• Filing Date: 2018-08-09
  • Form Type: 10-Q
  • Description: Quarterly report
v3.10.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Jul. 24, 2018
Document And Entity Information    
Entity Registrant Name Mobiquity Technologies, Inc.  
Entity Central Index Key 0001084267  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
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   377,975,600
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2018  
v3.10.0.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Current Assets:    
Cash and cash equivalents $ 121,034 $ 56,470
Accounts receivable, net 221,960 18,576
Prepaid expenses and other current assets 11,700 17,638
Total Current Assets 354,694 92,684
Intangible assets, net 160 9,960
Other Assets    
Security deposit 9,900 11,275
Investment in corporate stock 7,560,000 0
Total Other Assets 7,569,900 11,275
Total Assets 7,924,754 113,919
Current Liabilities:    
Accounts payable 420,189 458,280
Accrued expenses 1,320,911 735,431
Derivative liability 11,119,717 666,123
Note payables-Bank 0 54,644
Convertible promissory notes, net 4,390,010 3,149,498
Total Current Liabilities 17,250,827 5,063,976
Stockholders' Deficit:    
Common stock, $.0001 par value; 900,000,000 and 900,000,000 shares authorized; 377,975,600 and 199,375,600 shares issued and outstanding at June 30, 2018, and December 31, 2017, respectively 37,810 19,850
Additional paid-in capital 60,531,589 44,776,029
Stock subscription (260,000) 0
Accumulated deficit (81,188,010) (61,298,474)
Total Stockholders' Deficit (20,878,586) (16,502,570)
Total Liabilities and Stockholders' Deficit 7,924,754 113,919
Preferred Stock [Member]    
Stockholders' Deficit:    
Preferred Stock 25 25
AAA Preferred Stock [Member]    
Stockholders' Deficit:    
Preferred Stock $ 11,552,513 $ 11,552,513
v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2018
Dec. 31, 2017
Common stock par value $ .0001 $ 0.0001
Common stock shares authorized 900,000,000 900,000,000
Common stock shares issued 377,975,600 199,375,600
Common stock outstanding 377,975,600 199,375,600
Preferred Stock [Member]    
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
AAA Preferred Stock [Member]    
Preferred Stock par value $ .0001 $ .0001
Preferred Stock shares authorized 5,000,000 5,000,000
Preferred Stock shares issued 850,588 850,588
Preferred stock shares outstanding 850,588 850,588
v3.10.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Revenues $ 241,573 $ 100,204 $ 280,276 $ 181,991
Cost of revenues 324,984 309,739 386,101 406,031
Gross profit (83,411) (209,535) (105,825) (224,040)
Operating Expenses:        
Selling, general and administrative 782,410 1,413,197 1,673,414 3,024,957
Total Operating Expenses 782,410 1,413,197 1,673,414 3,024,957
Loss from Operations (865,821) (1,622,732) (1,779,239) (3,248,997)
Other Income (Expense):        
Interest expense (928,121) (758,107) (1,474,133) (1,891,235)
Gain/(Loss) on Derivative Instrument (263,225) 1,006,309 (9,246,435) 1,284,031
Initial derivative expense (314,822) (181,265) (559,728) (1,284,704)
Gain/(Loss) on Settlement of Debt 0 0 0 (2,706,197)
Impairment of intangible assets 0 0 0 (12,127)
Loss on sale of company stock (6,965,000) 0 (6,965,000) 0
Total Other Income (Expense) (8,471,168) 66,937 (18,245,296) (4,610,232)
Loss from continuing operations (9,336,989) (1,555,795) (20,024,535) (7,859,229)
Other Comprehensive Income 0 0 0 13,047
Unrealized holding gains arising during period 135,000 0 135,000 0
Discontinued operations:        
Loss from operations of discontinued entity 0 (13,113) 0 (244,298)
Net Comprehensive Loss $ (9,201,989) $ (1,568,908) $ (19,889,535) $ (8,090,480)
Net Loss Per Common Share:        
Basic and diluted $ (0.04) $ (0.01) $ (0.09) $ (0.05)
Weighted Average Common Shares Outstanding:        
Basic and diluted 226,733,752 191,606,423 227,203,861 170,802,429
v3.10.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash Flows from Operating Activities:    
Net loss $ (20,024,535) $ (7,859,229)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation Expense 0 6,451
Amortization - Intangible Assets 9,800 14,300
Amortization - Debt discount 874,443 1,363,013
Common stock issued for services 189,740 314,310
Loss on sale of company stock 6,965,000 0
Common stock issued for interest 406,375 0
Change in derivative instrument 9,246,435 (1,284,031)
Stock-based compensation 327,405 425,358
Initial derivative expense 559,728 1,284,704
Gain on settlement of debt 0 2,706,197
Loss on disposal of assets 0 12,241
Expenses paid from note 0 567,737
Changes in operating assets and liabilities:    
Accounts receivable (203,384) (84,676)
Inventory 0 13,149
Prepaid expenses and other assets 7,313 48,461
Investment in corporate stock (7,560,000) 0
Accounts payable (38,092) (163,310)
Accrued expenses and other current liabilities 137,872 361,064
Accrued interest 447,608 0
Total adjustments 11,370,243 5,584,968
Net Cash Used in Operating Activities (8,654,292) (2,274,261)
Net Cash Used in Operating Activities-discontinued operations 0 (244,298)
Cash Flows from Financing Activities:    
Proceeds from the issuance of notes, net 1,273,500 1,735,000
Proceeds from issuance of common stock 460,000 311,250
Proceeds received from exercising warrants 0 95,834
Proceeds from the collection of stock subscription 200,000 456,503
Stock subscription receivable (260,000) 0
Cash received from bank loans 143,077 0
Cash paid on bank loans (197,721) 0
Loss on sale of company stock 6,965,000 0
Net Cash Provided by Financing Activities 8,583,856 2,598,587
Net Increase (Decrease) in Cash and Cash Equivalents (70,436) 80,028
Cash and Cash Equivalents, beginning of period 56,470 213,184
Change in foreign currency 0 13,047
Unrealized gain on securities 135,000 0
Cash and Cash Equivalents, end of period 121,034 306,259
Supplemental Disclosure Information:    
Cash paid for interest 5,000 3,140
Cash paid for taxes 0 0
Non-cash Financing and Investing Activities:    
Stock issued for interest 406,375 0
Original debt discount against derivative liabilities 0 1,600,000
Investment in corporate stock 7,425,000 0
Conversion of note and interest into AAA Preferred and Common Stock 12,791,476
Recognition of debt discount $ 1,123,931 $ 294,939
v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1: 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 a wholly-owned U.S. subsidiary, named, Mobiquity Networks, 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 condensed 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 six months ended June 30, 2018 of $20,024,535. As of June 30, 2018, the Company has an accumulated deficit of $81,188,010. The Company has had negative cash flows from operating activities of $8,654,292, for the six months ended June 30, 2018. 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.

 

The Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, the Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2018 and 2017 and the Condensed Statements of Cash Flows for the six months ended June 30, 2018 and 2017 have been prepared by us without audit, and in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly in all material respects our financial position as of June 30, 2018, results of operations for the three months and six months ended June 30, 2018 and 2017 and cash flows for the six months ended June 30, 2018 and 2017. All such adjustments are of a normal recurring nature. The results of operations and cash flows for the three months and six months ended June 30, 2018 and 2017 are not necessarily indicative of the results to be expected for the full year. We have evaluated subsequent events through the filing of this Form 10-Q with the SEC and determined there have not been any events that have occurred that would require adjustments to our unaudited Condensed Financial Statements.

 

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 — For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

 

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

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  $   $   $11,119,717   $11,119,717 

 

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 22 convertible notes issued totaling $4,609,000 which have a variable conversion price equal to 50% of the lowest volume weighted average price in the 30 days prior to conversion. The notes have maturity dates ranging from February 2, 2018 – October 21, 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 June 30, 2018. The fair values of the derivative instruments are measured each quarter, which resulted in a loss of $9,246,435 and derivative expense of $559,728 during the six months ended June 30, 2018. As of June 30, 2018, the fair market value of the derivatives aggregated $11,119,717 using the following assumptions: estimated 0.1 to 4.1-year term, estimated volatility of 196.98% to 394.26%, and a discount rate of 0.00% to 2.09%.

 

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 June 30, 2018, and December 31, 2017, the balances were $121,034 and $56,470, 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 receivables at June 30, 2018 are with five customers. One customer constitutes 82.79% of our sales.

 

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 June 30, 2018, and December 31, 2017, the Company did not exceed FDIC limits.

 

REVENUE RECOGNITION – The Company recognized revenue on arrangements in accordance with FASB Codification Topic 606, Revenue from Contracts with Customers. Revenue represents amounts earned for data licensing arrangements consisting of flat fee, per use basis or revenue share. Licensee is sent data on a daily basis, has use of the data for a period of time based on the contract life between one month to one year.

 

We recognize revenues in the period in which the data transmission is provided to the licensee.

 

Under these policies, the Company evaluates each of these criteria as follows:

 

  Evidence of an arrangement. We consider a signed insertion order or contract by the licensee or its agency to be evidence of an arrangement.

 

  Delivery. Delivery is considered to occur daily with the transmission of the data from our network servers to the licensee.

 

  Fixed or determinable fee. The Company recognizes revenue for data license arrangements ratably over the term of the insertion order or contract. Our arrangements with the licensee is noted in the signed contracts which specifies the price to be paid and due date of remittance. Contracts that include fixed-fee data transmission are invoiced upon acceptance of the insertion order or contract and billed at time of delivery. The Company’s terms as stated in the contracts. Final billing is based on usage of delivered data. At the end of the period (usually monthly) an acknowledgment of data amount delivered is sent to licensee, who then verifies usage and at the point a final invoice is generated.

 

  Collection is deemed reasonably assured. We deem collection reasonably assured if we expect that the licensee will be able to pay the amounts under the arrangement as payments become due. Collection is deemed not reasonably assured when a licensee is perceived to be in financial distress, which may be evidenced by weak industry conditions, a bankruptcy filing, or previously billed amounts that are past due. If we determine that collection is not reasonably assured, then we would defer the revenue and recognize the revenue upon cash collection.

 

  No other warranties and or obligations are implied or due once the data transmission has been completed with the licensee.

 

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 June 30, 2018, and December 31, 2017, 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 June 30, 2018.

 

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 quarter ended June 30, 2018 and for the year ended December 31, 2017, there were no advertising costs.

 

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.

 

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.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS – Revenue from Contracts with Customers (Topic 606). The company adopted Revenue Recognition Standard, ASC 606 on January 1, 2018 and after for the recognition for our revenue policy.

 

We have completed our assessment of the impact under the new revenue standard on our condensed financial statements. Based on our assessment, we have concluded that our financial statements will not be materially impacted upon adoption.

v3.10.0.1
2. LOSS PER SHARE
6 Months Ended
Jun. 30, 2018
Net Loss Per Common Share:  
LOSS PER SHARE

NOTE 2: LOSS PER SHARE

 

Basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Dilutive loss per share gives effect to stock options and warrants, which are considered to be dilutive common stock equivalents. Basic loss per common share was computed by dividing net loss by the weighted average number of shares of common stock outstanding. 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 357,519,663 because they are anti-dilutive as a result of a net loss for the six months ended June 30, 2018.

v3.10.0.1
3. CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES

NOTE 3: CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES

 

Summary of Convertible Promissory Notes:

 

    June 30,   December 31,
    2018   2017
         
CAVU Notes, net   $ 100,000     $ 100,000  
Berg Note     50,000       50,000  
Secured and unsecured Notes net of discounts of $368,990 for June 30, 2018 and $234,502 for December 31, 2017     4,240,010       2,999,498  
Total Debt     4,390,010       3,149,498  
Current portion of debt     4,390,010       3,149,498  
Long-term portion of debt   $ —       $ —    

 

In the first quarter of 2018, the Company entered into agreements with 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. Each of these new notes are on the terms of the Company's 10% Senior Secured debt.

 

The Company's 10% Senior Secured Debt consists of 19 convertible notes issued totaling $4,234,000. These notes mature 6 months from the date of issuance, accrue interest at 10%, and had a base conversion price of $.05. As of June 30, 2018, the 10% Senior Secured Debt notes are in default for breach of covenants due to notes which have matured during the period not being settled. The default on these notes triggered an increase in the interest rate from 10% to 24% on the principal balance, a 9% late fee being charged on interest accrued, and a variable conversion price equal to 50% of the lowest volume weighted average price in the 30 days prior to conversion. On February 27, 2018 the Company reduced the base conversion price from $.05 to $.02. The Company accounted for this modification per ASC 470-50 "Modifications and Extinguishments". Due to the variable rate in effect from the default provisions of the 10% Senior Secured Debt notes this reduction in base conversion price had no material change on the value of the notes.

 

In the second quarter of 2018, the Company borrowed $375,000 from investors, including $125,000 from the Chairman of the Company. A total of 10,500,000 shares of common stock were issued as origination fees. The principal of the loans are due and payable the earlier of July 31, 2018 or upon the completion of a financing of at least $1,000,000.

 

A recap of the derivative liability is as follows:

 

Derivative Liability 2018
Beginning balance   $ (666,123 )
New Issuances     (559,728 )
Discount on new issuances     (647,431 )
Gain (Loss) on revaluation of derivative liability     (9,246,435 )
Ending balance   $ (11,119,717 )

 

v3.10.0.1
4. STOCKHOLDERS' DEFICIT
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
STOCKHOLDERS' DEFICIT

NOTE 4: STOCKHOLDERS’ (DEFICIT)

  

Shares issued for Original Interest Discount

 

During the quarter ended June 30, 2018, the Company issued 10,500,000 shares of common stock at a price per share between $0.04 and $0.05 for original issue discount on receipt of $375,000 in unsecured convertible promissory notes.

 

On June 20, 2018, the Company entered into a strategic investment transaction with Glen Eagles Acquisitions LP (“GEA”). As part of the strategic investment, the Company received 4,500,000 shares of Gopher Protocol Inc. common stock (traded in the OTC Market under the symbol “GOPH”) and cash in exchange for 150,000,000 shares of its restricted common stock. There was also an origination fee of 15,000,000 shares of its restricted common stock paid to GEA by the Company in connection with this transaction. There were no commissions or finder’s fees paid by the Company in connection with this transaction.

v3.10.0.1
5. STOCK-BASED COMPENSATION
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION

NOTE 5: STOCK-BASED COMPENSATION

 

Compensation costs related to share-based payment transactions, including employee stock options, are recognized in the financial statements utilizing the straight-line method for the cost of these awards.

 

The Company's results for the three-month period ended June 30, 2018 and 2017 include employee share-based compensation expense totaling $0.00 and $152,266, respectively. The Company's results for the six-month period ended June 30, 2018 and 2017 include employee share-based compensation expense totaling $327,405 and $425,358, respectively. Such amounts have been included in the Condensed Consolidated 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.

 

    Three Months Ended
June 30,
  Six Months Ended
June 30,
    2018   2017   2018   2017
Employee stock-based compensation - option grants   $ —       $ 152,266     $ 273,945     $ 302,858  
Employee stock-based compensation - stock grants     —         —         —         11,500  
Non-Employee stock-based compensation - option grants     —         —         53,460       —    
Non-Employee stock-based compensation - stock grants     —         —         —         —    
Non-Employee stock-based compensation-stock warrant     —         —         —         111,000  
Total   $ —       $ 152,266     $ 327,405     $ 425,358  

 

v3.10.0.1
6. STOCK OPTION PLAN
6 Months Ended
Jun. 30, 2018
Retirement Benefits [Abstract]  
STOCK OPTION PLANS

NOTE 6: STOCK OPTION PLAN

 

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.

 

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 three and six months ended June 30, 2018 and 2017 are as follows:

 

    Three Months Ended
June 30
  Six Months Ended
June 30
    2018   2017   2018   2017
Expected volatility     0.00 %     0.00 %     173.00 %     146.77 %
Expected dividend yield     —         —         —         —    
Risk-free interest rate     0.00 %     0.00 %     2.43 %     1.89 %
Expected term (in years)     0       0       5.00       5.00  

 

    Share   Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Term
  Aggregate
Intrinsic
Value
Outstanding, January 1, 2018     17,515,001       0.39       4.43     $ —    
Granted     19,250,000       0.05       4.50       577,500  
Exercised                                
Cancelled & Expired     (11,615,001 )                        
                                 
Outstanding, June 30, 2018     25,150,000       0.12       4.00     $ 599,500  
                                 
Options exercisable, June 30, 2018     25,150,000       0.12       4.00     $ 599,500  

 

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2018 and 2017 was $0.05 and $0.05, respectively.

 

The aggregate intrinsic value of options outstanding and options exercisable at June 30, 2018 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 $0.08 closing price of the Company's common stock on June 30, 2018.

 

As of June 30, 2018, the fair value of unamortized compensation cost related to unvested stock option awards is $0.00.

 

  

The weighted average assumptions made in calculating the fair value of warrants granted during the three and six months ended June 30, 2018 and 2017 are as follows:

 

    Three Months Ended
June 30
  Six Months Ended
June 30
    2018   2017   2018   2017
Expected volatility     0.00 %     0.00 %     0.00 %     151.49 %
Expected dividend yield     —         —         —         —    
Risk-free interest rate     0.00 %     0.00 %     0.00 %     0.00 %
Expected term (in years)     —         —         —         4.75  

 

  Share  

Weighted

Average

Exercise

Price

Weighted

Average

Remaining Contractual

Term

Aggregate Intrinsic

Value

  Outstanding, January 1, 2018     11,814,167     $ 0.20     2.58   $ —    
  Granted     —       $ —       —       —    
  Exercised     —       $ —       —       —    
  Expired     (1,040,000 )                    
  Outstanding, June 30, 2018     10,774,167     $ 0.19     1.85     176,000  
  Warrants exercisable, June 30, 2018     10,774,167     $ 0.19     1.85     176,000  

 

 

v3.10.0.1
7. COMMITMENTS AND CONTINGENCIES
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 7: COMMITMENTS AND CONTINGENCIES

 

COMMITMENTS –

 

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 $6,600. These executive suites are located at 85 Broadway, 16th Floor, Suites 16-035 and 16-040, New York, NY 10010.

 

There are currently no minimum future rentals under non-cancelable lease commitments.

 

Rent and real estate tax expense was approximately $14,575 and $571,084 for the quarters ended June 30, 2018 and 2017, respectively, and approximately $33,387 and $1,053,619, respectively for the six months ended June 30, 2018 and 2017.

 

Transactions with major customers

 

During the quarter ended June 30, 2018, one customer accounted for approximately 88% of revenues. During the quarter ended June 30, 2017, two customers accounted for 100% of revenues. During the six months ended June 30, 2018, one customer accounted for approximately 82.79% of revenues. During the six months ended June 30, 2017, two customers accounted for 93.42% of revenues.

v3.10.0.1
8. SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 8: SUBSEQUENT EVENTS

 

There are no subsequent events required to be disclosed in the Notes to Financial Statements through the date of the report.

 

 

v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
6 Months Ended
Jun. 30, 2018
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 a wholly-owned U.S. subsidiary, named, Mobiquity Networks, 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 condensed 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 six months ended June 30, 2018 of $20,024,535. As of June 30, 2018, the Company has an accumulated deficit of $81,188,010. The Company has had negative cash flows from operating activities of $8,654,292, for the six months ended June 30, 2018. 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.

 

The Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, the Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2018 and 2017 and the Condensed Statements of Cash Flows for the six months ended June 30, 2018 and 2017 have been prepared by us without audit, and in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly in all material respects our financial position as of June 30, 2018, results of operations for the three months and six months ended June 30, 2018 and 2017 and cash flows for the six months ended June 30, 2018 and 2017. All such adjustments are of a normal recurring nature. The results of operations and cash flows for the three months and six months ended June 30, 2018 and 2017 are not necessarily indicative of the results to be expected for the full year. We have evaluated subsequent events through the filing of this Form 10-Q with the SEC and determined there have not been any events that have occurred that would require adjustments to our unaudited Condensed Financial Statements.

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 — For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

 

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

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  $   $   $11,119,717   $11,119,717 

 

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 22 convertible notes issued totaling $4,609,000 which have a variable conversion price equal to 50% of the lowest volume weighted average price in the 30 days prior to conversion. The notes have maturity dates ranging from February 2, 2018 – October 21, 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 June 30, 2018. The fair values of the derivative instruments are measured each quarter, which resulted in a loss of $9,246,435 and derivative expense of $559,728 during the six months ended June 30, 2018. As of June 30, 2018, the fair market value of the derivatives aggregated $11,119,717 using the following assumptions: estimated 0.1 to 4.1-year term, estimated volatility of 196.98% to 394.26%, and a discount rate of 0.00% to 2.09%.

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 June 30, 2018, and December 31, 2017, the balances were $121,034 and $56,470, 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 receivables at June 30, 2018 are with five customers. One customer constitutes 82.79% of our sales.

 

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 June 30, 2018, and December 31, 2017, the Company did not exceed FDIC limits.

REVENUE RECOGNITION

REVENUE RECOGNITION – The Company recognized revenue on arrangements in accordance with FASB Codification Topic 606, Revenue from Contracts with Customers. Revenue represents amounts earned for data licensing arrangements consisting of flat fee, per use basis or revenue share. Licensee is sent data on a daily basis, has use of the data for a period of time based on the contract life between one month to one year.

 

We recognize revenues in the period in which the data transmission is provided to the licensee.

 

Under these policies, the Company evaluates each of these criteria as follows:

 

  Evidence of an arrangement. We consider a signed insertion order or contract by the licensee or its agency to be evidence of an arrangement.

 

  Delivery. Delivery is considered to occur daily with the transmission of the data from our network servers to the licensee.

 

  Fixed or determinable fee. The Company recognizes revenue for data license arrangements ratably over the term of the insertion order or contract. Our arrangements with the licensee is noted in the signed contracts which specifies the price to be paid and due date of remittance. Contracts that include fixed-fee data transmission are invoiced upon acceptance of the insertion order or contract and billed at time of delivery. The Company’s terms as stated in the contracts. Final billing is based on usage of delivered data. At the end of the period (usually monthly) an acknowledgment of data amount delivered is sent to licensee, who then verifies usage and at the point a final invoice is generated.

 

  Collection is deemed reasonably assured. We deem collection reasonably assured if we expect that the licensee will be able to pay the amounts under the arrangement as payments become due. Collection is deemed not reasonably assured when a licensee is perceived to be in financial distress, which may be evidenced by weak industry conditions, a bankruptcy filing, or previously billed amounts that are past due. If we determine that collection is not reasonably assured, then we would defer the revenue and recognize the revenue upon cash collection.

 

  No other warranties and or obligations are implied or due once the data transmission has been completed with the licensee.

 

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 June 30, 2018, and December 31, 2017, 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 June 30, 2018.

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 quarter ended June 30, 2018 and for the year ended December 31, 2017, there were no advertising costs.

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 CONVERSIONS

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.

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS – Revenue from Contracts with Customers (Topic 606). The company adopted Revenue Recognition Standard, ASC 606 on January 1, 2018 and after for the recognition for our revenue policy.

 

We have completed our assessment of the impact under the new revenue standard on our condensed financial statements. Based on our assessment, we have concluded that our financial statements will not be materially impacted upon adoption.

v3.10.0.1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Fair value of derivatives
    Level 1     Level 2     Level 3     Total  
Fair value of derivatives   $     $ -     $ 11,119,717     $ 11,119,717  
v3.10.0.1
3. CONVERTIBLE PROMISSORY NOTES (Tables)
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Summary of Convertible Promissory Notes
    June 30,   December 31,
    2018   2017
         
CAVU Notes, net   $ 100,000     $ 100,000  
Berg Note     50,000       50,000  
Secured and unsecured Notes net of discounts of $368,990 for June 30, 2018 and $234,502 for December 31, 2017     4,240,010       2,999,498  
Total Debt     4,390,010       3,149,498  
Current portion of debt     4,390,010       3,149,498  
Long-term portion of debt   $ —       $ —    
Schedule of Derivative Instruments
Derivative Liability 2018
Beginning balance   $ (666,123 )
New Issuances     (559,728 )
Discount on new issuances     (647,431 )
Gain (Loss) on revaluation of derivative liability     (9,246,435 )
Ending balance   $ (11,119,717 )
v3.10.0.1
5. STOCK-BASED COMPENSATION (Tables)
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of stock-based compensation expense
    Three Months Ended
June 30,
  Six Months Ended
June 30,
    2018   2017   2018   2017
Employee stock-based compensation - option grants   $ —       $ 152,266     $ 273,945     $ 302,858  
Employee stock-based compensation - stock grants     —         —         —         11,500  
Non-Employee stock-based compensation - option grants     —         —         53,460       —    
Non-Employee stock-based compensation - stock grants     —         —         —         —    
Non-Employee stock-based compensation-stock warrant     —         —         —         111,000  
Total   $ —       $ 152,266     $ 327,405     $ 425,358  
v3.10.0.1
6. STOCK OPTION PLAN (Tables)
6 Months Ended
Jun. 30, 2018
Options  
Assumptions used
    Three Months Ended
June 30
  Six Months Ended
June 30
    2018   2017   2018   2017
Expected volatility     0.00 %     0.00 %     173.00 %     146.77 %
Expected dividend yield     —         —         —         —    
Risk-free interest rate     0.00 %     0.00 %     2.43 %     1.89 %
Expected term (in years)     0       0       5.00       5.00  
Schedule of options outstanding
    Share   Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Term
  Aggregate
Intrinsic
Value
Outstanding, January 1, 2018     17,515,001       0.39       4.43     $ —    
Granted     19,250,000       0.05       4.50       577,500  
Exercised                                
Cancelled & Expired     (11,615,001 )                        
                                 
Outstanding, June 30, 2018     25,150,000       0.12       4.00     $ 599,500  
                                 
Options exercisable, June 30, 2018     25,150,000       0.12       4.00     $ 599,500  
Warrants  
Assumptions used
    Three Months Ended
June 30
  Six Months Ended
June 30
    2018   2017   2018   2017
Expected volatility     0.00 %     0.00 %     0.00 %     151.49 %
Expected dividend yield     —         —         —         —    
Risk-free interest rate     0.00 %     0.00 %     0.00 %     0.00 %
Expected term (in years)     —         —         —         4.75  
Schedule of warrants outstanding
  Share  

Weighted

Average

Exercise

Price

Weighted

Average

Remaining Contractual

Term

Aggregate Intrinsic

Value

  Outstanding, January 1, 2018     11,814,167     $ 0.20     2.58   $ —    
  Granted     —       $ —       —       —    
  Exercised     —       $ —       —       —    
  Expired     (1,040,000 )                    
  Outstanding, June 30, 2018     10,774,167     $ 0.19     1.85     176,000  
  Warrants exercisable, June 30, 2018     10,774,167     $ 0.19     1.85     176,000  
v3.10.0.1
1. Summary of Significant Accounting Policies (Details - Fair value)
Jun. 30, 2018
USD ($)
Fair value of derviatives $ 11,119,717
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]  
Fair value of derviatives 0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]  
Fair value of derviatives 0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]  
Fair value of derviatives $ 11,119,717
v3.10.0.1
1. Summary of Significant Policies (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Dec. 31, 2016
Accumulated deficit $ (81,188,010)   $ (81,188,010)   $ (61,298,474)  
Net Loss from continuing operations (9,336,989) $ (1,555,795) (20,024,535) $ (7,859,229)    
Cash flows from operations     (8,654,292) (2,274,261)    
Convertible notes outstanding 4,609,000   $ 4,609,000      
Convertible notes maturity range     February 2, 2018 to October 21, 2018      
Gain (loss) on derivatives     $ (9,246,435)      
Derivative expense 314,822 181,265 559,728 1,284,704    
Fair market value of derivatives 11,119,717   11,119,717      
Cash and cash equivalents 121,034 $ 306,259 121,034 $ 306,259 56,470 $ 213,184
Allowance for doubtful accounts         0  
Impairment losses on long lived assets     $ 0      
Advertising costs $ 0       $ 0  
Warrants [Member] | AAA Preferred Stock [Member]            
Warrants outstanding 2,200,000   2,200,000      
Warrants [Member] | Placement fee related to Note [Member]            
Warrants outstanding 1,000,000   1,000,000      
Sales Revenue, Net [Member] | One customer [Member]            
Concentration risk percentage 88.00%   82.79%      
v3.10.0.1
3. Convertible Debt and Derivative Liabilities (Details - Promissory Notes) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Total debt $ 4,390,010 $ 3,149,498
Current portion of debt 4,390,010 3,149,498
Long-term portion of debt 0 0
Cavu Notes    
Total debt 100,000 100,000
Berg Notes    
Total debt 50,000 50,000
Secured and unsecured notes [Member]    
Total debt 4,240,010 2,999,498
Discount on notes $ 368,990 $ 234,502
v3.10.0.1
3. Convertible Debt And Derivative Liabilities (Details- Derivative Instruments )
6 Months Ended
Jun. 30, 2018
USD ($)
Debt Disclosure [Abstract]  
Beginning balance $ (666,123)
New Issuances (559,728)
Discount on new issuances (647,431)
Gain (Loss) on revaluation of derivatives (9,246,435)
Ending balance $ (11,119,717)
v3.10.0.1
4. Stockholders' Deficit (Details Narrative)
6 Months Ended
Jun. 30, 2018
shares
Common Stock [Member]  
Class of Stock [Line Items]  
Stock issued for discount on note, shares 10,500,000
v3.10.0.1
5. Stock-Based Compensation (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Share-based compensation $ 0 $ 152,266 $ 327,405 $ 425,358
Employee stock-based compensation - Option Grants        
Share-based compensation 0 152,266 273,945 302,858
Employee stock-based compensation - Stock Grants        
Share-based compensation 0 0 0 11,500
Non-Employee stock-based compensation - Option Grants        
Share-based compensation 0 0 53,460 0
Non-Employee stock-based compensation - Stock Grants        
Share-based compensation 0 0 0 0
Non-Employee stock-based compensation - Stock Warrant        
Share-based compensation $ 0 $ 0 $ 0 $ 111,000
v3.10.0.1
5. Stock-Based Compensation (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]        
Share-based compensation $ 0 $ 152,266 $ 327,405 $ 425,358
v3.10.0.1
6. Stock Option Plan (Details - Assumptions)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Options        
Expected volatility 0.00% 0.00% 173.00% 146.77%
Expected dividend yield 0.00% 0.00% 0.00% 0.00%
Risk-free interest rate 0.00% 0.00% 2.43% 1.89%
Expected term (in years)     5 years 5 years
Warrants        
Expected volatility 0.00% 0.00% 0.00% 151.49%
Expected dividend yield 0.00% 0.00% 0.00% 0.00%
Risk-free interest rate 0.00% 0.00% 0.00% 0.00%
Expected term (in years)       4 years 9 months
v3.10.0.1
6. Stock Option Plan (Details - Option Activity) - Options
6 Months Ended
Jun. 30, 2018
USD ($)
$ / shares
shares
Shares  
Shares outstanding - beginning 17,515,001
Shares granted 19,250,000
Shares exercised 0
Shares cancelled and expired (11,615,001)
Shares outstanding - ending 25,150,000
Shares exercisable 25,150,000
Weighted Average Exercise Price  
Weighted average exercise price - beginning | $ / shares $ 0.39
Weighted average exercise price - shares granted | $ / shares 0.05
Weighted average exercise price - ending | $ / shares 0.12
Weighted average exercise price - exercisable | $ / shares $ 0.12
Weighted Average Remaining Contractural Term  
Weighted average contractural term - beginning 4 years 5 months 5 days
Weighted average contractural term - granted 4 years 6 months
Weighted average contractural term - ending 4 years
Weighted average contractural term - exercisable 4 years
Aggregate Intrinsic Value  
Aggregate intrinsic value - beginning | $ $ 0
Aggregate intrinsic value - granted | $ 577,500
Aggregate intrinsic value - ending | $ 599,500
Aggregate intrinsic value - exercisable | $ $ 599,500
v3.10.0.1
6. Stock Options Plan (Details - Warrants Outstanding) - Warrants
6 Months Ended
Jun. 30, 2018
USD ($)
$ / shares
shares
Shares  
Shares outstanding - beginning 11,814,167
Shares granted 0
Shares exercised 0
Shares Cancelled 1,040,000
Shares outstanding - ending 10,774,167
Shares exercisable 10,774,167
Weighted Average Exercise Price  
Weighted average exercise price - beginning | $ / shares $ 0.20
Weighted average exercise price - shares Exercised | $ / shares 0.00
Weighted average exercise price - ending | $ / shares 0.19
Weighted average exercise price - exercisable | $ / shares $ 0.19
Weighted Average Remaining Contractural Term  
Weighted average contractural term - beginning 2 years 6 months 29 days
Weighted average contractural term - ending 1 year 10 months 6 days
Weighted average contractural term - exercisable 1 year 10 months 6 days
Aggregate Intrinsic Value  
Aggregate intrinsic value - beginning | $ $ 0
Aggregate intrinsic value - granted | $ / shares $ 0
Aggregate intrinsic value - ending | $ $ 176,000
Aggregate intrinsic value - exercisable | $ $ 176,000
v3.10.0.1
6. Stock Option Plan (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Unamortized compensation cost related to stock option awards $ 0  
2016 Plan [Member]    
Shares authorized for plan 10,000,000  
Options    
Weighted average grant date fair value of options $ 0.05 $ 0.05
v3.10.0.1
7. Commitments and Contingencies (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Rent and real estate expense $ 14,575 $ 571,084 $ 33,387 $ 1,053,619
Sales Revenue, Net [Member] | One customer [Member]        
Concentration risk percentage 88.00%   82.79%  
Sales Revenue, Net [Member] | Two customers [Member]        
Concentration risk percentage   100.00%   93.42%