• Filing Date: 2018-04-17
  • Form Type: 10-K
  • Description: Annual report
v3.8.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2017
Apr. 16, 2018
Jun. 30, 2017
Document And Entity Information      
Entity Registrant Name Mobiquity Technologies, Inc.    
Entity Central Index Key 0001084267    
Document Type 10-K    
Document Period End Date Dec. 31, 2017    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Is Entity a Well-known Seasoned Issuer? No    
Is Entity a Voluntary Filer? No    
Is Entity's Reporting Status Current? Yes    
Entity Filer Category Smaller Reporting Company    
Entity Common Stock, Shares Outstanding   199,375,600  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2017    
Entity Public Float     $ 13,536,511
v3.8.0.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Current Assets:    
Cash and cash equivalents $ 56,470 $ 193,933
Accounts receivable, net 18,576 0
Prepaid expenses and other current assets 17,638 5,590
Assets of discontinued operations 0 450,680
Total Current Assets 92,684 650,203
Property and equipment, net 0 9,187
Intangible assets, net 9,960 29,560
Other Assets 11,275 37,223
Total Assets 113,919 726,173
Current Liabilities:    
Accounts payable 458,280 418,719
Accrued expenses 735,431 1,150,564
Derivative liability 666,123 350,700
Note payables - Bank 54,644 0
Convertible promissory notes, net 3,149,498 10,832,275
Liabilities of discontinued operations 0 507,042
Total Current Liabilities 5,063,976 13,259,300
Total Liabilities 5,063,976 13,259,300
AAA Preferred Stock, $.0001 par value; 5,000,000 shares authorized 1,090,588 and zero shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 11,552,513 0
Commitments and contingencies
Stockholders' Deficit:    
Preferred Stock, $.0001 par value; 5,000,000 shares authorized, 240,000 and 240,000 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 25 25
Common stock, $.0001 par value; 900,000,000 and 500,000,000 shares authorized; 198,375,600 and 99,020,103 shares issued and outstanding at December 31, 2017, and December 31, 2016, respectively 19,850 9,913
Additional paid-in capital 44,776,029 38,652,075
Accumulated other comprehensive loss 0 (13,047)
Accumulated deficit (61,298,474) (51,182,093)
Total Stockholders' Deficit (16,502,570) (12,533,127)
Total Liabilities and Stockholders' Deficit $ 113,919 $ 726,173
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
AAA Preferred Stock par value $ .0001  
AAA Preferred Stock shares authorized 5,000,000  
AAA Preferred Stock shares issued 1,090,588  
AAA Preferred Stock shares outstanding 1,090,588  
Preferred Stock par value $ 0.0001 $ 0.0001
Preferred Stock shares authorized 5,000,000 5,000,000
Preferred Stock shares issued 240,000 240,000
Preferred stock shares outstanding 240,000 240,000
Common stock par value $ 0.0001 $ 0.0001
Common stock shares authorized 900,000,000 500,000,000
Common stock shares issued 198,375,600 99,020,103
Common stock outstanding 198,375,600 99,020,103
v3.8.0.1
Consolidated Statements of Operations - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Revenues    
Service revenue $ 385,628 $ 65,932
Total revenues 385,628 65,932
Cost of Revenues    
Cost of service revenue 684,004 162,075
Total cost of revenue 684,004 162,075
Gross Profit (298,376) (96,143)
Operating Expenses:    
Selling, general and administrative expenses 4,908,934 7,885,264
Total Operating Expenses 4,908,934 7,885,264
Loss from Operations (5,207,310) (7,981,407)
Other Income (Expense):    
Interest expense (3,058,310) (3,520,609)
Change in derivatives 3,376,620 1,870,653
Initial derivative expense (1,284,704) (565,780)
Loss on disposition of fixed assets 0 (17,526)
Loss on settlement of debt (4,071,789) 36,177
Total Other Income (Expense) (5,038,183) (2,197,085)
Net Loss from continuing operations (10,245,493) (10,178,492)
Other Comprehensive (Loss) 13,047 (14,119)
Discontinued operations:    
(Loss) from operations of discontinued entity (149,608) (532,011)
Gain on sale of segment 278,720 0
Net Comprehensive Loss $ (10,103,334) $ (10,724,622)
Net loss per common share for continuing operations $ (0.06) $ (0.12)
Net Loss per Common Sahre: Basic and Diluted $ (0.05) $ (0.13)
Weighted Average Common Shares Outstanding: Basic and diluted 184,099,336 83,575,215
v3.8.0.1
Consolidated Statement of Stockholders' Equity - USD ($)
Preferred Stock
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income / Loss
Subscription Receivable
Accumulated Deficit
Total
Beginning balance, shares at Dec. 31, 2015 200,000 78,781,757          
Beginning balance, value at Dec. 31, 2015 $ 20 $ 7,887 $ 36,356,626 $ 1,072 $ 0 $ (40,471,590) $ (4,105,985)
Common stock issued in exchange for interest, shares   6,390,011          
Common stock issued in exchange for interest, value   $ 638 475,594       476,232
Common stock issued for services, shares   940,000          
Common stock issued for services, value   $ 96 122,699       122,795
Common stock issued for rent, shares   1,000,000          
Common stock issued for rent, value   $ 100 19,900       20,000
Common stock issued for the exercise of warrants, shares   11,908,335          
Common stock issued for the exercise of warrants, value   $ 1,192 594,225       595,417
Stock based compensation     683,036       683,036
Preferred stock issued for cash, shares 40,000            
Preferred stock issued for cash, value $ 5   399,995       400,000
Net Loss       (14,119)   (10,710,503) (10,724,622)
Ending balance, shares at Dec. 31, 2016 240,000 99,020,103          
Ending balance, value at Dec. 31, 2016 $ 25 $ 9,913 38,652,075 (13,047) 0 (51,182,093) (12,533,127)
Common stock issued new, shares   6,225,000          
Common stock issued for new, value   $ 623 310,627       311,250
Common stock issued in exchange for interest, shares   9,002,164          
Common stock issued in exchange for interest, value   $ 900 493,592       494,492
Common stock issued for services, shares   5,038,532          
Common stock issued for services, value   $ 504 405,950       406,454
Common stock issued for the exercise of warrants, shares   1,916,667          
Common stock issued for the exercise of warrants, value   $ 192 95,642       95,834
Stock based compensation     595,692       595,692
Common stock issued for conversion of debt, shares   73,440,000          
Common stock issued for conversion of debt, value   $ 7,344 3,664,656       3,672,000
Derivative conversions     229,939       229,939
Mezzanine shares, shares   3,200,000          
Mezzanine shares, value   $ 320 301,180       301,500
Shares issued for debt extinguishment, shares   533,334          
Shares issued for debt extinguishment, value   $ 54 26,676       26,730
Net Loss       13,047   (10,116,381) (10,103,334)
Ending balance, shares at Dec. 31, 2017 240,000 198,375,600          
Ending balance, value at Dec. 31, 2017 $ 25 $ 19,850 $ 44,776,029 $ 0 $ 0 $ (61,285,427) $ (16,502,570)
v3.8.0.1
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Cash Flows from Operating Activities:    
Net loss $ (10,245,493) $ (10,178,492)
Net gain (loss) - discontinued operations 129,113 (532,011)
Total Net Loss (10,116,382) (10,710,503)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation Expense 2,994 130,634
Amortization - Intangible Assets 19,600 28,600
Amortization - Debt discount 2,338,155 2,662,564
Change in derivatives (3,376,620) (1,870,653)
Stock-based compensation 595,692 683,036
Common stock issued for services 406,454 122,730
Stock incentives 63,255 0
Initial derivative expense 1,284,704 565,780
Disposal of assets 12,241 17,526
Gain on settlement of debt 4,071,789 (36,177)
Impairment of long-lived assets 0 223,487
Gain on sale of segment (128,720) 0
Expenses paid from note 567,737 0
Changes in operating assets and liabilities:    
Accounts receivable (18,576) 24,385
Inventory 0 38,602
Prepaid expenses and other assets 7,851 593,969
Accounts payable 32,325 432,243
Accrued expenses and other current liabilities 12,906 371,813
Accrued interest 559,056 792,112
Total adjustments 6,450,844 4,780,651
Net Cash from operating activities - Discontinued operations (72,359) 0
Net Cash Used in Operating Activities (3,665,537) (5,929,852)
Cash Flows from Investing Activities:    
Purchase of property and equipment 0 (283,684)
Net Cash Used in Investing Activities 151,954 (283,684)
Cash from investing activities - discontinued operations 151,954 0
Cash Flows from Financing Activities:    
Proceeds from the issuance of notes, net 2,557,000 3,400,760
Proceeds from issuance of common stock 311,250 0
Proceeds received from exercising warrants 95,834 595,417
Cash paid for accrued interest (3,140) 0
Proceeds from the collection of stock subscription receivable 456,503 0
Cash received from bank notes 121,000 0
Cash paid on bank loans (103,016) 0
Proceeds from issuance of preferred stock 0 400,000
Net Cash Provided by Financing Activities 3,435,431 4,396,177
Net Change in Cash and Cash Equivalents (150,511) (1,817,359)
Cash and Cash Equivalents, beginning of period 193,933 2,044,662
Change in foreign currency 13,047 (14,119)
Cash and Cash Equivalents, end of period 56,470 193,933
Supplemental Disclosure Information:    
Cash paid for interest 30,635 169,873
Cash paid for taxes 0 0
Non-cash Financing and Investing Activities:    
Stock issued for interest 907,053 476,297
Discount on convertible notes 2,096,947 0
Recognition of debt discount 0 1,079,016
Conversion of notes and interest in AAA Preferred and Common Stock $ 13,480,992 $ 0
v3.8.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2017
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS – On September 10, 2013, Mobiquity Technologies, Inc. changed its name from Ace Marketing & Promotions, Inc. “the Company” or “Mobiquity”). We operate through two wholly-owned U.S. subsidiaries, namely, Mobiquity Networks, Inc. and Ace Marketing& Promotions, Inc. Mobiquity Networks owns 100% of Mobiquity Wireless S.L.U, a company incorporated in Spain. This corporation had an office in Spain to support our U.S. operations, which office was closed in the fourth quarter of 2016. Ace Marketing, its legacy marketing and promotions business was successfully sold on October 1, 2017, allowing us to focus our full attention to Mobiquity Networks.

 

Mobiquity Technologies, Inc., a New York corporation (the “Company”), is the parent company of its operating subsidiary; Mobiquity Networks, Inc. (“Mobiquity Networks”). The Company’s wholly-owned subsidiary, Mobiquity Networks has evolved and grown from a mobile advertising technology company focused on driving Foot-traffic throughout its indoor network, into a next generation location data intelligence company. Mobiquity Networks provides precise unique, at-scale location data and insights on consumer’s real-world behavior and trends for use in marketing and research. With its combined first party location data via its advanced SDK and its various exclusive data sets; Mobiquity Networks provides one of the most accurate and scaled solution for mobile data collection and analysis. utilizing multiple geo-location technologies. Mobiquity Networks is seeking to implement several new revenue streams from its data collection and analysis, including, but not limited to; Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research.

 

GOING CONCERN - The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company's continued existence is dependent upon the Company's ability to obtain additional debt and/or equity financing to advance its new technology revenue stream. The Company has incurred losses from continued operations for the years ending December 31, 2017 and December 31, 2016 of $10,245,493 and $10,178,492, respectively. As of December 31, 2017, the Company has an accumulated deficit of $61,298,475. The Company has had negative cash flows from operating activities of $3,665,537 and $5,929,852 for the years ending December 31, 2017 and 2016, respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

 

Management has plans to address the Company’s financial situation as follows:

 

In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan related to technology. Management will continue to seek out equity and/or debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders and investors will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raises doubts about the Company’s ability to continue as a going concern.

 

In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s efforts to raise equity and debt at acceptable terms or that the planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.

 

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing & Promotions, Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc., All intercompany accounts and transactions have been eliminated in consolidation.

 

ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

  

FAIR VALUE OF FINANCIAL INSTRUMENTS- The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. 

 

The following are the hierarchical levels of inputs to measure fair value: 

 

  · Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
     
  · Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
     
  · Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

 

The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. 

 

The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3.  

 

   Level 1   Level 2   Level 3   Total 
Fair value of derivatives  $   $   $666,123   $666,123 

 

Embedded Conversion Features

 

The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature. 

 

Derivative Financial Instruments

 

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to 15 convertible notes issued totaling $3,234,000 which included a ratchet provision in the conversion price of $.05 or $.30 or a price equal to the last equity transaction completed by the Company as part of a subscription agreement. The notes have maturity dates ranging from February 11, 2018 – March 28, 2018. The Company also has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to 2,200,000 warrants which included a ratchet provision in the conversion price of $.05 as part of a conversion of preferred AAA shares, and 1,000,000 warrants which included a ratchet provision in the conversion price of $.055 as part of a placement fee related to a note. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures and associated warrants using a multinomial lattice model as of December 31, 2017. The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $3,376,620 and initial derivative expense of $1,284,704 during the year ended December 31, 2017. As of December 31, 2017, the fair market value of the derivatives aggregated $666,123 using the following assumptions: estimated 0.1 to 4.33-year term, estimated volatility of 183.70% to 415.83%, and a discount rate of 0.00% to 1.87%.

 

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt instruments with a maturity of three months or less, as well as bank money market accounts, to be cash equivalents. As of December 31, 2017 and 2016, the balances are $56,470 and $193,933, respectively.

 

CONCENTRATION OF CREDIT RISK - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and cash and cash equivalents.

 

Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. Our current receivable at December 31, 2017 is all with a single customer. Two customers constitute 75.44% of our sales. Customer A percentage of sales was 42.28% and customer B was 33.16%.

 

The Company places its temporary cash investments with high credit quality financial institutions. At times, the Company maintains bank account balances, which exceed FDIC limits. As of December 31, 2017 and 2016, the Company exceeded FDIC limits by $0 and $0, respectively.

   

REVENUE RECOGNITION – The Company recognizes revenue, for all revenue streams, when it is realized or realizable and estimable in accordance with ASC 605, “Revenue Recognition”. The Company will recognize revenue only when all of the following criteria have been met:

 

  · Persuasive evidence for an agreement exists;

 

  · Service has been provided or shipment has occurred;

 

  · The fee is fixed or determinable; and,

 

  · Collection is reasonably assured.

 

MOBIQUITY NETWORKS – Revenue is recognized with the billing of an advertising contract or data sale. The customer signs a contract directly with us for an advertising campaign with mutually agreed upon term and is billed on the start date of the advertising campaign, which are normally in short duration periods. The second type of revenue is through the licensing of our data. Revenue from data can occur in two ways; the first is a direct feed, which is billed at the end of each month. The second way is through the purchasing of audience segments. When an audience segment is purchased, we bill the buyer upon delivery, which is usually 1-2 days for the order date.

 

ALLOWANCE FOR DOUBTFUL ACCOUNTS - Management must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of December 31, 2017 and 2016, allowance for doubtful accounts were $0 and $0, respectively.

 

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation is expensed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are being amortized using the straight-line method over the estimated useful lives of the related assets or the remaining term of the lease. The costs of additions and improvements, which substantially extend the useful life of a particular asset, are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the account and the gain or loss on disposition is reflected in operating income.

 

LONG LIVED ASSETS - Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company recognized no impairment losses for the period ended December 31, 2017.

   

PATENTS and TRADEMARKS - Patents and trademarks developed during the prior years were capitalized for the period of development and testing. Expenditures during the planning stage and after implementation have been expensed in accordance with ASC 985.

 

ADVERTISING COSTS - Advertising costs are expensed as incurred. For the years ended December 31, 2017 and 2016, there were advertising costs of $0 and $3,841, respectively.

 

ACCOUNTING FOR STOCK BASED COMPENSATION. Stock based compensation cost is measured at the grant date fair value of the award and is recognized as expense over the requisite service period. The Company uses the Black-Sholes option-pricing model to determine fair value of the awards, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”) and the number of options for which vesting requirements will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated statements of operations. Refer to Note 8 “Stock Option Plans” in the Notes to Consolidated Financial Statements in this report for a more detailed discussion.

 

BENEFICIAL CONVERSION FEATURES - Debt instruments that contain a beneficial conversion feature are recorded as deemed interest to the holders of the convertible debt instruments. The beneficial conversion is calculated as the difference between the fair values of the underlying common stock less the proceeds that have been received for the debt instrument limited to the value received.

 

FOREIGN CURRENCY TRANSLATIONS - The Company’s functional and reporting currency is the U.S. dollar. We owned a subsidiary in Europe with it operations in 2016 consolidated into our U.S. location. Our subsidiary’s functional currency in 2016 is the EURO. All transactions initiated in EUROs are translated into U.S. dollars in accordance with ASC 830-30, “Translation of Financial Statements,” as follows:

 

  (i) Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.
     

 

(ii) Fixed assets and equity transactions at historical rates.
     

 

(iii) Revenue and expense items at the average rate of exchange prevailing during the period.

 

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income.

 

No significant realized exchange gains or losses were recorded since March 7, 2013 (date of acquisition of subsidiary) to December 31, 2016 the date operations were consolidated into our U.S. location.

 

INCOME TAXES - Deferred income taxes are recognized for temporary differences between financial statement and income tax basis of assets and liabilities for which income tax or tax benefits are expected to be realized in future years. A valuation allowance is established to reduce deferred tax assets, if it is more likely than not, that all or some portion of such deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

 

NET LOSS PER SHARE - Basic net loss per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options. The number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted loss per common share calculation was approximately 110,453,240 and 51,912,242 because they are anti-dilutive, as a result of a net loss for the years ended December 31, 2017 and 2016, respectively.

  

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - ASC 606, Revenue from contracts with customers, the effective date of ASC 606 is for annual reporting periods beginning after December 15, 2017. It provides accounting guidance related to revenue from contracts with customers. The guidance applies to all entities and to all customers. The accounting for ASC 606 will take effect for our company starting in January of 2018.

 

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

v3.8.0.1
2. PROPERTY AND EQUIPMENT
12 Months Ended
Dec. 31, 2017
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

Property and equipment, net, consist of the following at December 31:

 

   USEFUL LIVES  2017   2016 
            
Furniture and Fixtures  3 or 5 years  $55,702   $73,450 
       55,702    73,450 
Less Accumulated Depreciation      55,702    64,263 
      $   $9,187 

 

Depreciation expense from continuing operations for the years ended December 31, 2017 and 2016 was $5,667 and $119,332, respectively. No deposition or impairment of assets during 2017. In 2016 the company disposed of approximately $736,100 of outdated fixed assets resulting in a loss on disposal of $17,526. In 2016, the Company performed an impairment assessment in accordance with ASC 360-10-35-17, and determined that an impairment loss of $223,487 of the capitalized costs for internal use software exists as of December 31, 2016, no impairment loss was recorded for December 31, 2017.

v3.8.0.1
3. INTANGIBLE ASSETS
12 Months Ended
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

Intangible assets, net, consist of the following at December 31:

 

   USEFUL LIVES  2017   2016 
            
Acquisition of intellectual property (FuturLink)  5 years   98,000    98,000 
       98,000    98,000 
Less Accumulated Amortization      88,040    68,440 
      $9,960   $29,560 

 

Future amortization, for the years ending December 31, is as follows:

 

2018     9,960  
2019      
Thereafter      
    $ 9,960  

 

Amortization expense from continuing operations for the years ended December 31, 2017 and 2016 was $19,600 and $19,600, respectively.

v3.8.0.1
4. CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
CONVERTIBLE PROMISSORY NOTE

Summary of Convertible Promissory Notes:

 

   2017   2016 
Arnost Note  $   $322,000 
CAVU Notes, net of $0 for 2017 and $8,379 for 2016   100,000    241,621 
Berg Notes (a)   50,000    3,722,000 
Investor Notes, net of discounts of $0 and $529,107, respectively       6,546,654 
Secured Notes (b) net of discounts of $234,502 for 2017 and $0 for 2016   2,999,498     
Total Debt   3,149,498    10,832,275 
Current portion of debt   3,149,498    10,832,275 
Long-term portion of debt  $   $ 

 

 

(a)

Between August and December 2015, the Company borrowed $3,675,000 from accredited investors. These loans are due and payable the earlier of December 31, 2016 or the completion of an equity financing of at least $2,500,000. Upon the sale of the unsecured promissory notes, the Company issued $1 of principal, one share of common stock and a warrant to purchase one share of common stock at an exercise price of $0.40 per share through August 31, 2017. Accordingly, an aggregate of 3,675,000 shares of common stock and warrants to purchase a like amount were issued in the last six months of 2015. Each noteholder has the right to convert the principal of their note and accrued interest thereon at a conversion price of $0.30 per share or at the noteholder’s option, into equity securities of the Company on the same terms as the last equity transaction completed by the Company prior to each respective conversion date.
     
  (b) On February 28, 2017, the Company entered into an agreement with two non-affiliated persons to provide $1.6 million of short term secured debt financing in three monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible promissory note. In connection with this transaction, the Company agreed to issue an origination fee of 3,200,000 warrants. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction. In August, September and October 2017, the noteholders exchanged their $1,600,000 of notes that were coming due in August through October 2017 plus a 30% premium and accrued interest for new six-month notes in the principal amount of $2,184,000. As additional consideration for the exchange, the Company issued 533,334 shares of common stock..

 

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to 15 convertible notes issued totaling $3,234,000 which included a ratchet provision in the conversion price of $.05 or $.30 or a price equal to the last equity transaction completed by the Company as part of a subscription agreement. The notes have maturity dates ranging from July 31, 2017 – June 13, 2018. The Company also has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to 2,200,000 warrants which included a ratchet provision in the conversion price of $.05 as part of a conversion of preferred AAA shares, and 1,000,000 warrants which included a ratchet provision in the conversion price of $.055 as part of a placement fee related to a note. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures and associated warrants using a multinomial lattice model as of December 31, 2017. The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $3,376,620 and initial derivative expense of $1,284,704 during the period ended December 31, 2017. As of December 31, 2017, the fair market value of the derivatives aggregated $666,123 using the following assumptions: estimated 0.1 to 4.33-year term, estimated volatility of 183.70% to 415.83%, and a discount rate of 0.00% to 1.87%.

    

In February 2017, The Company debt holders converted $3,672,000 of notes being converted at 0.05 per share into 73,440,000 shares of common stock.

 

In February 2017, the Company reported that substantially all of its outstanding debt both secured and unsecured have been converted into equity securities of the Company as outlined below. It should be noted that the capital transactions below were based on a premium to the average closing sale price of $0.045 per share during the 60 day period prior to February 08, 2017. The Company had outstanding 882,588 shares of newly designated Series AAA preferred stock and $1,350,000 of convertible notes. The convertible notes consisted of $1,200,000 of secured notes and $150,000 of unsecured notes. The 882,588 shares of Series AAA preferred stock were issued in exchange for the conversion of principal and accrued interest of approximately $9,147,891 of unsecured debt. This conversion resulted in a loss on extinguishment of debt of $2,706,197. Between August and December 2017, the Company issued $3,234,000 of secured notes due in six months to various investors. The notes are convertible at $.05 per share through the maturity date, subject to adjustment in the event of default. A total of 3,234,000 origination shares of common stock were issued to the noteholders. Thomas Arnost, Chairman of the Company, invested $100,000 in the loan transaction. The terms of the Series AAA preferred stock can be summarized as follows:

 

The price of each preferred share shall be, at the option of the holder, convertible into 100 shares of Common Stock. If the preferred shares are converted, the subscriber will then receive 100% warrant coverage, with each warrant exercisable at $.05 per share with a cash payment to the Company through the close of business on December 31, 2019. The preferred shares have no voting or other preferences except as required by law other than the right of conversion described above and a liquidation preference equal to $.01 per share.

 

In February 2017, Thomas Arnost, our Executive Vice Chairman, and another principal stockholder agreed to convert letters of credit in the principal amount of $2,700,000 and $322,000 of secured debt into shares of common stock at the then marketing price of $.05 per share. Accrued interest on these obligations were either previously converted into our common stock or were upon conversion of the principal, converted into common stock at the fair market value of our common stock at each interest accrual date.

   

A recap of the derivative instruments is as follows:

 

Derivative Liability 2016
Beginning balance  $(576,557)
New Issuances   (1,079,016)
Discount on new derivative in excess of note face value   (565,780)
Gain on revaluation of derivatives   1,870,653 
Ending balance  $(350,700)

 

Derivative Liability 2017
Beginning balance  $(350,700)
Discount on new issuances   (1,867,287)
Discount on new derivatives in excess of note face value   (1,284,704)
Gain on revaluation of derivatives   3,376,620 
Conversions   229,939 
Effect of debt extinguishment   (769,991
Ending balance  $(666,123)

 

v3.8.0.1
5. FAIR VALUE MEASUREMENTS
12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

Our financial assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2017 and 2016, consisted of the following:

 

   Total fair   Quoted prices   Significant other   Significant 
   value at   in active   observable   unobservable 
   December 31,   markets   inputs   inputs 
Description  2017   (Level 1)   (Level 2)   (Level 3) 
Derivative liability (1)  $666,123   $   $   $666,123 

 

   Total fair   Quoted prices   Significant other   Significant 
   value at   in active   observable   unobservable 
   December 31,   markets   inputs   inputs 
Description  2016   (Level 1)   (Level 2)   (Level 3) 
Derivative liability (1)  $350,700   $   $   $350,700 

 

  (1) The Company has estimated the fair value of these embedded derivatives for convertible debenture using a multinomial lattice model.  

 

 

v3.8.0.1
6. INCOME TAXES
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
INCOME TAXES

The provision for income taxes for the years ended December 31, 2017 and 2016 is summarized as follows:

 

    2017    2016 
Current:          
Federal  $     
State        
         
Deferred:          
Federal        
State        
   $   $ 

 

The Company has federal and state net operating loss carry forwards of approximately $60,876,000, which begin to expire 2025 and can be used to reduce future taxable income through 2034. The Company is open for tax years for the years ended 2008 through present.

 

The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:

 

   YEARS ENDED DECEMBER 31, 
   2017   2016 
Net operating loss carry-forwards  $(24,351,000)  $(20,261,000)
Stock based compensation – options/warrants   3,778,000    3,540,000 
Stock issued for services   971,000    971,000 
Gain on derivative instrument   (2,361,000)   (1,011,000)
Disallowed entertainment expense   59,000    56,000 
Charitable contribution limitation   11,000    11,000 
Preferred Stock   39,000    39,000 
Bad debt expense & reserves   47,000    47,000 
Penalties   1,000    1,000 
Loss on extinguishment of debt   1,743,000    114,000 
Beneficial conversion features   119,000    119,000 
Mobiquity-Spain – net loss   830,000    830,000 
Impairment of long lived assets   89,000    89,000 
Stock issued for interest   376,000     
Nondeductible insurance   10,000     
Stock incentives   24,000     
Derivative expense   514,000     
Amortization of debt discount   2,246,000    1,311,000 
Deferred Tax Assets   (15,855,000)   (14,144,000)
Less Valuation Allowance   15,855,000    14,144,000 
Net Deferred Tax Asset  $   $ 

 

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:

 

   YEARS ENDED DECEMBER 31, 
   2016   2015 
Federal Statutory Tax Rate   34.00%    34.00% 
State Taxes, net of Federal benefit   6.00%    6.00% 
Change in Valuation Allowance   (40.00%)   (40.00%)
Total Tax Expense   0.00%    0.00% 

 

 

v3.8.0.1
7. STOCKHOLDERS' EQUITY (DEFICIT)
12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
STOCKHOLDERS' EQUITY (DEFICIT)

Shares issued for services

 

During the year ended December 31, 2017, the Company issued 5,038,332 shares of common stock, at $0.05 to $0.13 per share for $406,454 in exchange for services rendered.

 

Shares issued for accrued interest

 

During the year ended December 31, 2017, the Company issued 9,002,164 common shares, at $0.04 to $0.09 per share, valued at $494,492 and AAA preferred shares of 47,588, at $10.00 per share, valued at $475,841 as payment of interest.

v3.8.0.1
8. OPTIONS AND WARRANTS
12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
OPTIONS AND WARRANTS

The Company’s results for the years ended December 31, 2017 and 2016 include employee share-based compensation expense totaling $595,692 and $683,036, respectively. Such amounts have been included in the Statements of Operations within selling, general and administrative expenses. No income tax benefit has been recognized in the statement of operations for share-based compensation arrangements due to a history of operating losses.

 

The following table summarizes stock-based compensation expense for the years ended December 31, 2017 and 2016:

 

   Years Ended December 31, 
   2017   2016 
Employee stock-based compensation - option grants  $473,192   $603,536 
Employee stock-based compensation-stock grants        
Non-Employee stock-based compensation - option grants   11,500    79,500 
Non-Employee stock-based compensation-stock grants    –     
Non-Employee stock-based compensation-stock warrant   111,000     
   $595,692   $683,036 

  

v3.8.0.1
9. STOCK OPTION PLANS
12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
STOCK OPTION PLANS

During Fiscal 2005, the Company established, and the stockholders approved, an Employee Benefit and Consulting Services Compensation Plan (the “2005 Plan”) for the granting of up to 2,000,000 non-statutory and incentive stock options and stock awards to directors, officers, consultants and key employees of the Company. On June 9, 2005, the Board of Directors amended the Plan to increase the number of stock options and awards to be granted under the Plan to 4,000,000. During Fiscal 2009, the Company established a plan of long-term stock-based compensation incentives for selected Eligible Participants of the Company covering 4,000,000 shares. This plan was adopted by the Board of Directors and approved by stockholders in October 2009 and shall be known as the 2009 Employee Benefit and Consulting Services Compensation Plan (the “2009 Plan”). In September 2013, the Company’s stockholders approved an increase in the number of shares covered by the 2009 Plan to 10,000,000. In February 2015, the Board approved, subject to stockholder approval within one year, an increase in the number of shares under the 2009 Plan to 20,000,000 shares; however, stockholder approval was not obtained within the requisite one year and the anticipated increase in the 2009 Plan was canceled. In the first quarter of 2016, the Board approved and stockholders ratified a 2016 Employee Benefit and Consulting Services Compensation Plan covering 10,000,000 shares (the “2016 Plan”) and approving moving all options which exceeded the 2009 Plan limits to the 2016 Plan. The 2005, 2009 and 2016 plans are collectively referred to as the “Plans.”

 

All stock options under the Plans are granted at or above the fair market value of the common stock at the grant date. Employee and non-employee stock options vest over varying periods and generally expire either 5 or 10 years from the grant date. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. For option grants, the Company will take into consideration payments subject to the provisions of ASC 718 “Stock Compensation”, previously Revised SFAS No. 123 “Share-Based Payment” (“SFAS 123 (R)”). The fair values of these restricted stock awards are equal to the market value of the Company’s stock on the date of grant, after taking into certain discounts. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. Previously, such assumptions were determined based on historical data. The weighted average assumptions made in calculating the fair values of options granted during the years ended December 31, 2017 and 2016 are as follows:

 

   Years Ended December 31, 
   2017   2016 
Expected volatility   146.8%    135.6% 
Expected dividend yield   0    0 
Risk-free interest rate   1.89%    1.25% 
Expected term (in years)   5.00    5.00 

 

           Weighted     
       Weighted   Average     
       Average   Remaining   Aggregate 
       Exercise   Contractual   Intrinsic 
   Share   Price   Term   Value 
Outstanding, January 1, 2017   18,315,001   $0.41    5.18    5,625 
Granted   250,000   $0.05    4.00     
Exercised               
Cancelled / Expired   (1,050,000)            
                     
Outstanding, December 31, 2017   17,515,001   $0.39    4.43     
                     
Options exercisable, December 31, 2017   17,037,918   $0.39    4.40     

 

The weighted-average grant-date fair value of options granted during the years ended December 31, 2017 and 2016 was $0.05 and $0.08, respectively. The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2016 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for the shares that had exercise prices, that were lower than the $0.02 closing price of the Company’s common stock on December 31, 2017.

 

As of December 31, 2017, the fair value of unamortized compensation cost related to unvested stock option awards was $24,955.

 

The option information provided above includes options granted outside of the Plans, which total 4,115,000 as of December 31, 2017.

 

The weighted average assumptions made in calculating the fair value of warrants granted during the years ended December 31, 2017 and 2016 are as follows:

 

   Years Ended 
   2017   2016 
Expected volatility   157.84%    0% 
Expected dividend yield        
Risk-free interest rate   1.87%    0% 
Expected term (in years)   4.10     

 

           Weighted     
       Weighted   Average     
       Average   Remaining   Aggregate 
       Exercise   Contractual   Intrinsic 
   Share   Price   Term   Value 
Outstanding, January 1, 2017   21,252,734   $0.48    1.40     
Granted   7,400,000   $0.06    3.02     
Exercised   (1,916,667)            
Cancelled/Expired   (14,754,400)            
Outstanding, December 31, 2017   11,981,667   $0.20    2.58     
                     
Warrants exercisable, December 31, 2017   11,981,667   $0.20    2.58     

 

v3.8.0.1
10. COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

COMMITMENTS –

 

In April 2011, we entered into our agreement with Simon Property Group, which agreement was amended first in September 2013 and then in July 2014. This second amendment provides for us to expand our location-based mobile mall network footprint to about 195 current Simon malls across the United States. Our agreement with Simon currently expires December 31, 2017. Simon is entitled to receive fees from us equal to the greater of a pre-set per mall fee or a percentage of revenues derived from within the Simon Mall network. The revenue share agreement in which Simon participates will exceed the minimum annual mall fees if the Company has generated revenues within the Simon network of about $15 million or more in a calendar year. Our agreement with Simon requires the company to maintain letters of credit for each calendar year under the agreement represented by the minimum amount of fees due for such calendar year. For 2015, the minimum fees of $2.7 million has been secured through two bank letters of credit, one of which was issued in the amount of $1,350,000 utilizing the funds of a non-affiliated stockholder and the second letter of credit was obtained in the same amount through the funds of Thomas Arnost, our Executive Chairman. In the event Simon draws down upon either letter of credit, we have until the next minimum payment due date (approximately 90 days) after the draw down to obtain replacement letters of credit. Each person who secured our letters of credit has the opportunity to notify us that they wish to turn the cash funds securing the letters of credit over to us and to convert such funds into Common Stock currently at a conversion price of $.20 per share. Also, each person who issued the letter of credit is receiving quarterly, while the letters of credit are outstanding, options to purchase 125,000 shares of Common Stock, exercisable at the prevailing market price per share on the date of grant and interest at the rate of 8% per annum on the monies that they have had to set aside in their bank accounts and are unable to have access to such monies. In April, July and October 2016, and January, March 2017, Simon drew down on each bank letter of credit for an aggregate of $1,350,000 owed to each letter of credit provider. Simon agreement expired in May 2017.

  

Pursuant to a master agreement effective August, 2015, we entered into an agreement with PREIT pursuant to which we have the right to install our Mobi-Beacons and to send information across the air space of the common areas of our PREIT mall network, which will include approximately 27 malls in select states in the United States. Our right to install our Mobi-Beacons to market and sell third party paid advertising in the interior common areas of these malls is exclusive. Under our agreement between us and PREIT, PREIT is entitled to an agreed upon revenue share over the four-year term of the agreement. In the event the net revenue share as defined in the agreement is not attained for any measurement period, also as defined in the agreement, either party may terminate the agreement upon 90 days prior written notice. PREIT may also terminate the agreement if it determines that Mobiquity’s installed equipment is not adequate and/or provides a negative user experience for the visitors to the PREIT malls. The agreement also provides for PREIT to adjust the number of malls subject to the agreement from time-to-time based upon changes in its beneficial ownership in the malls. This agreement is no longer material as it is a revenue sharing agreement with respect to a discontinued line of business.

 

In January 2016, we entered into a license agreement with GGP, with an effective date of November 20, 2015. Pursuant to our agreement with GGP, we have the right to install Mobi-Beacons to send information across the air space of the common areas of our GGP mall network in up to 120 malls across the United States. Our right to install our Mobi-Beacons to market and sell third party paid advertising in the interior common areas of these malls is exclusive. In the fourth quarter of 2016, GGP terminated this agreement.

 

Pursuant to a master agreement entered into in 2015, we entered into an agreement with Rouse pursuant to which we have the right to install our Mobi-Beacons to send information across the air space of the common areas of our Rouse mall network, which will include approximately 30 malls in select states in the United States. Our right to install our Mobi-Beacons to market and sell third party paid advertising in the interior common areas of these malls is exclusive. Under our agreement between us and Rouse, Rouse is entitled to an agreed upon revenue share over the four-year term of the agreement. In the event the net revenue share as defined in the agreement is not attained for any measurement period, also as defined in the agreement, either party may terminate the agreement upon 90 days prior written notice. Either party may also terminate the agreement due to a material breach which is not cured within 30 days of written notice. Also, Rouse upon at least 60 days written notice to us prior to the end of the second contract year, may terminate the agreement with respect to any participating property for any reason at the end of the second contract year. The agreement also provides for Rouse to adjust the number of malls subject to the agreement from time-to-time based upon changes in its beneficial ownership in the malls. This agreement is no longer material as it is a revenue sharing agreement with respect to a discontinued line of business.

 

In February 2012, the Company entered into a lease agreement for new executive office space of approximately 4,200 square feet located at 600 Old Country Road, Suite 541, Garden City, NY 11530. The lease agreement is for 63 months, commencing April 2012 and expiring June 2017. The annual rent under this office facility for the first year was estimated at $127,000, including electricity, subject to an annual increase of 3%. This lease was not renewed.

 

Our lease for approximately 2,000 square feet of space at an annual cost of approximately $28,600 (inclusive of taxes) at 1105 Portion Road, Farmingville, NY 11738 expired in November 2013. We leased this property on a month to month basis for approximately $2,500 per month from December 2014 to September 2017, with a 5% increase in rent each month until Ace was sold in October 2017.

 

In March of 2014, we entered into a month-to-month lease agreement for approximately 400 square feet of office space located in Manhattan, NY at a monthly cost of $3,700. In May of 2015 we moved to a larger location with the same landlord on a month to month basis for $4,700 each month. In 2017 the Company is leasing on a month-to-month basis two fully furnished executive suites in Manhattan at a monthly cost of approximately $6,700. These executive suites are located at 85 Broadway, 16th Floor, Suites 16-035 and 16-040, New York, NY 10010.

 

Minimum future rentals under non-cancelable lease commitments are as follows:

 

YEARS ENDING DECEMBER 31,     
2018    
2019    
2019 and thereafter    
   $ 

 

Rent and real estate tax expense was approximately $1,032,272 and $3,534,439 for the years December 31, 2017 and 2016, respectively.

 

EMPLOYMENT CONTRACTS –

 

Dean L. Julia

 

On March 1, 2005, the Company entered into employment contracts with Dean L. Julia. The employment agreement provides for minimum annual salaries plus bonuses equal to 5% of pre-tax earnings (as defined) and other perquisites commonly found in such agreements.

  

On August 22, 2007, the Company approved a three-year extension of the employment contract with Mr. Julia expiring on February 28, 2011. The employment agreements provided for minimum annual salaries with scheduled increases per annum to occur on every anniversary date of the contract and extension commencing on March 1, 2008. A signing bonus of options to purchase 150,000 shares granted to Mr. Julia were fully vested at the date of the grant and exercisable at $1.20 per share through August 22, 2017. Ten year options to purchase 50,000 shares of common stock are to be granted at fair market value on each anniversary date of the contract and extension commencing March 1, 2008. Termination pay of one year base salary based upon the scheduled annual salary of Mr. Julia for the next contract year, plus the amount of bonuses paid (or entitle to be paid) to Mr. Julia for the current fiscal year of the preceding fiscal year, whichever is higher.

 

On April 7, 2010, the Board of Directors approved a five-year extension of the employment contract of Dean L. Julia to expire on March 1, 2015.  The Board approved the continuation of Mr. Julia’s current salary and scheduled salary increases on March 1st of each year. The Board also approved a signing bonus of stock options to purchase 200,000 shares granted to each officer which is fully vested at the date of grant and exercisable at $.50 per share through April 7, 2020; ten-year stock options to purchase 100,000 shares of Common Stock to be granted to Mr. Julia at fair market value on each anniversary date of the contract and extension thereof commencing March 1, 2011; and termination pay of one year base salary based upon the scheduled annual salary of Mr. Julia for the next contract year plus the amount of bonuses paid or entitled to be paid to Mr. Julia for the current fiscal year or the preceding fiscal year, whichever is higher.  In the event of termination, Mr. Julia will continue to receive all benefits included in the employment agreement through the scheduled expiration date of said employment agreement prior to the acceleration of the termination date thereof.

 

In July 2012, the Company approved and in January 2013 the Company implemented amending the employment agreement of Mr. Julia to expire on February 28, 2017, subject to an automatic one year renewal on March 1, 2013 and on each March 1st thereafter, unless the Employment Agreement is terminated in accordance with its terms on or before December 30th of the prior calendar year. In the event of termination without cause, the executives will continue to receive all salary and benefits included in the employment agreement through the scheduled expiration date of said employment agreement prior to the acceleration of the termination date thereof, plus one year termination pay.

 

On May 28, 2013, the Company approved amending the employment agreement of Mr. Julia to provide that Mr. Julia may choose an annual bonus equal to 5% of pre-tax earnings for the most recently completed year before deduction of annual bonuses paid to officers or, in the event majority control of the Company is acquired by a person or a group of persons during the prior fiscal year, Mr. Julia may choose to receive the aforementioned bonus or 1% of the control consideration paid by acquirer(s) to acquire majority control of the Company.

 

Michael Trepeta 

 

In April 2017, Michael Trepeta, who had an identical agreement to Mr. Julia and served as Co-Chief Executive Officer and President of the Company, entered into a separation agreement with the Company pursuant to which he resigned as an executive officer and director. There is currently a vacancy in the Board of Directors of the Company. After his resignation, the Board changed Dean Julia’s title from Co-Chief Executive Officer to Chief Executive Officer.

 

Pursuant to Michael Trepeta’s separation agreement, Mr. Trepeta is entitled to the following benefits:

 

  · Six months’ coverage under the Company’s existing director/officer insurance policy;
  · Indemnification per existing employment agreement;
  · Expense reimbursement through May 31, 2017;
  · All options vested shall continue until their normal expiration date; and
  · Mutual releases.

 

Thomas Arnost

 

In December 2014, we entered into a three-year employment agreement with Thomas Arnost serving as Executive Chairman of the board. Mr. Arnost receives a monthly salary of $10,000 plus an annual grant of options for serving on the board of directors. In the event of his termination, by Mr. Arnost or by the company for cause, Mr. Arnost will receive his pay through the termination date. In the event that Mr. Arnost is terminated without cause, he shall be entitled to receive his salary paid through the end of the term of his agreement. Mr. Arnost may terminate the agreement at any time by giving three months’ prior written notice to our board of directors. Mr. Arnost will also be entitled to indemnification against all claims, judgments, damages, liabilities, costs and expenses (including reasonably legal fees) arising out of, based upon or related to his performance of services to us, to the maximum extent permitted by law. This agreement has expired.

  

Sean Trepeta

 

In December 2014, Mobiquity Networks entered into an employment agreement with Sean Trepeta, to serve as President of Mobiquity Networks as an employee at will. Mr. Trepeta, as a full-time employee, is to be paid a salary at the rate of $20,000 per month. Upon the execution of the agreement, he received 10-year options to purchase 1,500,000 shares of our common stock vesting quarterly over a period of three years. For calendar 2015, he will be entitled to a bonus of $125,000 upon revenues of Mobiquity Networks achieving a minimum of $6 million in revenues and a further bonus of $125,000 for a total of $250,000 at such time as Mobiquity Network’s revenues achieve a minimum of $12 million, it being understood that any revenues which do not have a 30% margin shall not count toward these totals. All options granted to Mr. Trepeta will become immediately vested in the event of a change in control of our Company or sale of substantially all of our assets. In the event we terminate Mr. Trepeta without cause, after six months of continued employment under the employment agreement, Mr. Trepeta is entitled to receive three months’ severance pay.

   

Paul Bauersfeld

 

In December 2014, we entered into an employment agreement with Paul Bauersfeld, our Chief Technology Officer, who is an employee at will. Mr. Bauersfeld, as a full-time employee, is to be paid a salary at the rate of $25,000 per month. Upon the execution of the agreement, he received 10-year options to purchase 1,000,000 shares of our common stock vesting quarterly over a period of three years. For calendar 2015, he will be entitled to a bonus of $125,000 upon revenues of Mobiquity Networks achieving a minimum of $6 million in revenues and a further bonus of $125,000 for a total of $250,000 at such time as Mobiquity Network’s revenues achieve a minimum of $12 million, it being understood that any revenues which do not have a 30% margin shall not count toward these totals. The foregoing compensatory arrangements with Mr. Bauersfeld is in addition to the non-statutory stock options to purchase 2,600,000 shares of our common stock previously granted to Mr. Bauersfeld. All options granted to Mr. Bauersfeld will become immediately vested in the event of a change of control of our company or sale of substantially all of our assets. In the event we terminate Mr. Bauersfeld without cause. Mr. Bauersfeld is entitled to receive six months’ severance pay.

 

Sean McDonnell

 

Sean McDonnell, our Chief Financial Officer, is an employee at will and is currently receiving a salary of $132,000 per annum.

 

Transactions with major customers

 

During the year ended December 31, 2017, two customers accounted for approximately 75% of revenues and for the year ended December 31, 2016, three customers accounted for all our revenues.

v3.8.0.1
11. DISCONTINUED OPERATIONS
12 Months Ended
Dec. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]  
DISCONTINUED OPERATIONS

   December 31, 2017   December 31, 2016 
         
Revenue  $1,945,940   $2,202,591 
Cost of service revenue   (1,495,507)   (1,564,201)
           
Gross Profit   450,433    638,390 
           
Expenses          
Advertising       2,500 
Depreciation   1,229    11,312 
Amortization   7,022    9,613 
Rent   80,286    75,387 
Other SG & A   477,077    1,067,129 
Interest   34,427    4,460 
           
Loss on discontinued operations, net  $(149,608)  $(532,011)
           
Accounts receivable, net  $   $298,928 
Inventory, net       79,291 
Property and equipment       6,205 
Intangibles, net       7,557 
Other       58,699 
Assets of discontinued operations, net       450,680 
           
Accounts payable       295,962 
Accrued expenses       211,080 
Liabilities of discontinued operations, net  $   $507,042 

 

v3.8.0.1
12. SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2017
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

In the first quarter of 2018, the Company entered into an agreement with a non-affiliated persons to provide $1,000,000 of short term secured debt financing in four monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible promissory note. In connection with this transaction, the Company agreed to issue an origination fee of 1,000,000 shares of restricted common stock. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction.

v3.8.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
Dec. 31, 2017
Accounting Policies [Abstract]  
NATURE OF OPERATIONS

NATURE OF OPERATIONS – On September 10, 2013, Mobiquity Technologies, Inc. changed its name from Ace Marketing & Promotions, Inc. “the Company” or “Mobiquity”). We operate through two wholly-owned U.S. subsidiaries, namely, Mobiquity Networks, Inc. and Ace Marketing& Promotions, Inc. Mobiquity Networks owns 100% of Mobiquity Wireless S.L.U, a company incorporated in Spain. This corporation had an office in Spain to support our U.S. operations, which office was closed in the fourth quarter of 2016. Ace Marketing, its legacy marketing and promotions business was successfully sold on October 1, 2017, allowing us to focus our full attention to Mobiquity Networks.

 

Mobiquity Technologies, Inc., a New York corporation (the “Company”), is the parent company of its operating subsidiary; Mobiquity Networks, Inc. (“Mobiquity Networks”). The Company’s wholly-owned subsidiary, Mobiquity Networks has evolved and grown from a mobile advertising technology company focused on driving Foot-traffic throughout its indoor network, into a next generation location data intelligence company. Mobiquity Networks provides precise unique, at-scale location data and insights on consumer’s real-world behavior and trends for use in marketing and research. With its combined first party location data via its advanced SDK and its various exclusive data sets; Mobiquity Networks provides one of the most accurate and scaled solution for mobile data collection and analysis. utilizing multiple geo-location technologies. Mobiquity Networks is seeking to implement several new revenue streams from its data collection and analysis, including, but not limited to; Advertising, Data Licensing, Footfall Reporting, Attribution Reporting, Real Estate Planning, Financial Forecasting and Custom Research.

GOING CONCERN

GOING CONCERN - The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company's continued existence is dependent upon the Company's ability to obtain additional debt and/or equity financing to advance its new technology revenue stream. The Company has incurred losses from continued operations for the years ending December 31, 2017 and December 31, 2016 of $10,245,493 and $10,178,492, respectively. As of December 31, 2017, the Company has an accumulated deficit of $61,298,475. The Company has had negative cash flows from operating activities of $3,665,537 and $5,929,852 for the years ending December 31, 2017 and 2016, respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

 

Management has plans to address the Company’s financial situation as follows:

 

In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan related to technology. Management will continue to seek out equity and/or debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders and investors will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raises doubts about the Company’s ability to continue as a going concern.

 

In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s efforts to raise equity and debt at acceptable terms or that the planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.

PRINCIPLES OF CONSOLIDATION

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of Mobiquity Technologies, Inc., formerly known as Ace Marketing & Promotions, Inc., and its wholly owned subsidiary, Mobiquity Networks, Inc., All intercompany accounts and transactions have been eliminated in consolidation.

ESTIMATES

ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS- The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. 

 

The following are the hierarchical levels of inputs to measure fair value: 

 

  · Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
     
  · Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
     
  · Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

 

The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments. 

 

The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3.  

 

   Level 1   Level 2   Level 3   Total 
Fair value of derivatives  $   $   $666,123   $666,123 

 

Embedded Conversion Features

 

The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature. 

 

Derivative Financial Instruments

 

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to 15 convertible notes issued totaling $3,234,000 which included a ratchet provision in the conversion price of $.05 or $.30 or a price equal to the last equity transaction completed by the Company as part of a subscription agreement. The notes have maturity dates ranging from February 11, 2018 – March 28, 2018. The Company also has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting related to 2,200,000 warrants which included a ratchet provision in the conversion price of $.05 as part of a conversion of preferred AAA shares, and 1,000,000 warrants which included a ratchet provision in the conversion price of $.055 as part of a placement fee related to a note. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures and associated warrants using a multinomial lattice model as of December 31, 2017. The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $3,376,620 and initial derivative expense of $1,284,704 during the year ended December 31, 2017. As of December 31, 2017, the fair market value of the derivatives aggregated $666,123 using the following assumptions: estimated 0.1 to 4.33-year term, estimated volatility of 183.70% to 415.83%, and a discount rate of 0.00% to 1.87%.

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt instruments with a maturity of three months or less, as well as bank money market accounts, to be cash equivalents. As of December 31, 2017 and 2016, the balances are $56,470 and $193,933, respectively.

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and cash and cash equivalents.

 

Concentration of credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising the Company’s customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. Our current receivable at December 31, 2017 is all with a single customer. Two customers constitute 75.44% of our sales. Customer A percentage of sales was 42.28% and customer B was 33.16%.

 

The Company places its temporary cash investments with high credit quality financial institutions. At times, the Company maintains bank account balances, which exceed FDIC limits. As of December 31, 2017 and 2016, the Company exceeded FDIC limits by $0 and $0, respectively.

REVENUE RECOGNITION

REVENUE RECOGNITION – The Company recognizes revenue, for all revenue streams, when it is realized or realizable and estimable in accordance with ASC 605, “Revenue Recognition”. The Company will recognize revenue only when all of the following criteria have been met:

 

  · Persuasive evidence for an agreement exists;

 

  · Service has been provided or shipment has occurred;

 

  · The fee is fixed or determinable; and,

 

  · Collection is reasonably assured.

 

MOBIQUITY NETWORKS – Revenue is recognized with the billing of an advertising contract or data sale. The customer signs a contract directly with us for an advertising campaign with mutually agreed upon term and is billed on the start date of the advertising campaign, which are normally in short duration periods. The second type of revenue is through the licensing of our data. Revenue from data can occur in two ways; the first is a direct feed, which is billed at the end of each month. The second way is through the purchasing of audience segments. When an audience segment is purchased, we bill the buyer upon delivery, which is usually 1-2 days for the order date.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS - Management must make estimates of the collectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. As of December 31, 2017 and 2016, allowance for doubtful accounts were $0 and $0, respectively.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation is expensed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are being amortized using the straight-line method over the estimated useful lives of the related assets or the remaining term of the lease. The costs of additions and improvements, which substantially extend the useful life of a particular asset, are capitalized. Repair and maintenance costs are charged to expense. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the account and the gain or loss on disposition is reflected in operating income.

LONG-LIVED ASSETS

LONG LIVED ASSETS - Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company recognized no impairment losses for the period ended December 31, 2017.

PATENTS AND TRADEMARKS

PATENTS and TRADEMARKS - Patents and trademarks developed during the prior years were capitalized for the period of development and testing. Expenditures during the planning stage and after implementation have been expensed in accordance with ASC 985.

ADVERTISING COSTS

ADVERTISING COSTS - Advertising costs are expensed as incurred. For the years ended December 31, 2017 and 2016, there were advertising costs of $0 and $3,841, respectively.

ACCOUNTING FOR STOCK BASED COMPENSATION

ACCOUNTING FOR STOCK BASED COMPENSATION. Stock based compensation cost is measured at the grant date fair value of the award and is recognized as expense over the requisite service period. The Company uses the Black-Sholes option-pricing model to determine fair value of the awards, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”) and the number of options for which vesting requirements will not be completed (“forfeitures”). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated statements of operations. Refer to Note 8 “Stock Option Plans” in the Notes to Consolidated Financial Statements in this report for a more detailed discussion.

BENEFICIAL CONVERSION FEATURES

BENEFICIAL CONVERSION FEATURES - Debt instruments that contain a beneficial conversion feature are recorded as deemed interest to the holders of the convertible debt instruments. The beneficial conversion is calculated as the difference between the fair values of the underlying common stock less the proceeds that have been received for the debt instrument limited to the value received.

FOREIGN CURRENCY TRANSLATIONS

FOREIGN CURRENCY TRANSLATIONS - The Company’s functional and reporting currency is the U.S. dollar. We owned a subsidiary in Europe with it operations in 2016 consolidated into our U.S. location. Our subsidiary’s functional currency in 2016 is the EURO. All transactions initiated in EUROs are translated into U.S. dollars in accordance with ASC 830-30, “Translation of Financial Statements,” as follows:

 

  (i) Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.
     

 

(ii) Fixed assets and equity transactions at historical rates.
     

 

(iii) Revenue and expense items at the average rate of exchange prevailing during the period.

 

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income.

 

No significant realized exchange gains or losses were recorded since March 7, 2013 (date of acquisition of subsidiary) to December 31, 2016 the date operations were consolidated into our U.S. location.

INCOME TAXES

INCOME TAXES - Deferred income taxes are recognized for temporary differences between financial statement and income tax basis of assets and liabilities for which income tax or tax benefits are expected to be realized in future years. A valuation allowance is established to reduce deferred tax assets, if it is more likely than not, that all or some portion of such deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

NET LOSS PER SHARE

NET LOSS PER SHARE - Basic net loss per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options. The number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted loss per common share calculation was approximately 110,453,240 and 51,912,242 because they are anti-dilutive, as a result of a net loss for the years ended December 31, 2017 and 2016, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - ASC 606, Revenue from contracts with customers, the effective date of ASC 606 is for annual reporting periods beginning after December 15, 2017. It provides accounting guidance related to revenue from contracts with customers. The guidance applies to all entities and to all customers. The accounting for ASC 606 will take effect for our company starting in January of 2018.

 

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

v3.8.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
12 Months Ended
Dec. 31, 2017
Accounting Policies [Abstract]  
Fair value of derivatives
   Level 1   Level 2   Level 3   Total 
Fair value of derivatives  $   $   $666,123   $666,123 
v3.8.0.1
2. PROPERTY AND EQUIPMENT (Tables)
12 Months Ended
Dec. 31, 2017
Property, Plant and Equipment [Abstract]  
Property and equipment
   USEFUL LIVES  2017   2016 
            
Furniture and Fixtures  3 or 5 years  $55,702   $73,450 
       55,702    73,450 
Less Accumulated Depreciation      55,702    64,263 
      $   $9,187 
v3.8.0.1
3. INTANGIBLE ASSETS (Tables)
12 Months Ended
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible asset schedule
   USEFUL LIVES  2017   2016 
            
Acquisition of intellectual property (FuturLink)  5 years   98,000    98,000 
       98,000    98,000 
Less Accumulated Amortization      88,040    68,440 
      $9,960   $29,560 
Future accumulated amortization schedule
2018     9,960  
2019      
Thereafter      
    $ 9,960  
v3.8.0.1
4. CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES (Tables)
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Summary of Convertible Promissory Notes

   2017   2016 
Arnost Note  $   $322,000 
CAVU Notes, net of $0 for 2017 and $8,379 for 2016   100,000    241,621 
Berg Notes (a)   50,000    3,722,000 
Investor Notes, net of discounts of $0 and $529,107, respectively       6,546,654 
Secured Notes (b) net of discounts of $234,502 for 2017 and $0 for 2016   2,999,498     
Total Debt   3,149,498    10,832,275 
Current portion of debt   3,149,498    10,832,275 
Long-term portion of debt  $   $ 

 

 

(a)

Between August and December 2015, the Company borrowed $3,675,000 from accredited investors. These loans are due and payable the earlier of December 31, 2016 or the completion of an equity financing of at least $2,500,000. Upon the sale of the unsecured promissory notes, the Company issued $1 of principal, one share of common stock and a warrant to purchase one share of common stock at an exercise price of $0.40 per share through August 31, 2017. Accordingly, an aggregate of 3,675,000 shares of common stock and warrants to purchase a like amount were issued in the last six months of 2015. Each noteholder has the right to convert the principal of their note and accrued interest thereon at a conversion price of $0.30 per share or at the noteholder’s option, into equity securities of the Company on the same terms as the last equity transaction completed by the Company prior to each respective conversion date.
     
  (b) On February 28, 2017, the Company entered into an agreement with two non-affiliated persons to provide $1.6 million of short term secured debt financing in three monthly tranches. The Company will issue in connection with each tranche, a six-month secured convertible promissory note. In connection with this transaction, the Company agreed to issue an origination fee of 3,200,000 warrants. Alexander Capital L.P. acted as Placement Agent and Advisor for this transaction. In August, September and October 2017, the noteholders exchanged their $1,600,000 of notes that were coming due in August through October 2017 plus a 30% premium and accrued interest for new six-month notes in the principal amount of $2,184,000. As additional consideration for the exchange, the Company issued 533,334 shares of common stock..

 

Schedule of Derivative Instruments

Derivative Liability 2016
Beginning balance  $(576,557)
New Issuances   (1,079,016)
Discount on new derivative in excess of note face value   (565,780)
Gain on revaluation of derivatives   1,870,653 
Ending balance  $(350,700)

 

Derivative Liability 2017
Beginning balance  $(350,700)
Discount on new issuances   (1,867,287)
Discount on new derivatives in excess of note face value   (1,284,704)
Gain on revaluation of derivatives   3,376,620 
Conversions   229,939 
Effect of debt extinguishment   (769,991
Ending balance  $(666,123)

 

v3.8.0.1
5. FAIR VALUE MEASUREMENTS (Tables)
12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements, Recurring basis

Our financial assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2017 and 2016, consisted of the following:

 

   Total fair   Quoted prices   Significant other   Significant 
   value at   in active   observable   unobservable 
   December 31,   markets   inputs   inputs 
Description  2017   (Level 1)   (Level 2)   (Level 3) 
Derivative liability (1)  $666,123   $   $   $666,123 

 

   Total fair   Quoted prices   Significant other   Significant 
   value at   in active   observable   unobservable 
   December 31,   markets   inputs   inputs 
Description  2016   (Level 1)   (Level 2)   (Level 3) 
Derivative liability (1)  $350,700   $   $   $350,700 

 

  (1) The Company has estimated the fair value of these embedded derivatives for convertible debenture using a multinomial lattice model.  

 

 

v3.8.0.1
6. INCOME TAXES (Tables)
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Provision for income taxes
    2017    2016 
Current:          
Federal  $     
State        
         
Deferred:          
Federal        
State        
   $   $ 
Schedule of deferred income taxes
   YEARS ENDED DECEMBER 31, 
   2017   2016 
Net operating loss carry-forwards  $(24,351,000)  $(20,261,000)
Stock based compensation – options/warrants   3,778,000    3,540,000 
Stock issued for services   971,000    971,000 
Gain on derivative instrument   (2,361,000)   (1,011,000)
Disallowed entertainment expense   59,000    56,000 
Charitable contribution limitation   11,000    11,000 
Preferred Stock   39,000    39,000 
Bad debt expense & reserves   47,000    47,000 
Penalties   1,000    1,000 
Loss on extinguishment of debt   1,743,000    114,000 
Beneficial conversion features   119,000    119,000 
Mobiquity-Spain – net loss   830,000    830,000 
Impairment of long lived assets   89,000    89,000 
Stock issued for interest   376,000     
Nondeductible insurance   10,000     
Stock incentives   24,000     
Derivative expense   514,000     
Amortization of debt discount   2,246,000    1,311,000 
Deferred Tax Assets   (15,855,000)   (14,144,000)
Less Valuation Allowance   15,855,000    14,144,000 
Net Deferred Tax Asset  $   $ 
Reconciliation of federal statutory rate
   YEARS ENDED DECEMBER 31, 
   2016   2015 
Federal Statutory Tax Rate   34.00%    34.00% 
State Taxes, net of Federal benefit   6.00%    6.00% 
Change in Valuation Allowance   (40.00%)   (40.00%)
Total Tax Expense   0.00%    0.00% 
v3.8.0.1
8. OPTIONS AND WARRANTS (Tables)
12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of stock based compensation expense
   Years Ended December 31, 
   2017   2016 
Employee stock-based compensation - option grants  $473,192   $603,536 
Employee stock-based compensation-stock grants        
Non-Employee stock-based compensation - option grants   11,500    79,500 
Non-Employee stock-based compensation-stock grants    –     
Non-Employee stock-based compensation-stock warrant   111,000     
   $595,692   $683,036 
v3.8.0.1
9. STOCK OPTION PLANS (Tables)
12 Months Ended
Dec. 31, 2017
Options  
Assumptions used
   Years Ended December 31, 
   2017   2016 
Expected volatility   146.8%    135.6% 
Expected dividend yield   0    0 
Risk-free interest rate   1.89%    1.25% 
Expected term (in years)   5.00    5.00 
Schedule of options outstanding
           Weighted     
       Weighted   Average     
       Average   Remaining   Aggregate 
       Exercise   Contractual   Intrinsic 
   Share   Price   Term   Value 
Outstanding, January 1, 2017   18,315,001   $0.41    5.18    5,625 
Granted   250,000   $0.05    4.00     
Exercised               
Cancelled / Expired   (1,050,000)            
                     
Outstanding, December 31, 2017   17,515,001   $0.39    4.43     
                     
Options exercisable, December 31, 2017   17,037,918   $0.39    4.40     
Warrants  
Assumptions used
   Years Ended 
   2017   2016 
Expected volatility   157.84%    0% 
Expected dividend yield        
Risk-free interest rate   1.87%    0% 
Expected term (in years)   4.10     
Schedule of warrants outstanding
           Weighted     
       Weighted   Average     
       Average   Remaining   Aggregate 
       Exercise   Contractual   Intrinsic 
   Share   Price   Term   Value 
Outstanding, January 1, 2017   21,252,734   $0.48    1.40     
Granted   7,400,000   $0.06    3.02     
Exercised   (1,916,667)            
Cancelled/Expired   (14,754,400)            
Outstanding, December 31, 2017   11,981,667   $0.20    2.58     
                     
Warrants exercisable, December 31, 2017   11,981,667   $0.20    2.58     
v3.8.0.1
10. COMMITMENTS AND CONTINGENCIES (Tables)
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Future lease commitments
YEARS ENDING DECEMBER 31,     
2018    
2019    
2019 and thereafter    
   $ 
v3.8.0.1
11. DISCONTINUED OPERATIONS (Tables)
12 Months Ended
Dec. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued operations

   December 31, 2017   December 31, 2016 
         
Revenue  $1,945,940   $2,202,591 
Cost of service revenue   (1,495,507)   (1,564,201)
           
Gross Profit   450,433    638,390 
           
Expenses          
Advertising       2,500 
Depreciation   1,229    11,312 
Amortization   7,022    9,613 
Rent   80,286    75,387 
Other SG & A   477,077    1,067,129 
Interest   34,427    4,460 
           
Loss on discontinued operations, net  $(149,608)  $(532,011)
           
Accounts receivable, net  $   $298,928 
Inventory, net       79,291 
Property and equipment       6,205 
Intangibles, net       7,557 
Other       58,699 
Assets of discontinued operations, net       450,680 
           
Accounts payable       295,962 
Accrued expenses       211,080 
Liabilities of discontinued operations, net  $   $507,042 

 

v3.8.0.1
1. Summary of Significant Accounting Policies (Details) - USD ($)
Dec. 31, 2017
Dec. 31, 2016
Fair value of derviatives $ 666,123 $ 350,700
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Fair value of derviatives 0 0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Fair value of derviatives 0 0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]    
Fair value of derviatives $ 666,123 $ 350,700
v3.8.0.1
1. Summary of Significant Policies (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Net loss from continuing operations $ (10,245,493) $ (10,178,492)  
Accumulated deficit (61,298,474) (51,182,093)  
Cash flows from operations (3,665,537) (5,929,852)  
Unrealized gain on derivatives 3,376,620 1,870,653  
Derivative expense 1,284,704    
Fair market value of derviatives 666,123    
Cash and cash equivalents 56,470 193,933 $ 2,044,662
Cash over FDIC insurance limits 0 0  
Allowance for doubtful accounts 0 0  
Inventory reserve 31,676 31,676  
Impairment losses on long lived assets 0 223,487  
Advertising costs $ 0 $ 3,841  
Antidilutive shares excluded from earnings per share calculation 110,453,240 51,912,242  
Sales Revenue, Net [Member]      
Concentration risk percentage 77.44%    
Sales Revenue, Net [Member] | Customer A [Member]      
Concentration risk percentage 42.28%    
Sales Revenue, Net [Member] | Customer B [Member]      
Concentration risk percentage 33.16%    
v3.8.0.1
2. Property and Equipment (Details) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Property and equipment, gross $ 55,702 $ 73,450
Accumulated depreciation 55,702 64,263
Property and equipment, net 0 9,187
Furniture and Fixtures [Member]    
Property and equipment, gross $ 55,702 $ 73,450
Furniture and Fixtures [Member] | Minimum [Member]    
Useful lives 3 years  
Furniture and Fixtures [Member] | Maximum [Member]    
Useful lives 5 years  
v3.8.0.1
2. Property and Equipment (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Property, Plant and Equipment [Abstract]    
Depreciation expense for continuing operations $ 5,667 $ 119,332
Disposal of outdated fixed assets   736,100
Loss on disposal fixed assets 0 (17,526)
Impairment loss of fixed assets $ 0 $ 223,487
v3.8.0.1
3. Intangible Assets (Details-Intangible Assets) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Intangible assets, gross $ 98,000 $ 98,000
Acculumated amortization 88,040 68,440
Intangible assets, net 9,960 29,560
Intellectual Property [Member]    
Intangible assets, gross $ 98,000 $ 98,000
Useful lives 5 years