as
proper classification of accounts. Significant deficiencies and material weaknesses in our internal control could have a material adverse
effect on us. Due to these deficiencies, there is a reasonable possibility that a material misstatement of the Company’s annual
or interim financial statements will not be prevented or detected on a timely basis. We are working to remediate these deficiencies and
material weaknesses. We are taking steps to enhance our internal control environment establish and maintain effective disclosure and
financial controls and procedures, internal control over financial reporting and changes in corporate governance. In this regard, the
Company will be adopting several corporate governance policies and it has established various committees of the Board of Directors, including
an Audit Committee comprised of three independent directors in accordance with Nasdaq Rule 5605(c)(2), which will take effect at the
time that our registration statement of which this prospectus is a part becomes effective. One of the Audit Committee’s priorities
will be to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this process,
the Company plans to implement the following initiatives under the oversight of the Audit committee, and will dedicate a portion of the
net proceeds of its offering under this prospectus allocated to working capital to fund them:
· | Hire additional staff to the Finance department with sufficient GAAP experience. |
· | Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. |
· | Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis. |
· | Initiate a preliminary assessment of management’s internal controls over financial reporting. |
· | Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed. |
Although we plan to undertake and complete
this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not
be successful in remediating the deficiencies or material weaknesses.
A material weakness in our internal control over
financial reporting could adversely impact our ability to provide timely and accurate financial information, and to timely or accurately
report our financial condition, results of operations or cash flows or maintain effective disclosure controls and procedures. If we are
unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be
subject to, among other things, regulatory or enforcement actions by the SEC, any one of which could adversely affect our business prospects.
If
an active, liquid trading market for our warrants (forming part of the units offered hereby) does not develop, you may not be able to
sell your warrants quickly or at a desirable price.
The
warrants forming a part of the units issued in this offering will be immediately exercisable and expire on the fifth anniversary of the
date of issuance. The warrants will have an initial exercise price per share equal to $7.20. In the event that the stock price of our
common stock does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may
not have any value.
There
is no established trading market for the warrants sold in this offering, and the market for the warrants may be highly volatile or may
decline regardless of our operating performance. We have applied for the warrants offered in this offering to be listed on the Nasdaq
Capital Market under the symbol “MOBQW”. However, an active public market for our warrants may not develop or be sustained.
We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our
warrants or how liquid that market might become. If a market does not develop or is not sustained, it may be difficult for you to sell
your warrants at the time you wish to sell them, at a price that is attractive to you, or at all.
Holders
of our warrants (forming part of the units offered hereby) will have no rights as a common stockholder until they acquire our common
stock.
Until
you acquire shares of our common stock upon exercise of your warrants, you will have no rights with respect to the common stock issuable
upon exercise of such warrants. Upon exercise of your warrants, you will be entitled to exercise the rights of a common stockholder only
as to matters for which the record date occurs after the exercise date.
21 |
General Risk Factors
Certain provisions of our certificate of
incorporation, bylaws and New York law make it more difficult for a third party to acquire us and make a takeover more difficult to complete,
even if such a transaction were in the stockholders’ interest.
Our restated certificate of incorporation, as amended,
and by-laws and New York law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids
by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our board
of directors rather than to attempt a hostile takeover. In addition, provisions of our restated certificate of incorporation, as amended,
by-laws and New York law impose various procedural and other requirements, which could make it more difficult for shareholders to
effect certain corporate actions. These provisions include, among others:
· | the inability of our shareholders to call a special meeting; |
· | rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; |
· | the right of our Board to issue preferred stock without shareholder approval; and |
· | the ability of our directors, and not shareholders, to fill vacancies on our Board. |
We believe these provisions may help protect our
shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing
our Board with more time to assess any acquisition proposal. These provisions are not intended to make our Company immune from takeovers.
In addition, although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential
acquirers to negotiate with our Board, they would apply even if the offer may be considered beneficial by some shareholders. These provisions
may also frustrate or prevent any attempts by our shareholders to replace or remove our current management team by making it more difficult
for shareholders to replace members of our Board, which is responsible for appointing the members of our management.
Our bylaws provide for limitations of director
liability and indemnification of directors and officers and employees.
Our bylaws provide that we will indemnify our directors,
officers and employees to the fullest extent permitted by law. Our bylaws also provide that we are obligated to advance expenses incurred
by a director or officer in advance of the final disposition of any action or proceeding. We believe that these provisions are necessary
to attract and retain qualified persons as directors and officers.
Section 402(b) of the BCL permits a New
York corporation to include in its certificate of incorporation a provision eliminating the potential monetary liability of a
director to the corporation or its shareholders for breach of fiduciary duty as a director; provided that this provision may not
eliminate the liability of a director (i) for acts or omissions in bad faith or which involve intentional misconduct or a
knowing violation of law, (ii) for any transaction from which the director receives an improper personal benefit or (iii) for
any acts in violation of Section 719 of the BCL. Section 719 provides that a director who votes or concurs in a corporate
action will be liable to the corporation for the benefit of its creditors and shareholders for any damages suffered as a result of
an action approving (i) an improper payment of a dividend, (ii) an improper redemption or purchase by the corporation of
shares of the corporation, (iii) an improper distribution of assets to shareholders after dissolution of the corporation
without adequately providing for all known liabilities of the corporation or (iv) the making of an improper loan to a director
of the corporation.
The limitation of liability in our bylaws may discourage
stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative
litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our
results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors
and officers pursuant to these indemnification provisions.
22 |
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements.
These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, numerous
assumptions, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.
These statements are only predictions. Actual events or results may differ materially. We have based these forward-looking statements
on our current expectations and projections about future events. We believe that the assumptions and expectations reflected in such forward-looking
statements are reasonable, based on information available to us on the date of this prospectus, but we cannot assure you that these assumptions
and expectations will prove to have been correct or that we will take any action that we may presently be planning. These statements
are inherently subject to known and unknown risks, uncertainties and other factors, including, but not limited to, such forward-looking
statements contained in the sections “
Description of the Business
,” “
Management Discussion
and Analysis of Financial Condition and Results of Operations
” and “
Risk Factors
” and the following:
· | our ability to effectively execute our business strategy; |
· | our ability to manage our expansion, growth and operating expenses; |
· | our ability to evaluate and measure our business, prospects and performance metrics; |
· | our ability to compete and succeed in a highly competitive and evolving industry; |
· | our ability to respond and adapt to changes in technology and customer behavior; |
· | our ability to protect our intellectual property and to develop, maintain and enhance a strong brand; and, |
· | our significant losses since inception and anticipation that we will continue to incur significant losses for the foreseeable future; |
· | our need for substantial additional funding to finance our operations. |
These and other factors should be considered carefully,
and readers should not place undue reliance on our forward-looking statements. Forward-looking statements are made based on management’s
beliefs, estimates and opinions on the date the statements are made. Except as required by U.S. federal securities laws, we have no obligation
to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section.
Information regarding market and industry statistics
contained in this prospectus is included based on information available to us that we believe is accurate. It is generally based on academic
and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking
information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates
of future market size, revenue and market acceptance of products and services., we have no obligation to update forward-looking information
to reflect actual results or changes in assumptions or other factors that could affect those statements.
Our financial statements are stated in United States
dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common
stock” refer to the common shares in our capital stock.
23 |
USE OF PROCEEDS
We estimate that we
will receive gross proceeds of approximately $11,000,004 (or approximately $12,650,004 if the underwriter exercises in full its option
to purchase up to 275,000 additional shares of common stock and
warrants to purchase up to 275,000
shares of common stock
) based on the assumed public offering price of $6.00 per unit before deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase
(decrease) in the assumed initial public offering price of $6.00 per unit would increase (decrease) the net proceeds to us from this
offering by $1.686 million, assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the
same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly,
each increase (decrease) of 1.0 million shares in the number of units offered by us would increase (decrease) the net proceeds to us
from this offering by approximately $5.52 million, assuming the assumed initial public offering price remains the same, and after deducting
the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in
the initial public offering price or the number of units by these amounts would have a material effect on our uses of the proceeds from
this offering, although it may accelerate the time at which we will need to seek additional capital.
We intend to use the
net proceeds ($9,690,004 calculated as follows: $11,000,004 less estimated underwriting discounts and commissions of $880,000 and estimated
offering costs of $430,000) from the sale of the 1,833,334 shares of common stock for the following:
· | $2,500,000 to purchase digital media ad space inventory; |
· | $2,900,000 for expansion of our technology engineering, data, and sales human capital resources; |
· | $1,600,000 for repayment of short term debt that is payable through June 15, 2022; |
· | $790,000 for marketing and business development; and |
· | $1,900,004 for other general working capital , investor relations, internal controls remediation and other corporate purposes. |
This expected use of the net proceeds from this
offering represents our intentions based on our current plans and business conditions, which could change in the future as our plans and
business conditions evolve. If management reasonably determines that the net proceeds from this offering would not be sufficient to meet
the Company’s development plans and other working capital obligations after closing, management will re-evaluate and revise its
current plans and/or seek other sources of financing, although management currently has no specific additional financing plans. The amounts
and timing of our use of proceeds will vary depending on a number of factors, including the amount of cash generated or used by our operations.
As a result, we will retain broad discretion in the allocation of the net proceeds of this offering, and our investors will be relying
on the judgment of our management regarding the application of the net proceeds of this offering. In addition, while we have not entered
into any agreements, commitments or understandings relating to any significant transaction as of the date of this prospectus, we may use
a portion of the net proceeds to pursue acquisitions, joint ventures and other strategic transactions.
Pending their use, we intend to invest the net
proceeds of this offering in short-term interest-bearing investment-grade securities, certificates of deposit or government securities.
The goal with respect to the investment of these net proceeds is capital preservation and liquidity so that such funds are readily available
to fund our operations.
24 |
MARKET PRICE FOR OUR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
Our Common Stock trades on the OTCQB under the
symbol "MOBQ" on a limited basis. In October 2021, our Board of Directors approved the filing, and we submitted an application
in compliance with the NASDAQ rules and regulations to list and trade our Company’s securities on the NASDAQ Capital Market. As
of the date of this prospectus, we have been given approval by NASDAQ regarding the listing of our Company’s securities on the NASDAQ
Capital Market. The following table sets forth the range of high and low sales prices of our Common Stock for the last two fiscal years.
On September 9, 2020, the Company effected a one-for-400 reverse stock split. All share and per share amounts set forth herein give retroactive
effect to the stock split unless the context indicates otherwise.
Quarters Ended | High | Low | |||||
March 31, 2019 | $ | 96.00 | $ | 40.00 | |||
June 30, 2019 | 76.00 | 40.00 | |||||
June 30, 2019 | 72.00 | 28.00 | |||||
December 31, 2019 | 64.00 | 28.00 | |||||
March 31, 2020 | 48.00 | 8.00 | |||||
June 30, 2020 | 16.00 | 8.00 | |||||
June 30, 2020 | 16.00 | 4.00 | |||||
December 31, 2020 | 11.00 | 5.50 | |||||
March 31, 2021 | 10.95 | 6.15 | |||||
June 30, 2021 | 9.50 | 5.50 | |||||
September 30, 2021 | 10.25 | 6.45 | |||||
The closing sales price on November 15, 2021
was $7.95 per share. All quotations provided herein reflect inter-dealer prices, without retail mark-up, markdown or commissions.
In the event a public market for our common stock
is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities
in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who
has satisfied a six-month holding period in a fully reporting company under the Securities Exchange Act of 1934 may, sell their restricted
Common Stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for there to
be adequate public information disclosed. Affiliated persons may also sell their common shares held for at least six months, but affiliated
persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated
persons who hold their common shares for at least one year will be able to sell their shares without the need for there to be current
public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance
with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock. See "
Risk Factors –Our future sales of common stock by management and other stockholders may have an adverse effect on the then prevailing market price of our common stock
."
Holders of Record
As of November 8, 2021, there were 130
active holders of record of our common stock. The number of record holders was determined from the records of our transfer agent
and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered
clearing agencies. The transfer agent of our common stock is Continental Stock Transfer & Trust Company, New York NY.
25 |
DIVIDEND POLICY
The Company has not paid any cash dividends to
date and does not anticipate or contemplate paying cash dividends on our capital stock in the foreseeable future. It is the present intention
of management to utilize all available funds and future earnings for the development of the Company’s business. Any future determination
to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on our
financial condition, results of operations, capital requirements, general business conditions and other factors that our Board of Directors
may deem relevant. Our future ability to pay cash dividends on our capital stock may be limited by any future debt instruments or preferred
securities.
26 |
CAPITALIZATION
The following table sets forth our actual cash
and cash equivalents and our capitalization as of September 30, 2021 as follows:
· | on an actual basis; |
· | on a pro forma basis to reflect (i) the conversion of convertible notes in the principal amount of $89,100 in the fourth quarter through November 15, 2021, and (ii) the issuance of 2,500 shares as consulting fees in the fourth Quarter through November 19, 2021, as if such transactions had occurred on September 30, 2021 (1); and |
· | on a pro forma, as adjusted basis to further reflect our issuance and sale of 2,166,667 units in this offering at the assumed initial public offering price of $6.00 per unit after deducting the underwriting discount and estimated offering expenses payable by us. |
The pro forma information set forth in the table
below is illustrative only and will be adjusted based on the assumed public offering price and other terms of this offering determined
at pricing.
You should read this information in conjunction
with “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
”
and our financial statements and related notes which is included elsewhere in this prospectus.
As of September 30, 2021
|
|
| ||||||||||
CASH AND CASH EQUIVALENTS | $ | 735,505 | $ | 735,505 | $ | 8,825,509 | (1) | |||||
CONVERTIBLE NOTES | 5,111,523 | 5,022,423 | 3,422,423 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Preferred stock Series AAA: $0.0001 par value; 4,930,000 authorized; 56,413 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis as of September 30, 2021 | 868,869 | 868,869 | 868,869 | |||||||||
Preferred stock Series E: 70,000 authorized; 61,688 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis as of September 30, 2021 | 4,935,040 | 4,935,040 | 4,935,040 | |||||||||
Common stock: $0.0001 par value; 100,000,000 authorized; 3,670,086 shares issued and outstanding on an actual, 3,685,689 shares pro forma and 5,519,023 shares pro forma as adjusted basis as of September 30, 2021, respectively | 372 | 373 | 556 | |||||||||
Treasury stock: 37,500 shares outstanding at September 30, 2021 | (1,350,000 | ) | (1,350,000 | ) | (1,350,000 | ) | ||||||
Additional paid-in capital | 189,498,056 | 189,587,155 | 199,276,976 | |||||||||
Accumulated deficit | (194,904,072 | ) | (194,904,072 | ) | (194,904,072 | ) | ||||||
Total stockholders’ equity | (951,735 | ) | (862,635 | ) | 8,827,369 | |||||||
Total capitalization | $ | 4,159,788 | $ | 4,159,788 | $ | 12,249,792 | ||||||
27 |
(1)
Cash is shown net of $1,600,000 of Offering expenses utilized to repay debt(see “
Use of Proceeds
”)
(2)
Each $1.00 increase (decrease) in the assumed initial public offering price of $6.00 per share would increase (decrease) the net
proceeds to us from this offering by $1.686 million, assuming the number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares offered by us would increase
(decrease) the net proceeds to us from this offering by approximately $5.52 million, assuming the assumed initial public offering price
remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by
us.
The number
of shares of common stock to be outstanding after the offering is based on
3,670,086
, which
is the number of shares outstanding on September 30, 2021, assumes no exercise by the underwriters of their option to purchase up to
an additional 275,000 shares of common stock and/or warrants to purchase an additional 275,000 shares of common stock to cover over-allotments,
if any, and excludes:
· | 304,930 shares of our common stock issuable upon exercise of outstanding stock options by the members of our board of directors and third parties at a weighted average exercise price of $46.16 per share as of September 30, 2021; |
· | 904,136 shares of our common stock issuable upon exercise of outstanding warrants held by investors at a weighted average price of $47.68 per share as of September 30, 2021; |
· | 2,108,334 shares of common stock issuable upon the full exercise of the warrants (included as part of the units and over-allotment option) offered hereby; |
· | 55,000 shares of our common stock issuable upon the exercise of warrants we expect to grant to the underwriters in this offering at an exercise price of $7.50 per share as of September 30, 2021; |
· | 923,833 shares of our common stock issuable upon conversion of outstanding convertible debt at a weighted average price of $4.97 as of September 30, 2021; |
· | 1,100,000 shares of our common stock reserved for future grants pursuant to the exercise of options or other equity awards under our stock incentive plans, including 825,000 options which are being granted on the date of this Prospectus at an exercise price equal to 110% of the public offering price of this offering, and |
· | 168,324 shares issuable upon conversion of outstanding Preferred Stock as of September 30, 2021. |
28 |
DILUTION
If you invest in our
units
(comprised of our common stock and warrants)
in this offering, your ownership interest will be immediately diluted to the extent
of the difference between the assumed public offering price per share of common stock (which forms a part of a unit) and the as adjusted
net tangible book value per share after giving effect to this offering.
The net tangible book value (deficit) of our
Company as of September 30, 2021 was $(6,601,083). The proforma net tangible book value (deficit) of our Company (see Capitalization)
as of September 30, 2021 was $(6,512,703), after giving effect on a pro forma basis to reflect the (i) conversion of a note in the
principal amount of $89,100 in the fourth quarter through November 8, 2021 into 13,103 common shares and (ii) the issuance of 2,500 common
shares as consulting services, as if such transactions had occurred on September 30, 2021. After deducting the book value of $5,803,909
attributable to the Series AAA Preferred Stock and Series E Preferred Stock, the net tangible book value (deficit) of our Common Stock
on September 30, 2021 was $(12,405,712) or approximately $(3.37) per share of common stock. Net tangible book value (deficit) per common
share is determined by dividing the net tangible book value of our Company (total tangible assets less total liabilities less book value
of Preferred Stock) by the number of outstanding shares of our common stock. After giving effect to the issuance and sale in this offering
of 1,833,334 units at an assumed public offering price of $6.00 per unit after deducting the estimated underwriting discounts and commissions
and estimated offering expenses payable by us, the as adjusted net tangible book value (deficit) on September 30, 2021, would have been
approximately $(2,715,708), or $(0.49) per share of common stock. This represents an immediate dilution in the as adjusted net tangible
book value of $6.49 per share of common stock to investors purchasing our common stock in this offering.
The following table illustrates the range of immediate
dilution to new investors:
Assumed public offering price per unit | $ | 6.00 | ||
Proforma net tangible book value per common share as of September 30, 2021 | $ | (3.37 | ) | |
Increase in net tangible book value per share attributable to new investors in this offering | $ | 2.88 | ||
Pro forma as adjusted net tangible book value per common share after this offering | $ | (0.49 | ) | |
Dilution per share to investors in this offering | $ | 6.49 |
The
foregoing illustration also does not reflect the dilution that would result from the exercise of any of the warrants sold in the offering.
The
following table sets forth, as of September 30, 2021, the assumed number of shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid by existing stockholders and to be paid by new investors purchasing units (of which shares
of common stock form a part) in this offering, after giving pro forma effect to conversion of the note, issuance of shares to consultants,
and the issuance of units to the new investors in this offering at the public offering price of $6.00 per unit, together with the total
consideration paid an average price per share paid by each of these groups, before deducting underwriting discounts and commissions and
estimated offering expenses.
Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
Number | Percent | Amount | Percent | per Share | ||||||||||||||||
Existing stockholders as of September 30, 2021(1) | 3,670,086 | 66.50% | $ | 189,498,428 | 94.5% | $ | 51.63 | |||||||||||||
Conversion of note into common stock | 13,103 | 0.23% | $ | 89,100 | *% | $ | 6.80 | |||||||||||||
Issuance of common stock to consultants | 2,500 | 0.05% | $ | 23,125 | *% | $ | 9.25 | |||||||||||||
New investors | 1,833,334 | 33.22% | $ | 11,000,004 | 5.5% | $ | 6.00 | |||||||||||||
Total | 5,519,023 | 100.00% | $ | 200,610,657 | 100.00% | $ | 36.34 | |||||||||||||
_________________
* | Represents less than 1%. |
(1) | Existing shareholder consideration is shown as common stock par value plus additional paid in capital as of September 30, 2021 |
The information above assumes that the underwriters
do not exercise their over-allotment option. If the underwriters exercise their over-allotment option in full, the as adjusted net tangible
book value will increase to $(1,197,708) or $(0.21) per share, representing an immediate increase to existing stockholders of $3.16 per
share and an immediate dilution of $6.21 per share to new investors. If any shares are issued upon exercise of outstanding options or
warrants, new investors will experience further dilution.
The number of shares of our common stock that
will be issued and outstanding immediately after this offering as shown above is based on 3,670,086 shares outstanding as of September
30, 2021, with adjustments as shown under Capitalization. Assuming the 15% over-allotment option is exercised and the Underwriter exercises
their option in full then there will be 5,794,023 common shares outstanding immediately after this offering.
If you purchase securities in this offering, your
interest will be immediately and substantially diluted to the extent of the difference between the assumed public offering price per share
of our common stock and the as adjusted net tangible book value per share of our common stock after giving effect to this offering.
The
foregoing discussion and tables above do not give effect to the dilution that would result from (i) 304,930 shares of our common stock
issuable upon exercise of outstanding stock options by the members of our board of directors and third parties at a weighted average
exercise price of $46.16 per share as of September 30, 2021; (ii) 904,136 shares of our common stock issuable upon exercise of outstanding
warrants held by investors at a weighted average price of $47.68 per share as of September 30, 2021; (iii) 923,833 shares of our common
stock issuable upon conversion of outstanding convertible debt at a weighted average price of $4.97 as of September 30, 2021; (iv) 55,000
shares of our common stock issuable upon the exercise of warrants we expect to grant to the underwriters in this offering at an exercise
price of $7.50 per share as of September 30, 2021; (iv) 1,100,000 shares of our common stock reserved for future grants pursuant
to the exercise of options or other equity awards under our stock incentive plans, including 825,000 options which are being granted
on the date of this Prospectus at an exercise price equal to 110% of the public offering price of this offering; (vi) 2,108,334 shares
of common stock issuable upon the full exercise of the warrants (included as part of the units and over-allotment option) offered hereby;
and (vii) 168,324 shares issuable upon conversion of outstanding Preferred Stock as of September 30, 2021.
29 |
DESCRIPTION OF THE BUSINESS
Company Background
Mobiquity Technologies, Inc. is next-generation
marketing and advertising technology and data intelligence company who operates through our proprietary software platforms in the programmatic
advertising space. Our product solutions are comprised of two proprietary software platforms:
· | Our advertising technology operating system (or ATOS) platform; and | |
· | Our data intelligence platform. |
Our Products
The ATOS Platform
Our ATOS platform blends artificial intelligence
(or AI) and machine learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and
campaigns. The ATOS platform:
· | creates an automated marketplace of advertisers and publishers on digital media outlets to host online auctions to facilitate the sale of digital advertising (known as digital real estate) targeted at users while engaged on their internet-connected TV, laptop, tablet, desktop computer, mobile, and over-the-top (or OTT ) streaming media devices; and | |
· | gives advertisers the capability to understand and interact with their audiences and engage them in a meaningful way by using ads in both image and video formats (known as rich media) to increase their awareness, customer base and foot traffic to their e-commerce site, voting site or physical locations. |
Our ATOS platform engages with approximately 20
billion advertisement opportunities per day, based on our daily logs. Our sales and marketing strategy for our ATOS platform is focused
on providing a de-fragmented operating system that facilitates a considerably more efficient and effective way for advertisers and publishers
to transact with each other. Our goal is to become the programmatic display advertising industry standard for small and medium sized advertisers.
Our ATOS technology is proprietary and primarily
consists of know-how and trade secrets developed internally, as well as certain open source software.
Users of the ATOS platform get access to benefits
including among other things:
· | ease of set up; | |
· | targeting features based on audience profiles and location through an in-house data management platform (or DMP); | |
· | Inventory management and yield optimization; | |
· | support for all rich media creators’ ad tags; | |
· | machine learning and AI powered optimization which aids in delivering a higher click through rate on ad links; | |
· | support for third-party trackers and custom scripts for make-the-most-of-your media (or MOAT) analytics, Integral Ad Science (or IAS), and forensics to enable independent verification by advertisers for transparency; | |
· | detailed campaign wrap-up reporting that gives a breakdown on publishers, categories, demonstrations, and devices to better understand advertisement campaign performance; | |
· | access to business intelligence via an analytics dashboard; | |
· | advanced ad targeting; | |
· | easy campaign uploading; | |
· | automated performance optimization; | |
· | real time reporting; | |
· | fraud prevention tools; and | |
· | 24x7 support, along with guided managed services to enable users to rapidly harness and operate all the features of the ATOS platform. |
30 |
Our ATOS platform includes:
· | Adserver; | |
· | Demand Side Platform; | |
· | Advertisement quality tools; | |
· | Analytics dashboard; | |
· | Avails Engine; | |
· | Advertisement prediction and delivery tools; | |
· | Supply quality tools; | |
· | Private marketplace tools; | |
· | Audience and location targeting; | |
· | Wrap up reports; | |
· | An Advertisement software development kit (or SDK); | |
· | Prebid adaptor; | |
· | contextual targeting; | |
· | identity graph capabilities; | |
· | cookie syncing; and | |
· | the updated version of our quality and security tools, among other things for our ATOS platform. |
The Data Intelligence Platform
Our data intelligence platform provides
precise data and insights on consumer’s real-world behavior and trends for use in marketing and research. We believe, based on
our experience in our industry, that we provide one of the most accurate and scaled solutions for data collection and analysis,
utilizing multiple proprietary technologies. Our data intelligence platform technology allows for the ingestion and normalization of
various data sources, such as location data, transactional data, contextual data, and search data to reach the right target audience
with the right message. Utilizing massively parallel cluster computing and machine learning algorithms and technology, our data
intelligence solutions make available actionable data for marketers, researchers and application publishers through an automated
platform. We are seeking to generate several revenue streams from our data collection and analysis, including, among other things;
advertising, data licensing, attribution reporting, and custom research.
We also offer a self-service alternative
through our MobiExchange product, which is a SaaS fee model. MobiExchange is a data focused technology solution that
enables individuals and companies to rapidly build actionable data and insights for their own use or for
resale. MobiExchange’s easy-to-use, self-service tools allow users to reduce the complex
technical and financial barriers typically associated with turning offline data, and other
business data, into actionable digital products and
services. MobiExchange provides out-of-the-box private labeling, flexible branding, content management,
user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party platforms, and help
desk among other things.
We believe, based on our experience in our
industry, that we provide one of the most accurate and scaled solution for data collection and analysis, utilizing multiple
proprietary technologies. MobiExchange is a data focused technology solution that
enables individuals and companies to rapidly build actionable data and insights for its own use or for
resale. MobiExchange’s easy-to-use, self-service tools allow anyone to reduce the complex technical
and financial barriers typically associated with turning offline data, and other business data, into actionable
digital products and services. MobiExchange provides out-of-the box private labeling, flexible branding,
content management, user management, user communications, subscriptions, payment, invoices, reporting, gateways to third party
platforms, and help desk, among other things.
31 |
Our data intelligence platform is hosted
and managed on Amazon Web Service (AWS) and takes full advantage of open standards for processing, storage, security and big data
technology. Specifically, our data intelligence platform uses the following AWS services: EC2, Lambda, Kafka, Kinesis, S3,
Storm, Spark, Machine Learning, RDS, Redshift, Elastic Map Reduction, CloudWatch, DataBricks, and Elastic Search Service with
built-in Kibana integration.
Our Strategy
Our strategy in the programmatic advertising space
is to provide small- to medium-sized enterprises with an efficient and effective end-to-end, fully integrated ATOS platform. We believe
that our ATOS platform gives users in these markets the capability of running marketing and branding campaigns without the need for an
extensive marketing team, which enables them to better compete with their larger competitors who have greater marketing financial and
human capital resources. Our sales and marketing approach is focused on providing a de-fragmented operating system that facilitates a
considerably more efficient and effective way for advertisers and publishers to transact with each other. Our goal is to become the programmatic
display advertising industry standard for small- and medium-sized advertisers. Mobiquity plans to hire several new sales and sales support
individuals to help generate additional revenue through the use of our ATOS platform.
Our strategy is based on a problem we perceived
in the advertising technology industry as it has rapidly grown over the last 10 years. We viewed the technology in the industry to be
highly fragmented and thus inefficient. Many advertisers have had to mix multiple vendors’ different technologies, or bolt-on third-party
technology to legacy technology, in an effort to create an integrated solution. Often this has resulted in the absence of a central source
to address problems with an integrated system that arise. The flaws that this type of stacked technology ecosystem has includes:
· | Increased cost -- this results from integration costs, technology management costs and revenue sharing arrangements among vendors providing different components of the system. | |
· | Decreased speed -- the automated buying and selling of digital advertising space happens in micro-seconds and when the technology stack comprising the system has to work through several distinct vendor components, the system is inherently slower than a single vendor all-inclusive platform. | |
· | Lack of transparency – a digital programmatic advertising campaign is comprised of a multitude of metrics each of which can be optimized by the advertiser according to its needs. Lack of transparency occurs when the digital programmatic advertising campaign jumps from its primary platform to the add-on vendors’ platform and the advertiser is unable to see or access certain of the metrics covered by a particular vendor’s component. The user thus loses the ability to optimize that part of the campaign. This is exacerbated as more add-on technologies are added to the system. |
We believe our products address and solve the flaws
of a stacked system.
A typical digital advertising campaign requires
the following components:
· | Data Management Platform (or DMP) | |
· | Demand-Side Platform (or DSP) | |
· | Supply-Side Platform (or DSP) | |
· | Bidder | |
· | Ad Server | |
· | Ad Network | |
· | Supply Quality Tools | |
· | Fraud Detection | |
· | Analytical Tools | |
· | Reporting Dashboard |
32 |
Many of the companies we target have between 50-70%
of the above components and outsource the rest to vendors who bolt-on technology to those companies’ legacy technology which often
results in the flaws discussed above. We provide a single-vendor end-to-end solution integrating the required components from a single
source that work together because they are built together, in an effective and cost-efficient way. Our ATOS platform decreases the effective
cost-basis for users by integrating all the necessary capabilities at no additional cost: DSP and bidding technologies, AdCop™ Fraud
Protection, rich media and ad serving, attribution, reporting dashboard and DMP are all included.
Our Revenue Streams
We target brands, advertising agencies and other
advertising technology companies as our audience for our ATOS platform products. The ATOS platform creates three revenue streams.
· | The first is licensing the ATOS platform as a white-label product for use by advertising agencies, demand-side platforms (or DSP’s), brands and publishers. Under the white-label scenario, the user licenses the ATOS platform from us and is responsible for running its own business operations and is billed a percentage of amounts spent on advertising run through the platform. | |
· | The second revenue stream is a managed services model, in which, the user is billed a higher percentage of revenue run through the platform, but all services are managed by us. | |
· | The third revenue model is a seat model in which our customer uses our platform and we provide customer service but the customer does everything else, where the user is billed a percentage of revenue run through the platform and business operations are shared between the user and us. |
Our data intelligence revenue is driven by managed
services for advertising agencies; brands; market researchers; university research departments; healthcare; and financial, sports, pet, civil planning,
transportation, and other data and technology companies. Often-times sales to users of our data intelligence platform will lead to them
to our ATOS platform as well.
Our Intellectual Property
Our portfolio of technology consists of various
intellectual property including proprietary source code, trade secrets and know-how that we have developed internally. We own our technology,
although we use open source software for certain aspects, and we protect it though trade secrets and confidentiality requirements
set out in our employee handbook which each employee acknowledges, and assigning any technology creations and improvements to us.
We also have two patents that relate to our location-based mobile advertising technology business which we are not operating. These patents
and patents pending are not material to, or used in, our ATOS or data intelligence related technology that we use in our current operations.
Governmental Regulations
Federal, state and international laws and regulations
govern the collection, use, retention, sharing and security of data that we collect. We strive to comply with all applicable laws, regulations,
self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating
to the use of data for marketing purposes. As we develop and provide solutions that address new market segments, we may become subject
to additional laws and regulations, which could create unexpected liabilities for us, cause us to incur additional costs or restrict
our operations. From time to time, we may be notified of or otherwise become aware of additional laws and regulations that governmental
organizations or others may claim should be applicable to our business. Our failure to anticipate the application of these laws and regulations
accurately, or other failure to comply, could create liability for us, result in adverse publicity or cause us to alter our business
practices, which could cause our net revenues to decrease, our costs to increase or our business otherwise to be harmed. See “
Risk
Factors—Our business practices with respect to data and consumer protection could give rise to liabilities or reputational harm
as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer
protection
”; and “
Risk Factors-- Changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect data on consumer shopping behavior.
”
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We are subject to general business regulations
and laws as well as regulations and laws specifically governing the internet, e-commerce and m-commerce in a number of jurisdictions
around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online
services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights,
distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations
governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority
of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised
by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing
the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another
and may conflict with other rules or our practices. See “
Risk Factors-- Government regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by us to comply with these laws and regulations could substantially harm our business and results of operations
.”
Competition
We compete in the data, marketing and research
business and in all other facets of our business against small, medium and large companies throughout the United States. Some examples
include companies such as Liveramp, Groundtruth and Nielsen. Although we can give no assurance that our business will be able to compete
against other companies with greater experience and resources, we believe we have a competitive advantage with our proprietary software
and technology platform based on our view that our competitor’s products do not provide the end-to-end solutions that our product
solutions do, and their minimum fees are substantially higher than ours for a comparative suite of solutions.
See
“
Risk Factors — We face intense and growing competition, which could result in reduced sales and reduced operating margins, and limit our market share.
”
We believe that our competitors’ product
offerings in that our competitor’s products do not provide the end-to-end solutions our product solutions do, and their minimum
fees are substantially higher than ours for a comparative suite of solutions.
Employees and Contractors
As of September 30, 2021, we have eleven
full time employees, including executive management, technical personnel, salespeople, and support staff employees. We also utilize several
additional firms/persons who provide services to us on a non-exclusive basis as independent consultants.
Customers
During 2020 and the nine-month period ending
on September 30, 2021, sales of our products to four customers generated approximately 36% of our revenues. Our contracts
with our customers generally do not obligate them to a specified term and they can generally terminate their relationship with us at
any time with a minimal amount of notice.
Debt and Receivables Purchase Financing
We have the following debt financing in place:
Dr. Gene Salkind, who is our Chairman of the Board
and one of our directors, and his affiliate provided us an aggregate of $2,700,000 in convertible debt financing for convertible promissory
notes and common stock purchase warrants, as discussed in more detail under the heading “
Certain Relationships and Related Party Transactions – Related Party Debt Financing
”.
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Business Capital Providers, Inc. purchased certain
future receivables from the Company at a 26% discount under the following agreements on the following terms:
· | Pursuant to a Merchant Agreement dated July 28, 2021 Business Capital Providers purchased $405,000 of future receivables for a purchase price of $300,000. Under the agreement, the Company agrees to have all receivables collected be deposited into a bank account from which the purchased receivables are remitted to Business Capital Providers daily, at the daily percentage of 9% of the daily banking deposits, or daily amounts of $2,531.25, for the term of 160 days. The Company is responsible for ensuring there are sufficient funds in the account to cover the daily payments. Under the agreement, the Company paid an origination fee of 5% of the purchase price. In the event of a default under the agreement, Business Capital Providers may institute an action to enforce its rights, including recovery of its costs of enforcement. Events of default under the agreement include, among others: the Company’s breach of any provision or representation under the agreement; failure to give 24 hours’ notice there will be insufficient funds to cover a daily remittance; the Company offers for sale or sells a substantial portion of its assets or its business; the Company uses other depository accounts, or closes or changes its depository account from which daily remittances are made; a material change in the Company’s operations; loss of a key employee, customer or supplier of the Company; any change in stock float, voting rights or issuance of voting shares; the Company’s failure to renew a real property lease; any Company default under another agreement with Business Capital Providers; or any form of bankruptcy filing or declaration by or for the Company. The Agreement further provides that in the event of a default, lieu of personal guarantees by any Company principals, or if otherwise mutually agreed, Business Capital Providers may convert any portion of amounts payable to it into shares of common stock of the Company at a price equal to 85% of the lowest volume weighted average price for each of the five trading days preceding the conversion date; provided that Business Capital Providers will not convert into shares that will result in it owning more than 4.99% of the Company’s then outstanding shares of common stock. | |
· | Pursuant to a Merchant Agreement dated April 29, 2021 purchased $405,000 of future receivables for a purchase price of $300,000 on terms which are substantially the same as the July 28, 2021 Merchant Agreement, except that the daily percentage is 13% and the daily payment is $2,700 per day for a term of 150 business days. | |
· | In the fourth quarter of 2021, Business Capital Providers assigned its Merchant Agreement and related debt described in this paragraph to non-affiliated third parties, which subsequently converted $89,100 in outstanding indebtedness into 13,103 common shares pursuant to its terms. | |
· | The Company previously entered into separate Merchant Agreements with Business Capital Providers on eight occasions prior to the April 29, 2021 Merchant Agreement, starting in June 2019, for an aggregate of $1,060,000 in financing, at varying purchase amounts, daily percentages and daily payments, all of which were satisfied in full. |
19 private lender-investors, who were unaffiliated
shareholders of the Company and accredited investors as provided under Regulation D Rule 501 promulgated under the Securities Act of 1933,
provided us convertible debt financing during the period May, 2021 through September, 2021 pursuant to subscription agreements as described
below. (Certain of these investors provided us multiple investments in one or more of these convertible debt structures.):
· | Nine of the lender-investors provided us an aggregate of $668,000 in convertible debt financing on the following terms: |
o | The lender-investors were issued shares of Company common stock valued at $6 per share equal to 5% of their investments as original issue discount. |
o | The debt maturity date is October 31, 2021. If the Company receives debt or equity financing of $200,000 or more, the debt is payable within two business days after the Company receives those funds. The maturity dates of six of these investors’ convertible debt was extended to December 31, 2021. |
o | The debt is convertible into shares of Company common stock at a conversion price of $6 per share at any time at the investor’s option until the maturity date. |
· | Three of the lender-investors provided us an aggregate of $200,000 in convertible debt financing on the following terms: |
o | The lender-investors were issued shares of Company common stock valued at $6 per share equal to 6,000 per $100,000 of principal loan, or on a pro-rata basis if less than $100,000 is loaned (effectively 6% of the amount loaned) as original issue discount. |
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o | The debt is convertible into shares of Company common stock at a conversion price of $6 per share at any time at the investor’s option until the maturity date. |
o | These investors converted all of this convertible debt into a total of 40,000 shares of common stock. |
· | Eleven of the lender-investors provided us an aggregate of $819,500 in convertible debt financing on the following terms: |
o | The investment amounts included a 10% original issue discount. Accordingly, the total net principal proceeds of this debt that we received was $745,000. |
o | The debt maturity date is June 30, 2022. |
o | The investors may convert the debt at any time through the maturity date at a 30% discount to the volume weighted average price per share over the 60 day period prior to conversion, with a floor conversion price of $4 per share. The debt will automatically convert on July 1, 2022 at $4 per share if it not repaid, or converted by the investor, prior to then. |
o | All of these investors converted a total of $819,500 of this convertible debt into a total of 156,761 shares of common stock. |
· | Four of the lender-investors provided us $130,000 in convertible debt financing on the following terms: |
o | Interest at the annual rate of 10%. |
o | The debt maturity date is June 30, 2022. |
o | The investor may convert the debt at any time through the maturity date at a 30% discount to the volume weighted average price per share over the 60 day period prior to conversion, with a floor conversion price of $4 per share. The debt will automatically convert on July 1, 2022 at $4 per share if it not repaid, or converted by the investor, prior to then. |
o | One of these investors converted a total of $30,000 of this convertible debt into a total of 5,904 shares of common stock. |
In May of 2020, the Company received Small Business
Administration Cares Act loan of $265,842 due to the COVID-19 pandemic. This loan carried a five-year term, with interests at the annual
rate of 1%. During second fiscal quarter of 2021 the Cares Act loan was forgiven in full under the SBA Cares Act loan rules.
In June 2020, the Company received a $150,000 Economic
Injury Disaster Loan from the SBA which carries a 30-year term, payable in monthly installments of principal plus interest at the annual
rate of 3.75%. This loan is secured by all the assets of the Company. The loan proceeds were used for working capital to alleviate economic
injury cause by disaster in January 2020 and after that as required by the loan agreement.
On September 20, 2021, the Company entered into
securities purchase agreements, with two accredited investors, Talos Victory Fund, LLC and Blue Lake Partners LLC, pursuant to which the
Company issued 10% promissory notes with a maturity date of September 20, 2022, in the aggregate principal amount of $1,125,000. In addition,
the Company issued warrants to purchase an aggregate of 56,250 shares of its common stock to these holders. Spartan Capital Securities
LLC and Revere Securities LLC acted as placement agents on this transaction. The promissory notes include the following terms:
· | Interest at the annual rate of 10%. | |
· | The notes carry original issue discount of $112,500 in the aggregate. Accordingly, the total net principal of this debt was $1,012,500. | |
· | The Company is required to make interim payments to the holders in the aggregate amount of $225,000, on or before March 18, 2022, towards the repayment of the balance of the notes. The Company may prepay the principal sum under the notes then outstanding plus accrued and unpaid interest in full at any time without any prepayment premium; however the Company is required to pay a minimum amount of the first 12 months of interest under the notes | |
· | The holders may convert the notes and exercise the warrants into the Company’s common stock (subject to contractual beneficial ownership limitations of 4.99%). The holders have the right to convert the notes at any time into shares of common stock at a conversion price of $5.00 per share; provided, however, if the Company consummates a so-called uplisting offering to a national exchange within 180 days after the closing date, then the Note conversion price shall adjust to equal 70% of the price per share of common stock in that offering. The warrants may also be exercised at any time from date of issuance over a period of five years at the exercise price then in effect. The initial warrant exercise price shall equal $10.00 per share; provided however, if the Company consummates the uplisting offering within the 180-day period noted above, then the exercise price shall adjust to equal 130% of the price per share in that offering. The warrants contain cashless exercise provisions. Both the notes and the warrants contain customary anti-dilution provisions which could cause an adjustment to the conversion price of the notes and the exercise price of the warrants. |
36 |
· | The Company is required to make interim payments to the holders in the aggregate amount of $225,000, on or before March 18, 2022, towards the repayment of the balance of the notes. The Company may prepay the principal sum under the notes then outstanding plus accrued and unpaid interest in full at any time without any prepayment premium; however the Company is required to pay a minimum amount of the first 12 months of interest under the notes. | |
· | The holders may convert the notes and exercise the warrants into the Company’s common stock (subject to contractual beneficial ownership limitations of 4.99%). The holders have the right to convert the notes at any time into shares of common stock at a conversion price of $5.00 per share; provided, however, if the Company consummates a so-called uplisting offering to a national exchange within 180 days after the closing date, then the Note conversion price shall adjust to equal 70% of the price per share of common stock in that offering. The warrants may also be exercised at any time from date of issuance over a period of five years at the exercise price then in effect. The initial warrant exercise price shall equal $10.00 per share; provided however, if the Company consummates the uplisting offering within the 180-day period noted above, then the exercise price shall adjust to equal 130% of the price per share in that offering. The warrants contain cashless exercise provisions. Both the notes and the warrants contain customary anti-dilution provisions which could cause an adjustment to the conversion price of the notes and the exercise price of the warrants. | |
· | The notes provide that so long as the Company has any obligations under the Notes, the Company will not, among other things: |
o | Incur or guarantee any indebtedness which is senior or equal to the notes. | |
o | Redeem or repurchase any shares of stock, warrants, rights or options without the holders’ consent. | |
o | Sell, lease or otherwise dispose of a significant portion of its assets without the holders’ consent. |
· | The notes contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the notes or security purchase agreements. | |
· | In an event of default under the notes, which has not been cured within any applicable cure period, if any, the notes shall become immediately due and payable and the Company shall pay to the holders an amount equal to the principal sum then outstanding plus accrued interest, multiplied by 125%. Additionally, upon the occurrence of an event of default, additional interest will accrue from the date of the event of default at the rate equal to the lower of 16% per annum or the highest rate permitted by law. |
On the closing date of this financing, the holders
delivered the net amount of $910,000 of the purchase price to the Company in exchange for the notes (which was net of the original issue
discount and other fees and expenses relate to this financing).
On October 19,2021, the
Company filed a Form S-1 Registration Statement (File no.333-260364) with the Securities and Exchange Commission of which this Prospectus
is a part for a public Offering to raise approximately $11 million dollars in an underwritten public offering. The next day the Company
filed an application to list our common stock on the NASDAQ Capital Market under the symbol “MOBQ.” In the event that
the Offering is completed, the Company has allocated an estimated $1,600,000 to retire the loans of, Talos Victory Fund, LLC, Blue Lake
Partners LLC and other unsecured short term indebtedness.
In
the fourth quarter of 2021, Business Capital Providers assigned one of its Merchant Agreements and related debt described in note 6 above
to non-affiliated third parties, which subsequently converted $89,100 in outstanding indebtedness into 13,103 common shares pursuant
to their terms.
Corporate Structure
We operate our business through two wholly-owned
subsidiaries, Advangelists, LLC and Mobiquity Networks, Inc. Our corporate structure is as follows:
37 |
Subsidiaries
Advangelists, LLC
Advangelists LLC operates our ATOS platform business.
We originally acquired a 48% membership interest
and Glen Eagles Acquisition LP acquired a 52% membership interest in Advangelists in a merger transaction in December 2018 for consideration
valued at $20 Million. At the time Glen Eagles was a shareholder of the Company, owning 412,500 shares of our common stock. The Company
became, and remains, the sole manager of Advangelists following the merger with sole management power. In consideration for the merger:
· | Mobiquity issued warrants for 269,384 shares of common stock at an exercise price of $56 per share to the pre-merger Advangelsts’ members, and, in February 2019, upon the attainment of the vesting threshold of Advangelists’ combined revenues for the months of December 2018 and January 2019 being at least $250,000, the Company transferred 9,209,722 shares of Gopher Protocol, Inc. common stock to the pre-merger Advangelists members. The Mobiquity warrants were valued at a total of $3,844,444, and the Gopher shares of common stock were valued at a total of $6,155,556. |
· | Glen Eagles paid the pre-merger Advangelists members $10 million. $500,000 was paid at closing in cash (which the Company advanced on behalf of Glen Eagles without any agreement regarding repayment of the advance), and $9,500,000 was paid by Glen Eagles’ promissory note to Deepanker Katyal, as representative of pre-merger Advangelists members, payable in 19 monthly installments of $500,000 each. |
The Company acquired 3% of the Advangelists’
membership interests from Glen Eagles in April 2019 in satisfaction of the Company’s $500,000 closing payment advance to Glen Eagles,
resulting in Mobiquity owning 51% and Glen Eagles owning 49% of Advangelists.
In May 2019 the Company acquired the remaining
49% of Advangelists’ membership interests from Glen Eagles, becoming the 100% owner of Advangelists, in a transaction involving
the Company, Glen Eagles, and Gopher Protocol, Inc. In that transaction, Gopher acquired the 49% Advangelists membership interest from
Glen Eagles and assumed Glen Eagles’ promissory note to Deepanker Katyal, as representative of the pre-merger Advangelists owners,
which had a remaining balance of $7,512,500, in satisfaction of indebtedness owed by Glen Eagles to Gopher. Concurrently with that transaction,
the Company acquired the 49% of Advangelists membership interest from Gopher and assumed the promissory note in consideration. Additionally,
warrants for 300,000 shares of Company common stock which are issuable upon the conversion of Mobiquity Class AAA preferred stock owned
by Gopher were amended to provide for a cashless exercise. In September 2019, the assumed note, which then had a principal balance of
$6,780,000, was amended and restated to provide that:
· | $5,250,000 of the principal was payable in 65,625 shares of the Company’s Class E Preferred Stock, which is convertible into 164,062.50 shares the Company’s common stock, plus warrants to purchase 82,031.25 Company shares of common stock, at an exercise price of $48 per share; and |
· | $1,530,000 of the principal balance, plus all accrued and unpaid interest under the promissory note was payable in three monthly installments of $510,000 each. |
The promissory note was paid in full in November 2019.
Mobiquity Networks, Inc.
We have established Mobiquity Networks, Inc and
have operated it since January 2011. Mobiquity Networks started and developed as a mobile advertising technology company focused on driving
foot-traffic throughout its indoor network and has evolved and grown into a next generation data intelligence company. Mobiquity Networks
operates our data intelligence platform business.
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Properties
The Company is presently utilizing the office space
of its Chief Financial Officer as its principal executive office located at 35 Torrington Lane, Shoreham, NY 11786. The Company was leasing
on a month-to-month basis a fully furnished executive suite in Manhattan at a monthly cost of approximately $9,000. The executive suite
was located at 61 Broadway, 11
th
Floor, Suite 1105, New York, NY 10006. Since COVID-19 we have not been able to use the space
nor been responsible to pay rent for the period April 2020 through January 2021 when we terminated this office lease.
Legal Proceedings
We are not a party to any pending material legal
proceedings, except as follows:
Washington Prime Group, Inc. (“WPG”),
a successor in interest to Simon Property Group, L.P., commenced an action in the Marion Superior Court, County of Marion, State of Indiana
against the Company in February 2020 alleging default on 36 commercial leases which the Company had entered into in 36 separate shopping
mall locations across the United States for the placement of Mobiquity’s Bluetooth messaging system equipment in the shopping malls
to send advertisements through to shoppers’ phones as they walked through mall common areas. WPG alleged damages from unpaid rent
of $892,332. WPG sought a judgment from the court to collect the claimed unpaid rent plus attorneys’ fees and other costs of collection.
The Company disputed the claim. On September 18, 2020, the parties entered into a settlement agreement with respect to this lawsuit. Under
the settlement agreement, Mobiquity paid WPG $100,000.00 in five $20,000 monthly installments ending in January 2021 and mutual general
releases were exchanged.
In December 2019, Carter, Deluca & Farrell
LP, a law firm, commenced an action in the Supreme Court of New York, County of Nassau, against the Company seeking $113,654 in past due
legal fees allegedly owed. The Company disputed the amount owed to that firm. On March 13, 2021 the Company entered into a settlement
agreement with the law firm and paid them $60,000 to settle the lawsuit.
In July 2020, Fyber Monetization, an Israeli company
in the business of digital advertising, commenced an action against the Company’s wholly-owned subsidiary Advangelists LLC in the
Magistrate’s Court in Tel Aviv, Israel. In its statement of claim, Fyber alleged that Advangelists owes Fyber license fees of $584,945
invoiced in June through November 3, of 2019 under a February 1, 2017 license agreement for the use of Fyber’s RTB technology and
e-commerce platform with connects digital advertising media buyers and media sellers. Advangelists has disputed the claims and is defending
this lawsuit. Due to uncertainties inherent in litigation, we cannot predict the outcome on this action with any certainty. If we do
not settle this action on terms favorable to us, or at all and Fyber is successful in its claim against Advangelists, the obligation
to pay substantial monetary damages could have a material adverse effect on our financial condition and funds available to pursue our
business plans. See “
Risk Factors -- Our subsidiary Advangelists, LLC is party to litigation, the outcome of which could have a material adverse effect on us if it is not settled on terms favorable to us, or at all and the plaintiff is successful in its claims
.”
In October 2020, FunCorp Limited, a Cypriot company
which owns and operates social networking websites and mobile applications, commenced an action against the Company’s wholly-owned
subsidiary Advangelists LLC in Superior Court, State of Washington, County of King alleging Advangelists owed FunCorp for unpaid amounts
due under an insertion order for placement of Advangelists’ advertisements on FunCorp’s iFunny website totaling $42,464 plus
legal fees. Advangelists disputed the claim. In September, 2021 the action was settled in payment of $44,000 and the exchange of
general releases, without Advangelists admitting any liability. The settlement agreement provides that the terms of the settlement agreement
and FunCorp’s allegations are confidential, and may not be disclosed except as required by law, court order or subpoena with certain
limitations.
Reports to Securities Holders
We provide an annual report that includes audited
financial information to our shareholders. We make our financial information equally available to any interested parties or investors
through compliance with the disclosure rules for a small business issuer under the Exchange Act. We are subject to disclosure filing requirements
including filing Annual Reports on Form 10-K annually and Quarterly Reports on Form 10-Q quarterly. In addition, we will file Current
Reports on Form 8-K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the
above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy
any materials that we file with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K and registration statements
and proxy and information statements, at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549, or you can read
our SEC filings, including the Registration Statement on Form S-1 of which this prospectus is a part, over the Internet at the SEC’s
website at http://www.sec.gov.
1
The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction
with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of,
the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain
forward-looking statements in the following discussion and elsewhere in this prospectus and in any other statement made by, or on our
behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based
on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking
statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are
subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially
from those expressed in any forward-looking statements made by, or our behalf. We disclaim any obligation to update forward-looking statements.
Company Overview
Mobiquity Technologies, Inc. is a next-generation
marketing and advertising technology and data intelligence company who operates through our proprietary software platforms in the programmatic
advertising space.
Our product solutions are comprised of two proprietary
software platforms:
· | Our advertising technology operating system (or ATOS) platform; and | |
· | Our data intelligence platform. |
Our ATOS platform blends artificial intelligence (or AI) and machine
learning (ML) based optimization technology for automatic ad serving that manages digital advertising inventory and campaigns. Our data
intelligence platform provides precise data and insights on consumer’s real-world behavior and trends for use in marketing and research.
We operate our business through two wholly-owned
subsidiaries. Advangelists LLC operates our ATOS platform business, and Mobiquity Networks, Inc. operates our data intelligence platform
business.
Critical Accounting Policies
Our discussion and analysis of our financial condition
and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting
principles in the United States. The preparation of financial statements requires management to make estimates and disclosures on the
date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue
recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual
results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments
and estimates in the preparation of our financial statements.
Revenue Recognition
–On May 28, 2014,
the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), to update the financial reporting requirements
for revenue recognition. Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on
the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional
disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance became effective for
the Company beginning on January 1, 2018, and entities have the option of using either a full retrospective or a modified retrospective
approach for the adoption of the new standard. The Company adopted this standard using the modified retrospective approach on January
1, 2018.
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In preparation for adoption of the standard, the
Company evaluated each of the five steps in Topic 606, which are as follows: (1) Identify the contract with the customer; (2) Identify the
performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations;
and (5) Recognize revenue when (or as) performance obligations are satisfied.
Reported revenue will not be affected materially
in any period due to the adoption of ASC Topic 606 because: (1) the Company expects to identify similar performance obligations under
Topic 606 as compared with deliverables and separate units of account previously identified; (2) the Company has determined the transaction
price to be consistent; and (3) the Company records revenue at the same point in time, upon delivery of services, under both ASC Topic
605 and Topic 606, as applicable under the terms of the contract with the customer. Additionally, the Company does not expect the accounting
for fulfillment costs or costs incurred to obtain a contract to be affected materially in any period due to the adoption of Topic 606.
There are also certain considerations related to
accounting policies, business processes and internal control over financial reporting that are associated with implementing Topic 606.
The Company has evaluated its policies, processes, and control framework for revenue recognition, and identified and implemented the changes
needed in response to the new guidance.
Lastly, disclosure requirements under the new guidance
in Topic 606 have been significantly expanded in comparison to the disclosure requirements under the current guidance, including disclosures
related to disaggregation of revenue into appropriate categories, performance obligations, the judgments made in revenue recognition determinations,
adjustments to revenue which relate to activities from previous quarters or years, any significant reversals of revenue, and costs to
obtain or fulfill contract.
The Company generates revenue from service contracts
with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized
in proportion to the value provided to the customer for each project as of each reporting date. We recognize revenues in the period in
which the data transmission is provided to the licensee.
Allowance for Doubtful Accounts
We are required to make judgments as to the realizability
of our accounts receivable. We make these assessments based on the following factors: (a) historical experience, (b) customer concentrations,
(c) customer credit worthiness, (d) current economic conditions, and (e) changes in customer payment terms.
Accounting for Stock Based Compensation
Stock based compensation cost is measured at the
grant date fair value of the award and is recognized as expense over the requisite service period. The Company uses the Black-Sholes option-pricing
model to determine fair value of the awards, which involves certain subjective assumptions. These assumptions include estimating the length
of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility
of the company’s common stock price over the expected term (“volatility”) and the number of options for which vesting
requirements will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates
of fair value stock-based compensation, and the related amount recognized on the consolidated statements of operations.
Goodwill and Intangible Assets
Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the
Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible
assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships
and non-compete agreements. Their useful lives range from 1.5 to 10 years. The Company’s indefinite-lived intangible assets consist
of trade names.
41 |
Goodwill and indefinite-lived assets are not amortized
but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment
assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate
that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at
the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting
unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach
and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines
fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors
that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach,
which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk
relative to the overall market, the Company’s size and industry and other Company specific risks. Other significant assumptions
used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital
requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market.
If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying
amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates
the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the
fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of
the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired
on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount
equal to the excess.
Determining the fair value of a reporting unit
is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans
and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes
of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause
the Company to perform impairment test prior to scheduled annual impairment tests.
The Company performed its annual fair value assessment
at December 31, 2019, there were no impairment charges during the year. For the year ended December 31, 2020, there was a $4,000,000 impairment.
Plan of Operation
Mobiquity intends to hire several new sales and
sales support individuals to help generate additional revenue through the use of the Advangelists platform. Mobiquity’s sales team
will focus on Advertising Agencies, Brands and publishers to help increase both supply and demand across the Advangelists platform. The
Advangelists platform creates three revenue streams for Mobiquity. The first is licensing the Advangelists platform as a white-label product
for use by Advertising Agencies, DSP’s, Publishers and Brands. Under the White-Label scenario, the user licenses the technology
and is responsible for running its own business operations and is billed a percentage of volume run through the platform. The second revenue
stream is a managed services model, in which, the user is billed a higher percentage of revenue run through the platform, but all services
are managed by the Mobiquity/Advangelists team. The third revenue model is a seat model, whereas the user is billed a percentage of revenue
run through the platform and business operations are shared between the user and the Mobiquity/Advangelists team. The goal of the sales
team is to inform potential users of the benefits in efficiency and effectiveness of utilizing the end-to-end, fully integrated ATOS created
by Advangelists.
Results of Operations
Quarter Ended September 30, 2021, versus
Quarter Ended September 30, 2020
The following table sets forth certain selected
condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison
may not be indicative of future performance.
Quarter Ended | ||||||||
September 30, 2021 | September 30, 2020 | |||||||
Revenue | $ | 572,745 | $ | 1,429,696 | ||||
Cost of Revenues | (690,702 | ) | (952,779 | ) | ||||
Gross Income (Loss) | (117,957 | ) | 476,917 | |||||
Selling, General and Administrative Expenses | (3,076,255 | ) | (2,078,382 | ) | ||||
Loss from operations | (3,194,212 | ) | (1,601,465 | ) | ||||
42 |
We generated revenues
of $572,745 in the third quarter of 2021 as compared to $1,429,696 in the same period for 2020, a change in revenues of $856,951. The
nationwide economic shutdown due to COVID-19 during the third quarter severely reduced current operations.
Cost of revenues was $690,702
or 120.6% of revenues in the third quarter of 2021 as compared to $952,779 or 66.6% of revenues in the same fiscal period of fiscal 2020.
Cost of revenues include web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability
to capture and store data for sales does not translate to increased cost of sales.
Gross Income (Loss) was
$(117,957) or 20.6% of revenues for the third quarter of 2021 as compared to $476,917 in the same fiscal period of 2020 or 33.4% of revenues.
When the country comes out of COVID-19 and the economy begins to turn around we anticipate income to increase.
Selling, general, and
administrative expenses were $3,076,255 for the third quarter of fiscal 2021 compared to $2,078,382 in the comparable period of the prior
year, an increase of $997,873. Increased operating costs include cash expense for salaries of $105,308, non-cash operating costs include
stock-based compensation of $662,579, and origination fees of $605,880.
The net loss from operations
for the third quarter of fiscal 2021 was $3,194,212 as compared to $1,601,465 for the comparable period of the prior year. The continuing
operating loss is attributable to the focused effort in creating the infrastructure required to move forward with our Mobiquity and Advangelists
network business.
No benefit for income taxes
is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability to be profitable
in the future is dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data
Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.
Nine months Ended September 30, 2021, versus
Nine months Ended September 30, 2020
The following table sets forth certain selected
condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison
may not be indicative of future performance.
Nine Months Ended | ||||||||
September 30, 2021 | September 30, 2020 | |||||||
Revenue | $ | 1,797,052 | $ | 3,032,064 | ||||
Cost of Revenues | (2,439,501 | ) | (2,612,690 | ) | ||||
Gross Income (Loss) | (642,449 | ) | 419,374 | |||||
Selling, General and Administrative Expenses | (6,179,909 | ) | (8,013,595 | ) | ||||
Loss from operations | (6,822,358 | ) | (7,594,221 | ) | ||||
We generated revenues
of $1,797,052 in the nine months of 2021 as compared to $3,032,064 in the same period for 2020, a change in revenues of $1,235,012. The
nationwide economic shutdown due to COVID-19 during the six months ended severely reduced current operations.
Cost of revenues was $2,439,501
or 135.8% of revenues in the nine months of 2021 as compared to 2,612,690 or 86.2% of revenues in the same fiscal period of fiscal 2020.
Cost of revenues include web services for storage of our data and web engineers who are building and maintaining our platforms. Our ability
to capture and store data for sales does not translate to increased cost of sales.
Gross Income (Loss) was
$(642,449) or 35.8% of revenues for the nine months of 2021 as compared to $419,374 in the same fiscal period of 2020 or 13.8% of revenues.
When the country fully comes out of COVID-19 and the economy turns around we anticipate income to increase.
Selling, general, and
administrative expenses were $6,179,909 for the nine months of fiscal 2021 compared to $8,013,595 in the comparable period of the prior
year, a decrease of approximately $1,833,686. Decreased operating costs include professional fees of $359,064, salaries of $273,304,
non-cash expenses of amortization costs of $600,000 and warrant expense of $598,894.
43 |
The net loss from operations
for the nine months of fiscal 2021 was $6,822,358 as compared to $7,594,221 for the comparable period of the prior year. The continuing
operating loss is attributable to the focused effort in creating the infrastructure required to move forward with our Mobiquity and Advangelists
network business.
No benefit for income taxes is provided for in
the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability to be profitable in the future is
dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data Licensing, Footfall
Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.
Year Ended December 31, 2020 versus Year Ended December 31,
2019
Year Ended December 31 | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 6,184,010 | $ | 9,717,796 | ||||
Cost of Revenues | 4,360,645 | 7,297,550 | ||||||
Gross Profit | 1,823,365 | 2,420,246 | ||||||
Operating Expenses | 13,204,465 | 15,882,475 | ||||||
Loss from operations | (11,381,100 | ) | (13,462,229 | ) | ||||
Net Loss | (15,029,395 | ) | (43,747,375 | ) | ||||
Loss from operations per common share | (5.92 | ) | (22.55 | ) | ||||
Weighted average common shares outstanding | 2,537,811 | 1,952,538 | ||||||
We generated revenues
of $6,184,010 in fiscal 2020 compared to $9,717,796 in the same period for fiscal 2019, a change in revenues of $3,533,786, which is
a decrease of over 36%. Decreased revenues from the onset of COVID-19 started during the first quarter of 2020 and continues currently.
Cost of revenues was $4,360,645
or 70.5% of revenues in fiscal 2020 compared to $7,297,550 or 75.1% of revenues in the same fiscal period of fiscal 2019. Cost of revenues
include web services for storage and processing of our data and web engineers who are building and maintaining our platforms.
Gross Profit was $1,823,365
for fiscal 2020 or 29.5% of revenues compared to $2,420,246 in the same fiscal period of 2019 or 24.9% of revenues. The increase in gross
profit margin from fiscal year 2019 to 2020 pertains to discounts given to our current customer base with some introductory rates for
the new services we designed in 2019 have been removed in 2020.
Operating expenses were
$13,204,465 for fiscal 2020 compared to $15,882,475 in the comparable period of the prior year, a decrease of $2,678,010. Such operating
cost decreases include technology integration costs, payroll and related expenses, commissions, insurance, rents, professional (consulting)
and public awareness fees. Non-cash stock-based compensation decreased $5,251,952 along with an increase in amortization costs of $1,076,488
and impairment expense of $4,000,000.
The loss from operations
for 2020 was $11,381,100 as compared to $13,462,229 for the comparable period of the prior year, a $2,081,129 decrease. The loss from
operations included the non-cash decrease in stock-based compensation of $1,347,048, amortization costs of $2,600,735, and warrant expense
$598,894 and an increase in impairment costs of $4,000,000. Cash costs include a decrease in salaries of $783,474, rents $93,573 and
commissions of $116,406 an increase in bad debts of $444,697 due to the COVID-19 pandemic.
The net loss for 2020
was $15,029,395 as compared to $43,747,375 for the comparable period of the prior year, a 34.4% decrease from the previous year. Decrease
in net loss from 2020 include noncash expenses totaling $22,791,640, including $22,614,303 in warrant expense and stock-based compensation
of $5,251,952.
No benefit for income
taxes is provided for in the reported periods due to the full valuation allowance on the net deferred tax assets. Our ability to be profitable
in the future is dependent upon the successful introduction and usage of our data collection and analysis including Advertising, Data
Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research services.
44 |
Liquidity and Capital Resources
The Company had cash and
cash equivalents of $735,505 at September 30, 2021. Cash used in operating activities for the nine months ended September 30, 2021, was
$5,060,535. This resulted primarily from a net loss of $8,735,146 offset by stock-based compensation of $1,289,899, amortization
of $1,350,551, common stock issued for services of $173,300, accrued interest of $301,919, decrease in accounts receivable of $1,013,223
and $474,650 decrease in accounts payable, decrease in prepaid expenses of $43,696. Cash used in investing activities results from note
converted to common stock of $1,810,506, common stock issued for cash $898,990 and Original issue discount of $724,031. Cash flow from
financing activities of $1,760,240 resulted from the proceeds from the issuance of notes of $2,643,000, and cash paid on loans $616,918
and the forgiveness of Small Business Administration of $265,842.
We had cash and cash equivalents
of $602,182 at December 31, 2020. Cash used by operating activities for the year ended December 31, 2020 was $4,750,443. This resulted
from a net loss of $15,032,404, partially offset by non-cash expenses, including depreciation and amortization of $1,807,007, stock-based
compensation of $1,347,048, warrant expense of $1,472,367 and impairment expense of $4,000,000. Cash provided by financing activities
of $485,033 was the result of issuance of notes and cash payments on notes outstanding.
The Company had cash and
cash equivalents of $539,757 at September 30, 2020. Cash used in operating activities for the nine months ended September 30, 2020, was
$4,490,623. This resulted primarily from a net loss of $10,980,423 offset by stock-based compensation of $1,331,459, warrant expense
of $1,472,368 amortization of $1,950,552, increase in allowance of uncollectible receivables of $306,000, common stock issued for professional
services of $470,000, decrease in accounts receivable of $1,512,216, change in accrued expenses and other current liabilities of $95,310
and a change in of accounts payable and accrued expenses of $447,906. Cash flow from investing activities includes the issuance of common
stock for cash of $3,338,084and the conversion of a note for common stock of $30,695, purchase of property and equipment of $6,599. Cash
flow from financing activities of $425,103 resulted from the proceeds from the issuance of the Company's convertible notes of $915,842
and cash paid on bank loans $490,739.
Our company commenced operations
in 1998 and was initially funded by our three founders, each of whom has made demand loans to our company that have been repaid. Since
1999, we have relied on equity financing and borrowings from outside investors to supplement our cash flow from operations and expect
this to continue in 2019 and beyond until cash flow from our proximity marketing operations become substantial.
We had cash and cash equivalents
of $1,240,064 at December 31, 2019. Cash used by operating activities for the year ended December 31, 2019 was $8,342,506. This resulted
from a net loss of $44,027,719, partially offset by non-cash expenses, including depreciation and amortization of $1,528,644, stock-based
compensation of $6,599,000, and warrant expense of $3,153,991, other warrant costs from the conversion/issuance of debt of $23,213,197.
Cash provided by financing activities of $9,018,251 was the result of issuance of notes, proceeds from the issuance of common stock,
sales of investments, and notes from bank.
Our company commenced operations in 1998 and was initially funded by
our three founders, each of whom has made demand loans to our company that have been repaid. Since 1999, we have relied on equity financing
and borrowings from outside investors to supplement our cash flow from operations and expect this to continue in 2021 and beyond until
cash flow from our proximity marketing operations become substantial.
Recent Financings
We have completed various financings as described
as described under the Notes to Consolidated Financial Statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have
any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
45 |
Internal Control over Financial Reporting
Under the supervision and with the participation
of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure
controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are not effective.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process
to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting
principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records
that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded
as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets
are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition
of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because
of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement
of our financial statements would be prevented or detected.
A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of
the effectiveness of internal control over financial reporting as of December 31, 2020, our company determined that there were control
deficiencies that constituted material weaknesses, as described below:
We did not maintain appropriate financial
reporting controls – As of December 31, 2020, our company has not maintained sufficient internal controls over financial
reporting for the financial reporting process. As at December 31, 2018, our company did not have sufficient financial reporting
controls with respect to timely financial reporting and the ability to process complex accounting issues such as debt conversions.
Subsequent to December 31, 2018, our company has obtained the necessary assistance to ensure that the performance of complex
accounting issues can be performed accurately and on a timely basis.
Management conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in
Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the
company’s internal control over financial reporting was not effective as of December 31, 2018. There were no significant changes
in our internal control over financial reporting during the year ended December 31, 2018 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting. Our independent auditors have not audited and are not required
to audit this assessment of our internal control over financial reporting for the fiscal year ended December 31, 2020.
Internal Controls Remediation Efforts
We are working to remediate the deficiencies
and material weaknesses in our internal controls. We are taking steps to enhance our internal control environment establish and maintain
effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance.,
In this regard, the Company will be adopting several corporate governance policies and it has established various committees of the Board
of Directors, including an Audit Committee comprised of three independent directors in accordance with Nasdaq Rule 5605(c)(2), which
will take effect at the time that our registration statement of which this prospectus is a part becomes effective. One of the Audit Committee’s
priorities will be to begin the process of segregating tasks and processes to ensure proper internal controls. In connection with this
process, the Company plans to implement the following initiatives under the oversight of the Audit committee, and will dedicate a portion
of the net proceeds of its offering under this prospectus allocated to working capital to fund them:
· | Hire additional staff to the Finance department with sufficient GAAP experience. |
· | Implement ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel. |
· | Hire a consultant to assist in internal control review, testing of procedures and processes, and analysis. |
· | Initiate a preliminary assessment of management’s internal controls over financial reporting. |
· | Improve documentation of existing internal controls and procedures and train personnel to help ensure they are properly followed. |
Although we plan to undertake and complete
this remediation process as quickly as possible, we are unable, at this time to estimate how long it will take; and our efforts may not
be successful in remediating the deficiencies or material weaknesses.
46 |
MANAGEMENT
The following table presents information with respect
to our officers, directors and significant employees as of the date of this prospectus:
NAME | AGE | POSITION | ||
Dean L. Julia | 53 | Chief Executive Officer/President/Treasurer/Director/Co-Founder/Secretary | ||
Paul Bauersfeld | 57 | Chief Technology Officer | ||
Sean J. McDonnell, CPA | 59 | Chief Financial Officer | ||
Sean Trepeta | 53 | President of Mobiquity Networks /Secretary of the Company | ||
Dr. Gene Salkind, M.D. | 68 | Chairman of the Board of Directors | ||
Deepanker Katyal | 35 | Chief Executive Officer of Advangelists |
Our Company is governed by our board. Directors
are elected at the annual meeting of stockholders and hold office until the following annual meeting. The terms of all officers expire
at the annual meeting of directors following the annual stockholders meeting. Officers serve at the pleasure of our board of directors
and may be removed, either with or without cause, by our board of directors, and a successor elected by a majority vote of our board of
directors, at any time. Nevertheless, the foregoing is subject to the employment contracts of our executive officers.
Independent Directors
Currently we have no independent directors.
The following persons have consented to become directors of the Company upon the effectiveness of the registration statement of which
this prospectus is a part to fill vacancies on the board. Each of them are deemed to be independent directors under NASDAQ listing rules.
When Messrs. Zurkow, Wright and Iacovone become directors, only they will be independent directors; and all standing committees of our
board of directors will be composed either entirely of independent directors, in each case under NASDAQ’s independence definition
applicable to boards of directors, or a majority of independent directors with a non-independent director as and to the extent permitted
under NASDAQ’s listing rules.
NAME | AGE | POSITION | ||
Peter L. Zurkow | 68 | Director Candidate | ||
Michael A. Wright | 59 | Director Candidate | ||
Anthony Iacovone | 48 | Director Candidate |
For a director to be considered independent, our
board of directors must determine that the director has no relationship which, in the opinion of our board, would interfere with the exercise
of independent judgment in carrying out the responsibilities of a director.
Business Experience of our Directors, Officers and Significant Employees
Dean L. Julia
.
Mr. Julia works at
Mobiquity Technologies, Inc. where he has served as its Chief Executive Officer since December 2000. Mr. Julia co-founded Mobiquity in
1998. Mr. Julia is responsible for establishing our overall strategy and fostering key relationships with technology partners and developers.
Mr. Julia also works at Mobiquity Networks, Inc., Mobiquity’s wholly-owned subsidiary, since its formation in 2011. Mr. Julia is
responsible for the integration of the sales and intellectual property departments of Mobiquity. From September 1996 through February
1998, Mr. Julia served as President and Chief Executive Officer of DLJ Consulting, a financial intermediary consultant for public and
private companies. Mr. Julia has served on the board since its inception. Mr. Julia is a graduate of Hofstra University with a Bachelor
of Business Administration in 1990. Except for Mobiquity Technologies, Inc., Mr. Julia does not hold, and has not previously held, any
directorships in any publicly-traded reporting companies.
Paul Bauersfeld
. Mr. Bauersfeld works
at Mobiquity Technologies, Inc. where he has served as the Chief Technology Officer since June 2013. From 2003 to 2013, he worked at Varsity
Networks, an online media and services company dedicated to serving the local sports market through technology, which he founded and where
he served as its Chief Executive Officer. From 2000 to 2001, he worked at MessageOne, where he served as its Chief Executive Officer.
From 1999 to 2000, he worked at Ziff-Davies where he served as its Vice President of eCommerce. From 1997 to 1999, he worked at Viacom’s
Nickelodeon Online, where he served as its Technology Director. From 1996 to 1997, he worked at GiftOne, where he served as its President.
From 1988 to 1993, he worked at Apple Computer where he served in various engineering positions. From 1986 to 1988 he worked at Xerox
Corporation. Mr. Bauersfeld brings over 20 years of knowledge and experience as an executive, engineer and entrepreneur in the technology,
and software product development industries. His experience in these industries will help the company develop its products and technologies.
Mr. Bauersfeld is a graduate of the Rochester Institute of Technology with a B.S. in Electrical Engineering in 1986. Mr. Bauersfeld does
not hold, and has not previously held, any directorships in any publicly-traded reporting companies.
47 |
Sean J. McDonnell, CPA
. Mr. McDonnell
works at Mobiquity Technologies, Inc. where he has served as the Chief Financial Officer since January 2005. From January 1990 to present,
he has owned and operated Sean J. McDonnell CPA, P.C., a private accounting and tax practice. From 1985 to 1990, he worked at Breiner
& Bodian CPAs where he served as a senior staff member. Mr. McDonnell brings knowledge and experience in the accounting, finance and
tax industries. Mr. McDonnell is a graduate of Dowling College with a Bachelor of Business Administration in 1984. Mr. McDonnell does
not hold, and has not previously held, any directorships in any reporting companies.
Sean Trepeta
. Mr. Trepeta works
at our wholly-owned subsidiary, Mobiquity Networks, Inc. where he has served as President since January 2011. He is also the Secretary
of the Company since November 2021. From 2007 to 2011, he worked at Varsity Networks where he served as its President. From 1998
to 2007, Mr. Trepeta worked at OPEX Communications, Inc., a telecommunication service provider specializing in traditional long-distance,
wireless, and dedicated services, where he served as its President. From 1996 to 1998 he worked at U.S. Buying Group, Inc., where he
served as Vice President of Sales and Marketing and was responsible for developing a small business-buying program, which included value
added services such as overnight shipping, office supplies, and computer software products, as well as a full line of telecommunications
services. Mr. Trepeta also developed and implemented the agent and carrier divisions of U.S. Buying Group. Mr. Trepeta brings 25 years
of knowledge and experience in sales and marketing to our Company to help us grow sales and develop marketing strategies. Mr. Trepeta
is a graduate of the State University of New York at Cortland with a B.S. in Education in 1990. Except for Mobiquity Technologies, Inc.,
Mr. Trepeta does not hold, and has not previously held, any directorships in any publicly-traded reporting companies. We plan to have
a board of directors comprised of five members, including three independent directors if and when we are approved to have our common
stock listed on the NASDAQ Capital Market. Mr. Trepeta is expected to resign from the board if this occurs, on the listing date of our
common stock on the Nasdaq Capital Market to accommodate this board restructure.
Gene Salkind, M.D.
Dr. Salkind has
served as a director of Mobiquity since January 2019 and Chairman of our board of directors since October, 2019. Dr. Salkind is a prominent
practicing neurosurgeon and he has been a shareholder and has worked as President of Bruno & Salkind M.D. P.C. since 1985. He has
also worked at Holy Redeemer Hospital where he is the Chief of Neurosurgery, a position he has held since 2001. Dr. Salkind is board certified
in neurological surgery by the American Board of Neurological Surgery. He served as Chief of Neurosurgery of Albert Einstein Medical Center
in Philadelphia from 1997 to 2002, and of Jeanes Hospital in Philadelphia from 1990 to 2000. In addition to Dr. Salkind’s medical
career, he is a tech-company investor, with experience guiding small and micro-cap companies in their development and growth, including
up-listings to national securities exchanges. His experience will help the Company with its business growth and corporate finance strategies.
Dr. Salkind is a graduate of Lewis Katz School of Medicine at Temple University with a Doctor of Medicine in 1979. Dr. Salkind is a graduate
of the University of Pennsylvania with a B.A. in Biology,
cum laude
in 1974. From 2021 to present, Dr. Salkind has served as a
director at Grove Holdings, Inc., which expects to be a publicly traded company in sixty to ninety days. From 2018 to present, Dr. Salkind
has served as a director at CURE Pharmaceutical Holding Corp., a publicly traded company. From 2014 to 2020, Dr. Salkind served as a director
at Dermtech Intl., a publicly traded company.
Deepanker Katyal.
Mr. Katyal works
at the Company’s wholly-owned subsidiary, Advangelists, LLC where he has served as the Chief Executive Officer since the 2017 (prior
to the Company’s acquisition of an interest in Advangelists by merger in November 2018). From January 2017 to present, he has also
served as an advisor providing business and product advice to Q1media, a digital media services company. Additionally, from 2016 to present,
he has served as a strategic advisor to Silicon Valley Stealth Mode Products, a private company. From May 2016 to April 2017, he served
as a strategic advisor to Airupt Inc., a mobile marketing platform for brands. From May 2016 to March 2017, he was head of Partnership
and Strategy for Adtile Technologies, a mobile publishing and advertising solution company. From November 2015 to 2016, he served as a
strategic advisor to Moonraft Innovation Labs, a company that creates customer experiences to differentiate the entities’ clients
in the market by creating and designing interactive experiences across physical and digital customer touch points. From April 2014 to
May 2016, he also served as a member of the innovation team at Opera Mediaworks, a mobile advertising platform company. Mr. Katyal brings
knowledge and experience in software engineering, leading business development efforts, strategic partnerships, and product development
and strategy. His experience will help the Company grow and develop its technology and product strategies. Mr. Katyal was a director of
our Company from December 2018 following our merger transaction with Advangelists until May 2020, when he stepped down from that position
to attend to family matters and focus his working-time commitment on running the day-to-day operations of Advangelists. He does not hold
any directorships in any publicly-traded reporting companies.
48 |
Business Experience of our Director Candidates
Peter L. Zurkow
. Mr. Zurkow serves
as a consultant to Sustainability Industries since 2019. From 2014 to 2019, he worked at Perpetual Recycling Solutions LLC where he served
as the Chief Executive Officer and the head of sales and raw materials procurement.
From 2011 to
2013
,
Mr. Zurkow worked at Britton Hill Capital where he served as Managing Director and
Head of Corporate Finance. From 2010 to 2012, Mr. Zurkow worked at Advanced Brain Technologies where he served as Acting EVP and Director
of Finance and Business Development. Prior to that Mr. Zurkow worked in management positions in investment banking, fixed income and
asset management as various securities firms and funds.
Mr. Zurkow brings knowledge and experience in corporate finance, financial
matters, and investments, with a background in law. His experience will help the Company with its corporate financing strategies and
financial matters. Mr. Zurkow is a graduate of Harvard College, with an A.B.,
cum laude
, in 1975 and a graduate of Syracuse University
College of Law, with a J.D.,
magna cum laude
, in 1978. From 2012 to 2014, Mr. Zurkow served as a director and member of the audit
committee for National Holdings Corporation, a public company until it was acquired by Fortress Biotech. From 1992 through 2005 Mr. Zurkow
served a Director (and Chairman of the Board from 1999 to 2002) of Penn Traffic, a public company until it acquired by Giant Eagle and
Tops Markets. From 1996 to 1998 he served as a Director of Streamline, Inc., a former public company. From 1994 through 1996 Mr. Zurkow
served as a Director and representative of majority investor for Kash n’ Karry Supermarkets, then a public company.
Michael
A. Wright
.
Mr. Wright works at Seiden Krieger Associates, where he has served as an Executive Vice President and the head of Human
Resources and Diversity Practice since 2018. From 2009 to 2019, Mr. Wright worked at Covanta Holding Corporation where he served as Chief
Human Resources Officer. From 1984 to 2008, Mr. Wright worked at the Atria family of companies (Kraft and Philip Morris) where he served
in various roles including Vice President of Human Resources and HR Technology. Mr. Wright brings knowledge and experience in human resources,
human resources technology and diversity.
Mr. Wright is a graduate of North Carolina State University, with a B.S. in 1984, and
a graduate of Columbia University with a MBA in 1996.
Mr. Wright currently serves as the Chair of
the HR/Legal committee and Vice Chair of the Board of Directors of the YMCA of Greater Monmouth County. He is also a member of the Board
of Trustees and President of the Advisory Council for Lunch Break.
Anthony
Iacovone
.
Mr. Iacovone is currently the Co-Founder and, since 2018, has served as the Chief Executive Officer of BioSymetrics,
Inc. and Barometric Inc. From 2010 to 2018, Mr. Iacovone worked at AdTheorent/Ad Tech where he served as the Chief Executive Officer.
Mr. Iacovone brings knowledge and experience in the technology and advertising industries. His experience will help the Company
with
its business development strategies.
Mr. Iacovone serves as an advisory board member of Accelerate
NY Biotech Seed Fund, BrandVerge, Commerce Signals, EVZDRP, PainQX, Prospect Dugout, Targagenix and Wylie. As an advisory board member
Mr. Iacovone provides counsel on business and advertising technology industry issues. He is also the founder of the Beautiful Lives Project,
a not-for-profit organization that brings sports and leisure accessibility to disabled individuals throughout the United States. He previously
served as a director of Mobiquity from January 2019 to May 2019, when he stepped down to for personal reasons and he has now agreed to
rejoin our board of directors.
Family Relationships
There are no family relationships among any of
our executive officers and directors.
Director Attendance at Meetings
Our board of directors conducts its business through
meetings, both in person and telephonic, and by actions taken by written consent in lieu of meetings. During the year ended December 31,
2020, our board of directors held no meetings and acted through unanimous written consents six times. Our board of directors encourages
all directors to attend our future annual meetings of stockholders unless it is not reasonably practicable for a director to do so.
Corporate Governance
Our business, property and affairs are managed
by, or under the direction of, our Board, in accordance with the New York Business Corporation Law and our by-laws. Members of the Board
are kept informed of our business through discussions with the Chief Executive Officer and other key members of management, by reviewing
materials provided to them by management.
49 |
We continue to review our corporate governance
policies and practices by comparing our policies and practices with those suggested by various groups or authorities active in evaluating
or setting best practices for corporate governance of public companies. Based on this review, we have adopted, and will continue to adopt,
changes that the Board believes are the appropriate corporate governance policies and practices for our Company. We have adopted changes
and will continue to adopt changes, as appropriate, to comply with the Sarbanes-Oxley Act of 2002 and subsequent rule changes made by
the SEC, and the listing rules of the NASDAQ Capital Market and any applicable securities exchange.
Director Qualifications and Diversity
The board seeks independent directors who represent
a diversity of backgrounds and experiences that will enhance the quality of the board’s deliberations and decisions. Candidates
shall have substantial experience with one or more publicly traded companies or shall have achieved a high level of distinction in their
chosen fields. The board is particularly interested in maintaining a mix that includes individuals who are active or retired executive
officers and senior executives, particularly those with experience in the finance and capital market industries.
In evaluating nominations to the board of directors,
our board also looks for certain personal attributes, such as integrity, ability and willingness to apply sound and independent business
judgment, comprehensive understanding of a director’s role in corporate governance, availability for meetings and consultation on
Company matters, and the willingness to assume and carry out fiduciary responsibilities. Qualified candidates for membership on the board
will be considered without regard to race, color, religion, sex, ancestry, national origin or disability.
Oversight of Risk Management
Risk is inherent with every business, and how well
a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, financial risks, legal
and regulatory risks and others, such as the impact of competition. Management is responsible for the day-to-day management of the risks
that we face, while our board, as a whole and through its committees, has responsibility for the oversight of risk management. In its
risk oversight role, our board of directors is responsible for satisfying itself that the risk management processes designed and implemented
by management are adequate and functioning as designed. Our board of directors assesses major risks facing our Company and options for
their mitigation in order to promote our stockholders’ interests in the long-term health of our Company and our overall success
and financial strength. A fundamental part of risk management is not only understanding the risks a company faces and what steps management
is taking to manage those risks, but also understanding what level of risk is appropriate for us. The involvement of our full board of
directors in the risk oversight process allows our board of directors to assess management’s appetite for risk and also determine
what constitutes an appropriate level of risk for our Company. Our board of directors regularly includes agenda items at its meetings
relating to its risk oversight role and meets with various members of management on a range of topics, including corporate governance
and regulatory obligations, operations and significant transactions, risk management, insurance, pending and threatened litigation and
significant commercial disputes.
While our board of directors is ultimately responsible
for risk oversight, we plan to establish various committees of our board of directors to oversee risk management in their respective areas
and regularly report on their activities to our entire board of directors. In particular, the Audit Committee will have the primary responsibility
for the oversight of financial risks facing our Company. The Audit Committee’s charter will provide that it will discuss our major
financial risk exposures and the steps we have taken to monitor and control such exposures. Our board of directors will also delegate
primary responsibility for the oversight of all executive compensation and our employee benefit programs to the Compensation Committee.
The Compensation Committee will strive to create incentives that encourage a level of risk-taking behavior consistent with our business
strategy.
We believe the division of risk management responsibilities
described above is an effective approach for addressing the risks facing our Company and that our board’s leadership structure provides
appropriate checks and balances against undue risk taking.
Code of Business Conduct and Ethics
Our board of directors has adopted a code of ethical
conduct that applies to our principal executive officer, principal financial officer and senior financial management. This code of ethical
conduct is embodied within our Code of Business Conduct and Ethics, which applies to all persons associated with our Company, including
our directors, officers and employees (including our principal executive officer, principal financial officer, principal accounting officer
and controller). In order to satisfy our disclosure requirements under the Exchange Act, we will disclose amendments to, or waivers of,
certain provisions of our Code of Business Conduct and Ethics relating to our chief executive officer, chief financial officer, chief
accounting officer, controller or persons performing similar functions on our website promptly following the adoption of any such amendment
or waiver. The Code of Business Conduct and Ethics provides that any waivers of, or changes to, the code that apply to the Company’s
executive officers or directors may be made only by the Audit Committee. In addition, the Code of Business Conduct and Ethics includes
updated procedures for non-executive officer employees to seek waivers of the code.
50 |
Board Leadership Structure
In accordance with the Company's by-laws, the Chairman
of the Board presides at all meetings of the board. Currently, the Chief Executive Officer is held by a person who is not the Chairman.
The Company has no fixed policy with respect to the separation of these titles.
Committees of our board of directors
Our board of directors has established and
will delegate certain responsibilities to its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee,
effective at the time that the registration statement of which this prospectus is a part becomes effective.
Audit Committee
We have established a separately designated
Audit Committee in accordance with Section 3(a)(58)(A) of the Exchange Act, which will take effect at the time that the registration
statement of which this prospectus is a part becomes effective. The Audit Committee’s primary duties and responsibilities include
monitoring the integrity of our financial statements, monitoring the independence and performance of our external auditors, and monitoring
our compliance with applicable legal and regulatory requirements. The functions of the Audit Committee also include reviewing periodically
with our independent registered public accounting firm the performance of the services for which they are engaged, including reviewing
the scope of the annual audit and its results, reviewing with management and the auditors the adequacy of our internal accounting controls,
reviewing with management and the auditors the financial results prior to the filing of quarterly and annual reports, reviewing fees
charged by our independent registered public accounting firm and reviewing any transactions between our Company and related parties.
Our independent registered public accounting firm reports directly and is accountable solely to the Audit Committee. The Audit Committee
has the sole authority to hire and fire the independent registered public accounting firm and is responsible for the oversight of the
performance of their duties, including ensuring the independence of the independent registered public accounting firm. The Audit Committee
also approves in advance the retention of, and all fees to be paid to, the independent registered public accounting firm. The rendering
of any auditing services and all non-auditing services by the independent registered public accounting firm is subject to prior approval
of the Audit Committee.
The Audit Committee will operate under a written
charter. The Audit Committee is required to be composed of directors who are independent under the rules of the SEC and the listing standards
of the NASDAQ Stock Market. The SEC’s independence requirement provides that members of the Audit Committee may not accept directly
or indirectly any consulting, advisory or other compensatory fee from us or any of our subsidiaries other than their directors’
compensation. In addition, under SEC rules, an Audit Committee member who is an affiliate of the issuer (other than through service as
a director) cannot be deemed to be independent.
The members of the Audit Committee, who will
take office at the time that the registration statement of which this prospectus is a part becomes effective, are Peter Zurkow, the Chairperson
of the Audit Committee, Michael Wright and Anthony Iacovone. Messrs. Zurkow, Wright and Iacovone have been determined by the board
of directors to be independent under the NASDAQ listing standards and rules adopted by the SEC applicable to audit committee members
when they become directors. The board of directors has determined that Mr. Zurkow qualifies as an “audit committee financial expert”
under the rules adopted by the SEC and the Sarbanes Oxley Act. The term “Financial Expert” is defined under the Sarbanes-Oxley
Act of 2002 as a person who has the following attributes: an understanding of generally accepted accounting principles and financial
statements; has the ability to assess the general application of such principles in connection with the accounting for estimates, accruals
and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity
of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised
by the company’s financial statements, or experience actively supervising one or more persons engaged in such activities; an understanding
of internal controls and procedures for financial reporting; and an understanding of audit committee functions.
Compensation Committee
We have established a separately designated
Compensation Committee, which will take effect at the time that the registration statement of which this prospectus is a part becomes
effective. The primary duties and responsibilities of the Compensation Committee are to review, modify and approve the overall compensation
policies for the Company, including the compensation of the Company’s Chief Executive Officer and other senior management; establish
and assess the adequacy of director compensation; and approve the adoption, amendment and termination of the Company’s stock option
plans, pension and profit-sharing plans, bonus plans and similar programs. The Compensation Committee may delegate to one or more officers
the authority to make grants of options and restricted stock to eligible individuals other than officers and directors, subject to certain
limitations. Additionally, the Compensation Committee will have the authority to form subcommittees and to delegate authority to any
such subcommittee. The Compensation Committee will also have the authority, in its sole discretion, to select, retain and obtain, at
the expense of the Company, advice and assistance from internal or external legal, accounting or other advisors and consultants. Moreover,
the Compensation Committee will have the sole authority to retain and terminate any compensation consultant to assist in the evaluation
of director, Chief Executive Officer or senior executive compensation, including sole authority to approve such consultant’s reasonable
fees and other retention terms, all at the Company’s expense.
51 |
The Compensation Committee will operate under a
written charter. All members of the Compensation Committee must satisfy the independence requirements of NASDAQ applicable to Compensation
Committee members. In determining the independence of members of the Compensation Committee, NASDAQ listing standards require our board
of directors to consider certain factors, including, but not limited to:
· | the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by us to the director; and |
· | whether the director is affiliated with us, one of our subsidiaries or an affiliate of one of our subsidiaries. |
Under our planned Compensation Committee Charter,
members of the Compensation Committee also must qualify as “outside directors” for purposes of Section 162(m) of the Internal
Revenue Code of 1986, and as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act.
The Compensation Committee will consist of Michael
Wright, Peter Zurkow and Anthony Iacovone, who will take office at the time that the registration statement of which this prospectus
is a part becomes effective. Mr. Wright is the Chairperson of the Compensation Committee. Each of the Compensation Committee members
has been determined by the board of directors to be independent under NASDAQ listing standards applicable to compensation committee members,
outside directors under the Internal Revenue Code, and non-employee directors under Rule 16b-3 under the Exchange Act.
Nominating and Corporate Governance Committee
We have established a separately designated
Nominating and Corporate Governance Committee, which will take effect at the time that the registration statement of which this prospectus
is a part becomes effective. The Nominating and Corporate Governance Committee identifies, reviews and evaluates candidates to serve
on the Board; reviews and assesses the performance of the board of directors and the committees of the Board; and assesses the independence
of our directors. The Nominating and Corporate Governance Committee is also responsible for reviewing the composition of the Board’s
committees and making recommendations to the entire board of directors regarding the chairpersonship and membership of each committee.
In addition, the Nominating and Corporate Governance Committee is responsible for developing corporate governance principles and periodically
reviewing and assessing such principles, as well as periodically reviewing the Company’s policy statements to determine their adherence
to the Company’s Code of Business Conduct and Ethics.
The Nominating and Corporate Governance Committee
will operate under a written charter that identifies the procedures whereby Board of Director candidates are identified primarily
through suggestions made by directors, management and stockholders of the Company. The Nominating and Corporate Governance Committee
will consider director nominees recommended by stockholders that are submitted in writing to the Company’s Corporate Secretary
in a timely manner and which provide necessary biographical and business experience information regarding the nominee. The Nominating
and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the criteria considered
by the Nominating Committee, based on whether or not the candidate was recommended by a stockholder. The board of directors does not
prescribe any minimum qualifications for director candidates, and all candidates for director will be evaluated based on their qualifications,
diversity, age, skill and such other factors as deemed appropriate by the Nominating and Corporate Governance Committee given the current
needs of the board of directors, the committees of the board of directors and the Company. Although the Nominating and Corporate Governance
Committee does not have a specific policy on diversity, it considers the criteria noted above in selecting nominees for directors, including
members from diverse backgrounds who combine a broad spectrum of experience and expertise. Absent other factors which may be material
to its evaluation of a candidate, the Nominating and Corporate Governance Committee expects to recommend to the board of directors for
selection incumbent directors who express an interest in continuing to serve on the Board. Following its evaluation of a proposed director’s
candidacy, the Nominating and Corporate Governance Committee will make a recommendation as to whether the board of directors should nominate
the proposed director candidate for election by the stockholders of the Company.
No member of the Nominating and Corporate Governance
Committee may be an employee of the Company, and each member must satisfy the independence requirements of NASDAQ and the SEC, except
that the committee may have one member who does not meet the Nasdaq independent standards if that committee member is not a current executive
officer or employee of the Company or a family member of any current executive officer of the Company, and the Board determines, under
exceptional and limited circumstances, that the director’s membership on the Committee is in the best interests of the Company
and its Shareholders.
The Nominating and Corporate Governance Committee
will consist of Anthony Iavacone, who is the Chairperson of the committee, Peter Zurkow and Michael Wright who will take office at the
time that the registration statement of which this prospectus is a part becomes effective. Messrs. Iavacone, Zurkow and Wright have been
determined by the board of directors to be independent under NASDAQ listing standards.
We have implemented no material changes in
the past year to the procedures by which stockholders may recommend nominees for the Board.
52 |
EXECUTIVE COMPENSATION
The following table sets forth the overall compensation
earned over the fiscal years ended December 31, 2020 and 2019 by:
· | each person who served as the principal executive officer of the company during fiscal year 2020 and 2019; |
· | the Company’s most highly compensated (up to a maximum of two) executive officers as of December 31, 2019 and 2020 with compensation during fiscal years 2019 and 2020 of $100,000 or more; and |
· | those two individuals, if any, who would have otherwise been in included in bullet point above but for the fact that they were not serving as an executive of the company as of December 31, 2020. |
Name and Principal | Salary | Bonus | Stock | Option Awards | All Other Compensation | Total | |||||||||||||||||||||
Position | Year | ($) | ($) | Awards | ($)(1) | ($)(2)(3) | ($) | ||||||||||||||||||||
Dean L. Julia | 2020 | $ | 275,539 | $ | 65,318 | – | $ | – | $ | 61,716 | $ | 402,573 | |||||||||||||||
CEO of the company | 2019 | $ | 360,000 | $ | 15,900 | – | $ | 3,575,000 | $ | 70,474 | $ | 4,021,374 | |||||||||||||||
Deepanker Katyal | 2020 | $ | 306,154 | $ | 7,622 | – | $ | – | $ | 38,119 | $ | 351,895 | |||||||||||||||
CEO of Advangelists | 2019 | $ | 400,000 | $ | – | – | $ | – | $ | 29,799 | $ | 429,799 | |||||||||||||||
Paul Bauersfeld | 2020 | $ | 229,616 | $ | 39,970 | – | $ | – | $ | 30,533 | $ | 300,119 | |||||||||||||||
Chief Technology Officer | 2019 | $ | 300,000 | $ | 7,950 | – | $ | 500,500 | $ | 35,166 | $ | 835,666 | |||||||||||||||
(1)
The options and restricted stock awards presented in this table for fiscal years 2020 and 2019 reflect the full grant date fair
value, as if the total dollar amount were earned in the year of grant. The stock awards are valued based on the fair market value of such
shares on the date of grant and are charged to compensation expense over the related vesting period. The options are valued at the date
of grant based upon the Black-Scholes method of valuation, which is expensed over the service period over which the options become vested.
As a general rule, for time-in-service-based options, the company will immediately expense any option or portion thereof which is vested
upon grant, while expensing the balance on a pro rata basis over the remaining vesting term of the option.
(2)
Includes all other compensation not reported in the preceding columns, including (i) perquisites and other personal benefits, or
property, unless the aggregate amount of such compensation is less than $10,000; (ii) any “gross-ups” or other amounts reimbursed
during the fiscal year for the payment of taxes; (iii) discounts from market price with respect to securities purchased from the company
except to the extent available generally to all security holders or to all salaried employees; (iv) any amounts paid or accrued in connection
with any termination (including without limitation through retirement, resignation, severance or constructive termination, including change
of responsibilities) or change in control; (v) contributions to vested and unvested defined contribution plans; (vi) any insurance premiums
paid by, or on behalf of, the company relating to life insurance for the benefit of the named executive officer; and (vii) any dividends
or other earnings paid on stock or option awards that are not factored into the grant date fair value required to be reported in a preceding
column.
(3)
Includes compensation for service as a director described under Director Compensation, below.
For a description of the material terms of each
named executive officers’ employment agreement, including the terms of the terms of any common share purchase option grants, see
that section of this prospectus captioned “
Employment Agreements
.”
No outstanding common share purchase option or
other equity-based award granted to or held by any named executive officer in the past two years were re-priced or otherwise materially
modified, including extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable
performance criteria, or the change of the bases upon which returns are determined, nor was there any waiver or modification of any specified
performance target, goal or condition to payout, except as follows:
53 |
For a description of the material terms of any
contract, agreement, plan or other arrangement that provides for any payment to a named executive officer in connection with his or her
resignation, retirement or other termination, or a change in control of the company see “
Employment Agreements
” in this prospectus.
The number of shares of common stock referred
to in this “
Executive Compensation
” section gives effect to the one-for 400 share reverse stock split that we effectuated
on September 9, 2020, unless the context clearly indicates otherwise.
Executive Officer Outstanding Equity Awards
at Fiscal Year-End
The following table provides
certain information concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named
executive officers that were outstanding as of December 31, 2020.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options(#) Exercisable | Number of Securities Underlying Unexercised Options(#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) |
|
|
| |||||||||||||||||||||||||||
Dean L. | 12,250 | – | – | $ | 20.00 | 01/24/23 | – | – | – | – | ||||||||||||||||||||||||||
Julia (1) | 12,500 | – | – | $ | 28.00 | 11/20/23 | – | – | – | – | ||||||||||||||||||||||||||
62,500 | – | – | $ | 60.00 | 4/2/29 | – | – | – | – | |||||||||||||||||||||||||||
Deepanker | 128,517 | – | – | $ | 56.00 | 12/6/28 | – | – | – | – | ||||||||||||||||||||||||||
Katyal (1) | 25,000 | – | – | $ | 36.00 | 09/13/24 | – | – | – | – | ||||||||||||||||||||||||||
12,500 | – | – | $ | 36.00 | 09/13/25 | – | – | – | – | |||||||||||||||||||||||||||
Paul | 10,000 | – | – | $ | 20.00 | 01/24/23 | – | – | – | – | ||||||||||||||||||||||||||
Bauersfeld (1) | 7,500 | – | – | $ | 28.00 | 11/20/23 | – | – | – | – | ||||||||||||||||||||||||||
25,000 | – | – | $ | 60.00 | 04/2/29 | – | – | – | – | |||||||||||||||||||||||||||
(1) | All options contain cashless exercise provisions. |
Employment Agreements
In April of 2020, due to the COVID-19 pandemic
all employees’ salaries were reduced by 40% and we terminated one employee. In October of 2020 the employees pay reduction was reduced
to a 20% reduction where it stands as of the date of the registration statement of which this prospectus is a part.
54 |
Dean Julia
Dean Julia is employed as the Company’s Chief
Executive Officer under an employment agreement with an initial term of three years which commenced on April 2, 2019. The agreement will
automatically renew for an additional two years, unless terminated 90 days before termination of the initial term. Mr. Julia’s annual
base salary is $360,000. In addition to his base salary, Mr. Julia is entitled to a quarterly bonus of at least 1% of gross revenue for
each completed fiscal quarter, so long as the Company’s gross revenue meets or exceeds 75% of management’s stated goal. The
quarterly bonus may be paid either in cash, common stock or stock options, at Mr. Julia’s election. Should his employment agreement
be terminated prior to the end of any fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly
bonus shall be paid within 30 days of termination. The Company's board of directors will determine a revenue target each year for the
purpose of calculating the quarterly bonus in that year. Mr. Julia also received a signing bonus of vested 10-year options to purchase
62,500 shares, exercisable at $60 per share. Additionally, he is also entitled to 10-year options to purchase an additional 12,500 shares
of common stock, exercisable at $60 per share, annually on April 1
st
of each year which commenced on April 1, 2020. Additionally,
if the Company is acquired through a board of directors-approved change in control of at least 50% of the Company’s outstanding
voting stock, or the sale of all or substantially all of the Company’s assets, Mr. Julia shall be entitled to receive a payment
in-kind equal to 3% of the consideration paid in connection with that transaction. He is also entitled to paid disability insurance and
term life insurance at an annual cost of not more than $15,000. Additionally, he is also entitled to receive health, dental and 401(k)
benefits as is made available by the Company for its other senior officers, as well as indemnification by the Company to the fullest extent
permitted by law, and the Company’s certificate of incorporation and bylaws. Mr. Julia also has the use of a Company-leased or -owned
automobile. Mr. Julia’s employment agreement contains customary non-competition and non-solicitation of Company customers or employees
provisions during the term of the agreement. The Company may terminate Mr. Julia’s employment for cause, and Mr. Julia may terminate
his employment at any time on three-months’ notice. Also, the Company may terminate Mr. Julia’s employment agreement on Mr.
Julia’s death or disability – disability being unable to perform his essential functions for four consecutive months due to
physical, mental of emotional incapacity resulting from sickness, disease, or injury. In each of these termination cases, the Company
is obligated only to pay Mr. Julia amounts that were due or accrued prior to termination, plus, other than in a for-cause-termination,
any pro-rata quarterly bonus described above.
Paul Bauersfeld
Paul Bauersfeld is employed as the Company’s
Chief Technology Officer under an at-will employment agreement which commenced on April 2, 2019. Mr. Bauersfeld’s monthly salary
is $25,000. Mr. Bauersfeld is entitled to a quarterly bonus of at least 1% of gross revenue for each completed fiscal quarter, so long
as the Company’s gross revenue meets or exceeds management’s stated goal. The quarterly bonus may be paid either in cash,
common stock or stock options, at Mr. Bauersfeld’s election. Should his employment agreement be terminated prior to the end of any
fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly bonus shall be paid within 30 days
of termination. The Company's board of directors will determine a revenue target each year for the purpose of calculating the quarterly
bonus in that year. Mr. Bauersfeld also received a signing bonus of 10-year options to purchase 25,000 shares, exercisable at $60 per
share; 35% of which vested immediately, 35% of which vested on April 2, 2020 and 30% of which vested on April 2, 2021. Mr. Bauersfeld
is entitled to participate in the Company’s health plans as well as indemnification by the Company to the fullest extent permitted
by law, and the Company’s certificate of incorporation and bylaws. Mr. Bauersfeld’s employment agreement contains customary
non-competition and non-solicitation of Company customers or employees provisions during the term of the agreement. Although Mr. Bauersfeld’s
employment agreement is at-will, the Company may terminate Mr. Bauersfeld’s employment for cause. In the event Mr. Bauersfeld’s
employment agreement is terminated other than for cause by the Company, the Company will pay Mr. Bauersfeld severance pay equal to three
months of his salary.
Sean Trepeta
Sean Trepeta is employed as President of our wholly-owned
subsidiary, Mobiquity Networks, Inc. under an at-will employment agreement which commenced on April 2, 2019. Mr. Trepeta’s monthly
salary is $20,000. Mr. Trepeta is entitled to a quarterly bonus of at least 1% of gross revenue for each completed fiscal quarter, so
long as the Company’s gross revenue meets or exceeds management’s stated goal. The quarterly bonus may be paid either in cash,
common stock or stock options, at Mr. Trepeta’s election. Should his employment agreement be terminated prior to the end of any
fiscal year for any reason, other than for cause by the Company, a pro rata portion of the quarterly bonus shall be paid within 30 days
of termination. The Company's board of directors will determine a revenue target each year for the purpose of calculating the quarterly
bonus in that year. Mr. Trepeta also received a signing bonus of 10-year options to purchase 25,000 shares, exercisable at $60 per share;
35% of which vested immediately, 35% of which vested on April 2, 2020 and 30% of which vested on April 2, 2021. Mr. Trepeta is entitled
to participate in the Company’s health plans as well as indemnification by the Company to the fullest extent permitted by law, and
the Company’s certificate of incorporation and bylaws. Mr. Trepeta’s employment agreement contains customary non-competition
and non-solicitation of Company customers or employees provisions during the term of the agreement. Although Mr. Trepeta’s employment
agreement is at-will, the Company may terminate Mr. Trepeta’s employment for cause. In the event Mr. Trepeta’s employment
agreement is terminated other than for cause by the Company, the Company will pay Mr. Trepeta severance pay equal to three months of his
salary.
55 |
Deepanker Katyal
Deepanker Katyal is employed as Chief Executive
Officer of our wholly-owned subsidiary, Advangelists, LLC under employment agreement with Advangelists with a term of three years which
commenced on December 7, 2018. The agreement was amended on September 13, 2019. Mr. Katyal’s annual base salary is $400,000. Mr.
Katyal’s employment agreement, as amended, also provides the following compensation:
· | a bonus, payable in cash or common stock of the Company, equal to 1% of the Company’s gross revenue for each month during the 2019 fiscal year, subject to certain revenue thresholds as set forth in the agreement. Those revenue thresholds were not attained and this bonus was not earned; |
· | commissions equal to 10% of the net revenues derived from all New Katyal Managed Accounts (as defined in the agreement – being accounts directly introduced by Mr. Katyal or assigned to Employee in writing by the Manager of the Company); |
· | options to purchase 37,500 shares of the Company’s common stock at an exercise price of $36.00 per share, of which 25,000 vested on September 13, 2019, the date Mr. Katyal’s employment agreement was amended, and 12,500 vested on September 13, 2020; and |
· | one share of Company Series B Preferred Stock which was issued to Mr. Katyal. The Series B Preferred Stock, as a class, provided cash dividend rights, payable in cash, to the holders thereof in an aggregate amount equivalent to 10% of the annual gross revenue of Advangelists or the Company, whichever is higher, up to a maximum aggregate annual amount of $1,200,000, for each of its 2019 and 2020 fiscal years. As a holder of 50% of the Series B Preferred Stock, the maximum amount of annual dividends that Mr. Katyal would be entitled to $600,000. The Series B Preferred Stock rights, privileges, preferences, and restrictions was to terminate by its terms as of December 31, 2020; and, immediately upon declaration and payment of the dividend in respect of Mobiquity's 2020 fiscal year, Mobiquity was to withdraw such class from its authorized capital. The Series B Preferred Stock was subject to cancellation if Mr. Katyal terminated his employment without good reason or the Company terminated his employment for cause. Mr. Katyal did not receive any Series B Preferred Stock dividends and the Series B Preferred Stock was redeemed by the Company from Mr. Katyal in consideration for entering into the amendment of his employment agreement on September 13, 2019 and for no other consideration. |
During the term of the employment agreement, Mr.
Katyal is entitled to a monthly allowance of up to $550 per month to cover lease or purchase finance costs of an automobile. Mr. Katyal’s
employment agreement provides for indemnification by the Company to the fullest extent permitted by the Company’s certificate of
incorporation and bylaws, as well as participation in all benefit plans, programs and perquisites as are generally provided by Advangelists
to its employees, including medical, dental, life insurance, disability and 401(k) participation. Mr. Katyal’s employment agreement
contains customary non-solicitation of Company customers or employees provisions during the term of the agreement and for one year after
termination. The agreement provides for termination by Advangelists for cause upon 30 days’ prior written notice; and without cause
after 60 days’ prior written notice. The employment agreement terminates automatically upon Mr. Katyal’s death, and it may
also be terminated by Advangelists if Mr. Katyal is disabled for more than six consecutive months in any 12-month period—disability
being the inability to substantially perform Mr. Katyal's duties and responsibilities by reason of mental or physical illness or injury.
Mr. Katyal is entitled to terminate the agreement for “good reason”. If Mr. Katyal is terminated by Advangelists for cause,
Advangelists is obligated only to pay Mr. Katyal amounts of base salary and expense reimbursements that were due or accrued prior to the
termination date. If Mr. Katyal is terminated by Advangelists without cause, and provided Mr. Katyal is not in breach under the agreement,
Advangelists is obligated to pay Mr. Katyal his compensation and expense reimbursements that would payable to Mr. Katyal for the remainder
of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal’s employment is terminated as a result of
his death, Advangelists is obligated to pay Mr. Katyal his salary though the date of termination, and his other compensation for the remainder
of the contractual employment term had Mr. Katyal remained an employee. If Mr. Katyal’s employment is terminated as a result of
his disability, provided Mr. Katyal provides a general release, Advangelists is obligated to pay Mr. Katyal his salary though the date
of termination, and his other compensation for the remainder of the contractual employment term had Mr. Katyal remained an employee. If
Mr. Katyal terminates his employment for good reason, and provided Mr. Katyal provides a general release, Advangelists is obligated to
pay Mr. Katyal his compensation and expense reimbursements that would payable to Mr. Katyal for the remainder of the contractual employment
term had Mr. Katyal remained an employee. Mr. Kaytal’s employment agreement provides for assignment of ownership rights regarding
intellectual property created by Mr. Katyal relating to the Company’s business.
56 |
Sean McDonnell
Sean McDonnell is employed as the Company’s
Chief Executive Officer on a non-full-time basis as an employee at-will with no employment agreement. He has a monthly base salary of
$11,000 and he is eligible to receive options and other bonuses at the discretion of the board.
DIRECTOR COMPENSATION
Currently, four directors of the Company are executive
officers of the Company. They receive compensation as officers as described above under the heading “Executive Compensation”.
The Company is not currently paying Dr. Gene Salkind to serve on the board, as Chairman of the Board, or on any board committees. Future
compensation of board members/committee members are at the discretion of the board.
Employee Benefit and Consulting Services Compensation Plans
On January 3, 2005, our company established the
2005 Employee Benefit and Consulting Services Compensation Plan covering 5,000 shares, which 2005 Plan was ratified by our shareholders
in February 2005. On August 12, 2005, the company’s stockholders approved a 5,000 share increase in the 2005 Plan to 10,000 shares.
On August 28, 2009, the Board adopted the 2009 Employee Benefit and Consulting Services Compensation Plan identical to the 2005 Plan covering
10,000 shares. In September 2013, the Company’s stockholders ratified a board amendment to increase the number of shares covered
by the 2009 Plan to 25,000 shares. As the 2005 and 2009 Plans are identical other than the number of shares covered by each Plan, it is
the Company’s intention to first utilize the shares issuable (available) under the 2005 Plan prior to issuing shares under the 2009
Plan. In February 2015, the Board approved an increase in the number of shares covered by the 2009 Plan from 25,000 shares to 50,000 shares,
subject to shareholder approval within one year. However, shareholder approval was not obtained within the requisite time period, and
the Board established the 2016 Employee Benefit and Consulting Services Compensation Plan covering 25,000 shares which is otherwise identical
to the 2005 and 2009 Plans. All options granted under the 2009 Plan, which exceed the Plan limits, have been moved to the 2016 Plan. In
December 2018, the Company approved the 2018 Employee Benefit and Consulting Services Compensation Plan identical to the other Plans described
above, except for the number of shares covered by the Plan is 75,000. The 2018 Plan was ratified by shareholders in February 2019. On
April 2, 2019, the Board approved the 2019 Employee Benefit and Consulting Services Compensation Plan identical to the other Plans described
above, except for the number of shares covered by the Plan is 150,000. Approval of the 2019 Plan was not approved by the shareholders
within one year in order to grant incentive stock options under said Plan, and it remains unratified by our shareholders. On October 13,
2021 the Board approved the Employee Benefit and Consulting Services Compensation Plan identical to the 2019 Plan except that the number
of shares underlying the Plan is 1,100,000. The 2021 Plan must be approved by the shareholders within one year in order to grant incentive
stock options under said Plan. We refer to the 2005, 2009, 2016, 2018, 2019 and 2021 Plans as the “Plans”.
Administration
Our board of directors administers the Plans, has
the authority to determine and designate officers, employees, directors and consultants to whom awards shall be made; and the terms, conditions
and restrictions applicable to each award (including, among other things, the option price, any restriction or limitation, any vesting
schedule or acceleration of vesting, and any forfeiture restrictions).
Types of Awards
The Plans are designed to enable us to offer certain
officers, employees, directors and consultants of us and our subsidiaries equity interests in us and other incentive awards in order to
attract, retain and reward such individuals and to strengthen the mutuality of interests between such individuals and our stockholders.
In furtherance of this purpose, the Plans contain provisions for granting non-statutory stock options and incentive stock options and
common stock awards.
Stock Options
A “stock option” is a contractual right
to purchase a number of shares of common stock at a price determined on the date the option is granted. An incentive stock option is an
option granted under the Internal Revenue Code of 1986 to our employees with certain tax advantages to the grantee over non-statutory
stock options. The option price per share of common stock purchasable upon exercise of a stock option and the time or times at which such
options shall be exercisable shall be determined by the Board at the time of grant. Such option price in the case of incentive stock options
shall not be less than 100% of the fair market value of the common stock on the date of grant and may be granted below fair market value
in the case of non-statutory stock options. Incentive stock options granted to owners of 10% or more of our common stock must be granted
at an exercise price of at least 110% of the fair market value of our common stock and may not have a term greater than five years. Also,
the value of incentive options vesting to any employee cannot exceed $100,000 in any calendar year. The option price of our options must
be paid in cash, money order, check or common stock of the company. The non-statutory stock options may also contain at the time of grant,
at the discretion of the board, certain other cashless exercise provisions. These cashless exercise provisions are included in the currently
outstanding non-statutory stock options granted by the board.
57 |
Options shall be exercisable at the times and subject
to the conditions determined by the Board at the date of grant, but no option may be exercisable more than ten years after the date it
is granted. If the optionee ceases to be an employee of our company for any reason other than death, any incentive stock option exercisable
on the date of the termination of employment may be exercised for a period of thirty days or until the expiration of the stated term of
the option, whichever period is shorter. In the event of the optionee’s death, any incentive stock option exercisable at the date
of death may be exercised by the legal heirs of the optionee from the date of death until the expiration of the stated term of the option
or six months from the date of death, whichever event first occurs. In the event of disability of the optionee, any incentive stock options
shall expire on the stated date that the Option would otherwise have expired or 12 months from the date of disability, whichever event
first occurs. The termination and other provisions of a non-statutory stock option shall be fixed by the board of directors at the date
of grant of each respective option.
Common Stock Award
Common stock awards are shares of common stock
that will be issued to a recipient at the end of a restriction period, if any, specified by the board if he or she continues to be an
employee, director or consultant of us. If the recipient remains an employee, director or consultant at the end of the restriction period,
the applicable restrictions will lapse and we will issue a stock certificate representing such shares of common stock to the participant.
If the recipient ceases to be an employee, director or consultant of us for any reason (including death, disability or retirement) before
the end of the restriction period unless otherwise determined by the board, the restricted stock award will be terminated.
Awards
As of December 31, 2020, the Company has granted
a total of 276,437 options under the Plans and a total of 4,562 options outside the Plans, or a total of options to purchase 281,000 shares
of the Company’s Common Stock with a weighted average exercise price of $48.00 per share. The board has granted options with varying
terms
.
The Company has also granted to various officers, directors and employees of Advangelists, warrants to purchase an aggregate
of 274,941 shares at varying terms.
It is not possible to predict the individuals who
will receive future awards under the Plans or outside the Plans or the number of shares of Common Stock covered by any future award because
such awards are wholly within the discretion of the Board. The table below contains information as of December 31, 2020 on the known benefits
provided to certain persons and group of persons who own options under or outside the Plans.
|
|
| ||||||||||
Dean L. Julia | 87,250 | 49.80 | $ | – | ||||||||
Sean McDonnell | 3,000 | 23.33 | $ | – | ||||||||
Sean Trepeta | 41,750 | 45.39 | $ | – | ||||||||
Paul Bauersfeld | 42,500 | 44.94 | $ | – | ||||||||
Deepanker Katyal | 166,017 | 51.48 | $ | – | ||||||||
Five Executive Officers as a group | 340,517 | 49.24 | $ | – | ||||||||
(1)
Value is normally calculated by multiplying (a) the difference between the market value per share at period end (i.e. $6.75 based
upon a last sale on (or the last trade date before) December 31, 2020) and the option exercise price by (b) the number of shares
of Common Stock underlying the option.
58 |
In the past, the Company has granted certain employees
and consultants, stock awards for services for the prior year with vesting to occur after the passage of 12 months from grant. These awards
totaled the following:
112 shares for 2008, subject to continued services
with the Company through December 31, 2009.
127 shares for 2009 subject to continued services
with the Company through December 31, 2010.
262 shares for 2010 subject to continued services
with the Company through December 31, 2011.
112 shares for 2011, subject to continued services
with the Company through December 31, 2012.
A total of 509 shares were issued under the 2005
Plan pursuant to the stock award program described above (net of cancellations). No stock awards were granted in fiscal 2012 through fiscal
2020.
Eligibility
Our officers, employees, directors and consultants
of Mobiquity and our subsidiaries are eligible to be granted stock options, and common stock awards.
Termination or Amendment of the Plans
The board may at any time amend, discontinue, or
terminate all or any part of the Plans, provided, however, that unless otherwise required by law, the rights of a participant may not
be impaired without his or her consent, and provided that we will seek the approval of our stockholders for any amendment if such approval
is necessary to comply with any applicable federal or state securities laws or rules or regulations.
Options granted on the date of this Prospectus
Under
the 2021 Plan, the Board approved effective the date of this Prospectus the granting of 10 year options to purchase an aggregate of 825,000
shares to various Board members and executive officers, employees with the options exercisable commencing 61 days after the date of this
Prospectus at an exercise price equal to 110 % of the offering price of shares sold in this Offering. The following table reflects the
number of options granted to each officer and director:
Name | Amount |
Dean L. Julia | 250,000 |
Paul Bauersferld | 125,000 |
Sean J. McDonnell, CPA | 25,000 |
Sean Trepeta | 125,000 |
Dr. Gene Salkind, M.D. | 35,000 |
Peter L. Zurkow | 25,000 |
Michael A. Wright | 25,000 |
Anthony Iacovone | 25,000 |
59 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth the number of shares of and percent of the Company’s common stock beneficially owned as of November
15, 2021, by all directors, our named executive officers, our directors and executive officers as a group, and persons or groups known
by us to own beneficially 5% or more of our common stock, immediately prior to this Offering, and immediately after the closing of this
offering, as adjusted to reflect the assumed sale of units (which includes shares of our common stock and immediately exercisable warrants
to purchase shares of our common stock) in this Offering and the exercise of the Representative’s over-allotment option in full
to purchase additional shares of common stock and warrants to purchase shares of common stock, but assumes the warrants forming part
of the units and over-allotment option are not exercised. The number of shares in this “Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters” section gives effect to the one-for 400 share reverse stock split that we
effectuated on September 9, 2020.
Unless
otherwise noted, the business address of each of the beneficial owners listed below is c/o Mobiquity Technologies, Inc. at the address
set forth herein.
Name of Beneficial Owner |
|
|
|
| |||||||||||||
Directors and Executive Officers | |||||||||||||||||
Paul Bauersfeld (2) | 42,750 | * | % | 42,750 | * | % | |||||||||||
Dean L. Julia (3) | 92,384 | 2.4 | % | 92,384 | 1.6 | % | |||||||||||
Sean Trepeta (4) | 44,275 | * | % | 44,275 | * | % | |||||||||||
Sean McDonnell (5) | 3,417 | * | % | 3,417 | * | % | |||||||||||
Deepanker Katyal (6) | 230,205 | 4.7 | % | 230,205 | 3.8 | % | |||||||||||
Gene Salkind (7) | 2,503,521 | 49.3 | % | 2,503,521 | 34.9 | % | |||||||||||
All directors and officers as a group (six persons) (8) | 2,916,552 | 53.2 | % | 2,916,552 | 38.4 | % | |||||||||||
* | less than 1%. |
(1) | The pre-closing percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on November 15, 2021. The post-closing percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on November 15, 2021, plus the assumed sale of 1,833,334 units (which includes shares of our common stock and immediately exercisable warrants to purchase shares of our common stock) in this Offering and the exercise of the Representative’s over-allotment option in full to purchase 275,000 shares of common stock and warrants to purchase 275,000 shares of common stock, but assumes the warrants forming part of the units and over-allotment option are not exercised. On November 15, 2021, there were 3,685,689 shares of our common stock outstanding. To calculate a stockholder’s percentage of beneficial ownership, we include in the numerator and denominator the common stock outstanding and all shares of our common stock issuable to that person in the event of the exercise of outstanding warrants and other derivative securities owned by that person which are exercisable within 60 days of November 15, 2021. Common stock warrants and derivative securities held by other stockholders are disregarded in this calculation. Therefore, the denominator used in calculating beneficial ownership among our stockholders may differ. Unless we have indicated otherwise, each person named in the table has sole voting power and sole investment power for the shares listed opposite such person’s name. |
(2) | Includes 250 common shares and 42,500 options. |
(3) | Includes 4,884 common shares and 87,500 options. |
(4) | Includes 2,525 common shares and 41,750 options. |
(5) | Includes 417 common shares and 3,000 options. |
(6) | Includes 0 common shares and 230,205 derivative securities. |
(7) | Includes 1,116,021 common shares and 1,387,500 derivative securities. |
(8) | Includes 1,124,097 common shares and 1,792,455 derivative securities. |
60 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We describe below all transactions and series of
similar transactions, other than compensation arrangements, during our last three fiscal years, to which we were a party or will be a
party in which:
· | the amounts exceeded or will exceed $120,000; and |
· | any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. |
Compensation arrangements for our directors and
named executive officers are described under the heading “
Executive Compensation
”.
Employment Agreements and Executive Compensation
We have entered into various employment agreements
as described under the heading “
Executive Compensation
”. These agreements also provide for us to indemnify
such officers and/or directors to the maximum extent permitted by law. We also carry directors’ and officers’ liability insurance
which protects each of our officers and directors up to the policy maximum of $4.0 million, subject to a deductible of $100,000 for securities
claims and $75,000 for other claims. For more information regarding our employment agreements and indemnification provisions, see “
Executive Compensation
.”
Related Party Debt Financing
On September 13, 2019, Dr. Gene Salkind, who is
a director of the Company, and an affiliate of Dr. Salkind subscribed for 15% Senior Secured Convertible Promissory Notes and loaned the
Company an aggregate of $2,300,000. These notes were amended and restated on December 31, 2019 by Amended and Restated 15% Senior Secured
Convertible Promissory Notes which deferred interest payments from the date of the original notes to December 31, 2020 and added an aggregate
interim payment of $250,000 payable on December 31, 2020 that covered the deferred interest payments. These notes were again amended and
restated on April 1, 2021 by the Second Amended and Restated 15% Senior Secured Convertible Promissory Notes which reflected an additional
principal amount of $150,000 loaned by Dr. Salkind, and also amended the interim payment date to December 31, 2021, and the conversion
price from $32 to $4 per share. The notes are secured by the assets of the Company and its subsidiaries. The total amount loaned under
the notes, as amended and restated, including the principal amount and the interim payment amount is $2,700,000.
The notes, as amended and restated, bear annual
interest at 15% which is payable monthly in cash or, at the Salkind lenders’ option, in shares of the Company’s common stock.
The principal amount under the Notes is due on September 30, 2029, and the interim payment is payable on December 31, 2021, unless, in
either case, earlier converted into shares of our common stock under the terms of the notes, as described below.
The outstanding principal plus any accrued and
unpaid interest, and the interim payment under the notes, are convertible into shares of Company common stock at a conversion price of
$4 per share at any time, until the notes are fully converted, on the following terms:
· | The Salkind lenders may convert the notes at any time. |
· | The Company may convert the notes at any time that the trailing thirty (30) day volume weighted average price per share (as more particularly described in the Notes) of the Company’s common stock is above $400 per share. |
The notes contain customary events of default,
which, if uncured, entitle the holders to accelerate payment of the principal and all accrued and unpaid interest under their notes.
61 |
In connection with the subscription of the notes,
the Company issued to each Salkind lender a warrant to purchase one share of the Company’s common stock for every two shares of
common stock issuable upon conversion of the Notes, at an exercise price of $48 per share. The warrant exercise price was amended to 4
per share.
In the second quarter of 2020, we halted required
interest payments under the September 2019 and June 30, 2021 Notes to Dr. Salkind and his affiliate due to economic hardships stemming
from a downturn in our business and the related decline of our revenue resulting from the COVID 19 pandemic. See “
Risk Factors
– Impacts of COVID-19 to business and the general economy.“ Dr. Salkind and his affiliate have not declared a default under
the Notes due to the non-payment of interest. They have the right to declare the Notes in default at any time if we do not cure the non-payment.
Notes to the Financial Statements and Other
Disclosures
The disclosures contained in this prospectus,
in particular in the notes to our consolidated financial statements as well under the heading “
Executive Compensation
”, describe
various other transactions between the Company’s and its officers, directors and principal shareholders.
All related party transactions described elsewhere
in this prospectus are incorporated herein by reference.
62 |
DESCRIPTION OF
CAPITAL STOCK
Our authorized capital stock consists of 100,000,000
shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share.
Number of shares at November 15, 2021 | ||||||||||||
Title of Class | Authorized | Issued and Outstanding | Reserved | |||||||||
Common stock, par value $0.0001 per share | 100,000,000 | 3,685,689 | 421,874 | |||||||||
Common Stock
As of November 15, 2021, 3,685,689 shares
of our common stock were outstanding. The outstanding shares of our common stock are validly issued, fully paid, and non-assessable.
Dividends
Each share of our common stock is entitled to receive
an equal dividend, if one is declared. We cannot provide any assurance that we will declare or pay cash dividends on our common stock
in the future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to
applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions
and other factors that our Board of Directors may deem relevant. Our Board of Directors may determine it to be necessary to retain future
earnings (if any) to finance our growth. See “
Risk Factors
” and “
Dividend Policy
.”
Liquidation
If our Company is liquidated, then assets that
remain (if any) after the creditors are paid and the owners of preferred stock receive liquidation preferences (as applicable) will be
distributed to the owners of our common stock
pro rata
. At the date of this prospectus, none of the Company’s series of preferred
stock have liquidation preferences and they are treated the same as common shares on an as-converted basis for the purposes of distribution
of assets upon liquidation.
Voting Rights
Each share of our common stock entitles the owner
to one vote. There is no cumulative voting. A simple majority can elect all of the directors at a given meeting, and the minority would
not be able to elect any director at that meeting.
Preemptive Rights
Owners of our common stock have no preemptive rights.
We may sell shares of our common stock to third parties without first offering such shares to current stockholders.
Redemption Rights
We do not have the right to buy back shares of
our common stock except in extraordinary transactions, such as mergers and court approved bankruptcy reorganizations. Owners of our common
stock do not ordinarily have the right to require us to buy their common stock. We do not have a sinking fund to provide assets for any
buy back.
63 |
Conversion Rights
Shares of our common stock cannot be converted
into any other kind of stock except in extraordinary transactions, such as mergers and court approved bankruptcy reorganizations.
Non-assessability
All outstanding shares of our common stock are
fully paid and non-assessable.
Units
Each
unit consists of one share of common stock, par value $0.0001 per share, and one warrant to purchase one share of our common stock, each
as described further below. No units will actually be issued in this offering and the common stock and warrants will be immediately separable
and will be issued separately.
Warrants included in the Units
The following
summary of certain terms and provisions of the warrants offered by this prospectus is not complete and is subject to, and qualified in
its entirety by, the provisions of the warrant, the form of which has been filed as an exhibit to the registration statement of which
this prospectus is a part. Prospective investors should carefully review the terms and provisions of the form of warrant for a complete
description of the terms and conditions of the warrants.
