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MOBIVITY HOLDINGS CORP.

(MFON)
Delayed OTC Markets  -  09:58 2022-10-03 am EDT
1.000 USD    0.00%
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MOBIVITY HOLDINGS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/16/2022 | 04:26pm EDT

This Quarterly Report on Form 10-Q contains "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made and are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," or "will," and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption "Risk Factors" included in our 2020 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 30, 2021 and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Overview

Mobivity Holdings Corp. (the "Company" or "we") is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven marketing campaigns.

Mobivity's Recurrency platform enables multi-unit retailers to leverage the power of their own data to yield maximum customer spend, frequency and loyalty while achieving the highest Return on Marketing Spend (ROMS) possible. Mobivity's customers use Recurrency to:

?Transform messy point-of-sale (POS) data collected from thousands of points of sale into usable intelligence. ?Measure, predict, and boost guest frequency and spend by channel. ?Deploy and manage one-time use offer codes and attribute sales accurately across every channel, promotion and media program. ?Deliver 1:1 promotions and offers with customized Mobile Messaging, Personalized Receipt Promotions and Integrated Loyalty programs.

Mobivity's Recurrency, delivered as a Software-as-a-Service ("SaaS") platform, is used by leading brands including Subway, Sonic Drive-In, Baskin Robbins, Chick-fil-A and Checkers/Rally's across more than 40,000 retail locations globally.

We're living in a data-driven economy. In fact, by 2003 - when the concept of "big data" became common vernacular in marketing - as much data was being created every two day as had been created in all of time prior to 2003. Today, Big Data has grown at such a rate that 90% of the world's data has been created in the past two years. Unfortunately, despite there being so much data accumulated, only one percent of data is being utilized today by most businesses.

The challenge for multi-unit retailers isn't that they don't have enough data; in fact, national retailers are collecting millions of detailed transactions daily from thousands of points of sale around the world. The challenge is being able to make sense of this transaction data, which is riddled with data entry errors, collected by multiple POS systems and complicated by a taxonomy compiled by thousands of different franchisee owners. To normalize such an overwhelming amount of data into usable intelligence and then leverage it to optimize media investment and promotion strategy requires numerous teams of data analysts and data scientists that many retailers and restaurant operators simply don't have. Which is why so many technology and data companies, that can help solve these challenges, have been invested in and acquired by brands including, McDonald's, Starbucks and Yum Brands.

Mobivity's Recurrency platform fills this need with a self-service SaaS offering, enabling operators to intelligently optimize their promotions, media and marketing spend. Recurrency drives system-wide sales producing on average a 13% increase in guest spend and a 26% improvement in frequency, ultimately delivering an average Return on Marketing Spend of 10X. In other words, for every dollar invested in marketing, retailers using Recurrency to manage, optimize and deliver multi-channel consumer promotions generate an average of ten dollars in incremental revenue from their customers.


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The Recurrency Platform

Mobivity's Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights. Our technology provides transactional data, in real-time, that uncovers market-basket information and attributes both online and traditional promotions. Recurrency is comprised of seven components.

POS Data Capture

Recurrency captures, normalizes, integrates, and stores transaction data and is compatible with most POS systems used by restaurants and retailers today. The result is a clean useful dataset upon which to predict and influence customers' buying behavior and deliver basket-level insights.

Analytics Powered by Machine Learning

Recurrency uses Machine Learning ("ML") to uncover patterns in the buying behaviors of consumers and leverages that data to suggest pricing optimizations, and guide marketing campaigns.

Offers and Promotions

Recurrency provides a digital wallet system for creating and managing dynamic offers and promotions, enabling accurate and complete closed-loop attribution across all channels, media and marketing efforts. Retailers can deploy one-time, limited-use and multi-use promotions across all online and offline marketing channels that are scannable at the POS or redeemable online, enabling fraud-free, controllable promotion delivery and attribution at scale. Marketing teams can use the comprehensive attribution analysis and insights to optimize media mix and spend for maximum Return on Marketing Spend ("ROMS").

Predictive Offers

Recurrency leverages the normalized data captured at the POS and applies Artificial Intelligence ("AI") to build profiles of both known and anonymous customers, analyzes pre and post-redemption behavior and then predicts offers that will drive the highest increases in customer spend and frequency at the lowest discount possible. The result is optimized, personalized promotions that produce the highest ROMS possible.

Personalized Receipt Promotions

Recurrency unlocks the power of transactional data to create relevant and timely customer messages printed on the receipts already being generated at the POS. Both clients and agencies are using Recurrency to drive better results and make decisions around offers, promotions, and customer engagement through the medium of the printed receipt. Software integrated with leading POS systems, such as Oracle, MICROS, or installed directly onto receipt printer platforms, such as Epson's OmniLink product, dynamically controls what is printed on receipts including images, coupons, announcements, or other calls-to-action, such as invitations to participate in a survey. Recurrency offers a Web-based interface where users can design receipt content and implement business rules to dictate what receipt content is printed in particular situations. All receipt content is also transmitted to cloud-based Recurrency for storage and analysis.

Customized Mobile Messaging

Recurrency transforms standard short message service ("SMS"), multimedia messaging service ("MMS"), and rich communication services ("RCS") into a data-driven marketing medium. Recurrency tracks and measures offer effectiveness at a more granular level than other solutions, allowing clients to create smarter offers and drive higher redemption rates. Our proprietary platform connects to all wireless carriers so that any consumer, on any wireless service (for example, Verizon), can join our customer's SMS/MMS mobile marketing campaign. Our customers use Recurrency's self-service interface to build, segment, target and optimize mobile messaging campaigns to drive increased guest frequency and spend. Recurrency is an industry leader in RCS messaging and has an industry leading broadcast reach.

Belly Loyalty

Mobivity's Belly Loyalty solution drives increased customer engagement and frequency with a customer-facing digital rewards platform via an app and digital pad. Using Belly, customers can customize rewards and leverage pre-built email campaigns and triggers to encourage greater frequency as well as identify and reactivate lapsed customers.


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Company Strategy


Our objective is to build an industry-leading Software-as-a-Service ("SaaS")
product that connects consumers to merchants and brands. The key elements to our
strategy are:
?Exploit the competitive advantages and operating leverage of our technology
platform. The core of our business is our proprietary POS Data Capture
technology. Several years of development went into designing POS Data Capture
such that the process of intercepting POS data and performing actions, such as
controlling the receipt printer with receipt is scalable, portable to a wide
variety of POS platforms, and does not impact performance factors including the
print speed of a typical receipt printer. Furthermore, we believe the
transmission of POS data to Mobivity's cloud-based data stores presents a very
competitive and innovative method of enabling POS data access. Additionally, we
believe that our Recurrency platform is more advanced than technologies offered
by our competitors and provides us with a significant competitive advantage.
With more than ten years of development, we believe that our platform operates
SMS/MMS text messaging transactions at a "least cost" relative to competitors
while also being capable of supporting SMS/MMS text messaging transactional
volume necessary to support our goal of several thousand end users. Leveraging
our Recurrency platform allows for full attribution of SMS/MMS offers, which we
believe is a unique combination of both SMS/MMS text messaging and POS data.
?Evolve our sales and customer support infrastructure to uniquely serve very
large customer implementations such as franchise-based brands who operate a
large number of locations. Over the past few years we have focused our efforts
on the development of our technology and solutions with the goal of selling and
supporting small and medium-sized businesses. Going forward, we intend to
increase significantly our investments in sales and customer support resources
tailored to selling to customers that operate franchise brands. Today we support
more than 30,000 merchant locations globally.
?Acquire complementary businesses and technologies. We will continue to search
and identify unique opportunities which we believe will enhance our product
features and functionality, revenue goals, and technology. We intend to target
companies with some or all of the following characteristics: (1) an established
revenue base; (2) strong pipeline and growth prospects; (3) break-even or
positive cash flow; (4) opportunities for substantial expense reductions through
integration into our platform; (5) strong sales teams; and (6) technology and
services that further build out and differentiate our platform. Our acquisitions
have historically been consummated through the issuance of a combination of our
common stock and cash.
?Build our intellectual property portfolio. We currently have nine issued
patents that we believe have significant potential application in the technology
industry. We plan to continue our investment in building a strong intellectual
property portfolio.

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


Recent Events
Unsecured Promissory Note Investments in 2021
During the year ended December 31, 2021, we issued to Talkot Capital LLC,
unsecured Notes in the principal aggregate amount of $ 271,875, which are due
and payable two years after issuance. These Notes bear interest on the unpaid
balance at the rate of fifteen percent (15%) per annum. The Company may prepay
the advances and accrued interest, in whole or in part, without notice, penalty
or charge. As of December 31, 2021, we have $271,875 as a remaining balance of
these 2021 Notes and accrued interest of $23,200.


Unsecured Promissory Note Investments in 2022


As of March 31, 2022, we have $271,875 as a remaining balance of these 2021
Notes and accrued interest of $38,937
Secured Promissory Note Investments in 2021
During the year ended December 31, 2021, we issued to one of our directors,
Secured Notes in the principal aggregate amount of $3, 478,125, including cash
in the amount of $3,206,250 and $271,875 of principal and accrued interest under
the above-described Note that was rolled into the Credit Facility, which are due
and payable two years after issuance. These Notes bear interest on the unpaid
balance at the rate of fifteen percent (15%) per annum. The Company may prepay
the advances and accrued interest, in whole or in part, without notice, penalty
or charge. On November 19, 2021, a payment of $200,000 was paid toward the
principal balance of the note. As of December 31, 2021, we have $3,278,125 as a
remaining balance of these 2021 Notes and accrued interest of $149,040
Secured Note Investments in 2022
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During the three months period ending March 31, 2022, the Company issued
warrants to purchase an aggregate of 20,339 shares of its common stock at the
stated exercise price per share in connection with the issuance of funds under
this Credit Agreement. The estimated aggregate fair value of the warrants issued
is $6,201 using the Black-Scholes option valuation model as of March 31, 2022.
As of March 31, 2022, we have a principal balance of $3,278,125, discount of
$213,754, and accrued interest of $266,427 outstanding under the said Credit
Agreement.
Office Relocation
We entered into a six-year office lease starting in February of 2021 for 8,898
square feet of office space located at 3133 W. Frye Road, Suite 215, Chandler,
Arizona. Monthly rental payments, excluding common area maintenance charges,
will be $25,953 to $28,733. The first twelve months of the lease includes a 50%
abatement period.
Intellectual Property
U.S. Patent number 10,949,868 B1 was granted on March 16, 2021. This patent
covers the single use of electronic retailer coupons and referral program. The
method and system prevents fraud, is specific to geolocation and provides an
audit trail of the customer, cashier and marketing platform. A user can also
earn a subsequent coupon by referring a friend.
US Patent number 6,788,769 B1 expired in March of 2021. This patent covered a
method and system for using telephone numbers as a key to address email and
online content without the use of a look-up database. Using this system, a phone
number is used to access a website or an email address in exactly the same way
it is used to dial a telephone.
Results of Operations

Revenues

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

Revenues for the three months ended March 31, 2022, were $2,029,569 a decrease of $428,021 or 17% compared to the same period in 2021.

This decrease is primarily due to a decrease in revenue of $420,817 quarterly due to restructuring of customer contract related to Smart Receipt services. Cost of Revenues

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

Cost of revenues for the three months ended March 31, 2022, was $1,174,948, an increase of $131,153, or 13%, compared to the same period in 2021. This increase is primarily due to an increase in customer acquisitions costs. General and Administrative

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

General and administrative expenses decreased $82,194 or 6%, to $1,207,176 during the three months ended March 31, 2022, compared to $1,289,370 for the same period in 2021. The decrease in general and administrative expense was primarily due a decrease in subscriptions, share based compensation and legal fees.

Sales and Marketing

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

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Sales and marketing expenses decreased $299,249 or 33%, to $597,501 during the three months ended March 31, 2022, compared to $896,750 for the same period in 2021. The decrease is primarily due to reductions in payroll expense and share based compensation and recruiting fees. Engineering, Research & Development

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

Engineering, research & development expenses decreased $21,727 or 3%, to $702,223 during the three months ended March 31, 2022, compared to $723,950 for the same period in 2021. This decrease is primarily due to the a reduction on payroll expenses. Impairment on Intangible Asset

Impairment on intangible assets consists of an intangible asset valued at less than its carrying value. Impairment on intangible assets decreased 100% from $8,286 to $0 for the three months ended March 31, 2021, compared to the same period in 2021.

Depreciation and Amortization


Depreciation and amortization expense consist of depreciation on our equipment
and amortization of our intangible assets.
Depreciation and amortization expense decreased $33,915 or 21%, to $124,312
during the three months ended March 31, 2022 compared to the same period in
2021.This decrease is primarily due to the reduction in amortization of
intangibles on software development costs.
Interest Income
Interest income consists of stated interest income on our cash balances.
Interest income decreased $5 or 100% to $0, during the three months ended
March 31, 2022, compared to the same period in 2021. This decrease in interest
income is related to lower earnings on cash positions held throughout the year
compared to the previous year.

Interest Expense

Interest expense consists of stated or implied interest expense on our notes payable, amortization of note discounts, and amortization of deferred financing costs. Interest expense increased $127,311, or 392%, during the three months ended March 31, 2022, compared to $32,516 in the same period in 2021. This increase in interest expense is primarily related to an increase of borrowings from our related parties. Foreign Currency

The Company's financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three ended March 31, 2022, was $1 Canadian equals $0.79 U.S. Dollars. This compares to an average rate of $1 Canadian equals $0.79 during the same period of 2021. The Company's functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:

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

The change in foreign currency was a gain of $3,319 and a loss of $474 for the three months ended March 31, 2022 and 2021, respectively. Liquidity and Capital Resources

As of March 31, 2022, we had current assets of $2,279,358, including $1,455,147 in cash, and current liabilities of $6,033,142, resulting in a working capital deficit of $3,753,789.

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We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to fund our current level of operations at least through the end of the next twelve months. However, there can be no assurance that we will not require additional capital. If we require additional capital, we will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. However, there can be no assurance we will be able to obtain access to capital as and when needed and, if so, the terms of any available financing may not be subject to commercially reasonable terms. Cash Flows


                                                            Three Months
                                                              March 31,
                                                        2022            2021
Net cash provided by (used in):
Operating activities                                $ (1,813,845)   $ (1,901,959)
Investing activities                                            -       (126,440)
Financing activities                                    2,544,199       (221,058)
Effect of foreign currency translation on cash flow      (10,631)         (6,155)
Net change in cash                                  $     719,723   $ (2,255,612)



Operating Activities

We used cash from operating activities totaling $1,813,845 during the three months ended March 31, 2022 and used cash from operating activities totaling $1,901,959 during the three months ended March 31, 2021. The increase in cash used in operations was primarily due to an increase in net loss of $1,551,051. Investing Activities

Investing activities during the three months ended March 31, 2022, consisted of $0 of equipment purchases and $0 of capitalized software development costs.

Financing Activities

Financing activities during the three months ended March 31, 2022, consisted of $ 2,550,553 additional paid in capital from a warrant conversion to common stock and $6,354 in payment on notes payable, Critical Accounting Policies and Estimates

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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

© Edgar Online, source Glimpses

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