Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made and are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," or "will," and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those risks disclosed under the caption "Risk Factors" included in our 2023 annual report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 17, 2024, and in our subsequent filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Overview

Mobivity Holdings Corp. (the "Company" or "us", "our", or we") develops and operates proprietary platforms over which brick and mortar brands and digital first enterprises can conduct national and localized, data-driven marketing campaigns with unique targeting, incentivization and promotion to drive customer acquisition and loyalty. The company's core technology platform, RecurrencyTM, enables

	●	Transformation of messy point-of-sale (POS) data collected from thousands of locations and digital environments into usable intelligence.
	●	Measurement, prediction, and ability to boost guest frequency and spend by channel.
	●	Deployment and management of one-time use offer codes and attribution of sales accurately across every channel, promotion and media program.
	●	Delivery of uniquely attributable 1:1 offers that power incentivized actions in digital environments like user acquisition, continued monetization, and activities taken in a digital environment.

Our recurrency platform generates revenue in 2 ways. First, delivered as a Software-as-a-Service ("SaaS") platform used by leading convenience and quick service restaurant brands to build and engage with their loyal customers. Second, through our Connected RewardsTM business, our platform enables and powers unique incentivized programs in digital environments. Through our Connected Rewards platform, we enable businesses to reward their users and customers with products in the real world for actions taken in a digital environment. Our customers include some of the largest mobile casual game publishers in the world and some of the largest convenience and quick service restaurant brands in the world. The programs we run for our customers include incentivized user acquisition where users are rewarded with a real-world product, like a free or discounted burger, for downloading a mobile game, and rewarded play where users receive real world products for accomplishing activities in game, like achieving a certain level or winning enough points. We charge our customers for each unique action where our rewards are delivered, these include a per install or per individual engagement fee.

The Recurrency Platform

The Recurrency™ platform unlocks valuable POS and mobile data to help transform customer transactions into actionable and attributable marketing insights and power Connected Rewards interactions. Our technology analyzes transaction data to provide insights, delivers mobile rewards and powers redemption at all potential points of sale (i.e., mobile, in-store, in-app), and provides 100% attribution of the transaction. In Connected Rewards applications, Recurrency is integrated into mobile gaming platforms and mobile attribution partners to deliver the necessary data to deliver rewards for in-game actions.

Company Strategy

Our objective is to build an industry-leading mobile marketing technology product that bridges between in-person and digital environments powering a unique and defensible alternative for digital-first businesses to engage and retain their customers by rewarding them with real-world products and offers. The key elements to our strategy are:

	●	Exploit the competitive advantages and operating leverage of our technology platform. The core of our business is our ability to integrate our Recurrency platform into digital environments and deliver rewards based on activities taken in a digital environment. Because of our long history operating as a loyalty marketing solution we believe we have a defensible head start and ability to continue building products and features that will retain our competitive advantage.
	●	Evolve our sales and customer support infrastructure to uniquely meet the needs of the quickly evolving digital marketing universe. We have quickly evolved our organization and business to fill a gap in the digital marketing landscape. Through continued innovation and emphasis on automation and predictive analytics we believe we will expand our niche and create further value for our Connected Rewards Customers.
	●	Acquire complementary businesses and technologies. We will continue to search and identify unique opportunities which we believe will enhance our product features and functionality, revenue goals, and technology. We intend to target companies with some or all of the following characteristics: (1) an established revenue base; (2) strong and defensible technology services that further build out and differentiate our platform; (3) opportunities for substantial expense reductions through integration into our platform; and (4) strong sales teams. Our acquisitions have historically been consummated through the issuance of a combination of our common stock and cash.
	●	Build our intellectual property portfolio. We currently have nine issued patents that we believe have significant potential application in the technology industry. We plan to continue our investment in building a strong intellectual property portfolio.

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

Recent Events

Related Party Senior Secured Notes

During the first quarter of 2025 the Company issued 10 Convertible Notes payable for $425,000. Simple interest on the unpaid principal balance of the Convertible Note will accrue at the rate of 15% per annum. and automatically convert into the same equity securities issued for cash in the Qualified Financing, or at the option of the Investors, into the same equity securities issued for cash in a Corporate Transaction, each as the Convertible Note. Interest on the Convertible Notes will be accreted and added to the unpaid principal balance prior to conversion. The Convertible Notes are payable in one installment three years from the date of the Convertible Note.

Senior Secured Convertible Notes

During the first quarter of 2025 the Company issued 7 Convertible Notes payable to related party investors for $1,575,000. Simple interest on the unpaid principal balance of the Convertible Note will accrue at the rate of 15% per annum. and automatically convert into the same equity securities issued for cash in the Qualified Financing, or at the option of the Investors, into the same equity securities issued for cash in a Corporate Transaction, each as the Convertible Note. Interest on the Convertible Notes will be accreted and added to the unpaid principal balance prior to conversion. The Convertible Notes are payable in one installment three years from the date of the Convertible Note.

Acquisition of Certain Contracts by SMS Factory

On September 25, 2024, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with SMS Factory, Inc., a Florida corporation ("SMS Factory"). Pursuant to the Asset Purchase Agreement, SMS Factory purchased all of the right, title and interest in the Company's SMS/MMS text messaging customer accounts, excluding certain Excluded Assets (as defined in the Asset Purchase Agreement) utilized in the operation of the Company's SMS/MMS text messaging platform business (the "Business Assets") effective as of September 25, 2024 (the "Closing Date").

In consideration for the Business Assets, SMS Factory is expected to assume certain Performance Obligations and pay to the Company, for a period of two years following the Closing Date, an Earn-Out Payment in an amount equal to two times the Gross Profit earned from each Customer Account, including an upfront pre-payment of the Earn-Out Payment equal to $303,000. The Asset Purchase Agreement includes customary representations, warranties and covenants by the parties.

Results of Operations

Revenues

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

Revenues for the three months ended June 30, 2025, were $939,535 an increase of $565,399 compared to $374,136 for the same period in 2024.

Revenues for the six months ended June 30, 2025, were $1,452,846 an increase of $779,474 compared to $673,372 for the same period in 2024.

This increase is primarily due to an increase of Connected Rewards revenue.

Cost of Revenues

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

Cost of revenues for the three months ended June 30, 2025, was $528,022, an increase of $280,947, or 114%, compared to $247,075 for the same period in 2024.

Cost of revenues for the six months ended June 30, 2025, was $767,615, an increase of $475,606, or 163%, compared to $292,009 for the same period in 2024.

This increase is primarily due to an increase in Connected Rewards revenue resulting in a higher cost of good sold.

Bad Debt Expense

Bad Debt expense for the three months ended June 30, 2025 was $0, an increase of a $2,066 gain, or 100%, compared to a gain of $2,066 for the three months ended June 30, 2024. This increase is due to a increase in invoice aged past 90 days.

Bad Debt expense for the six months ended June 30, 2025 was $1,692, an increase of $3,757, or 182%, compared to $2,065 for the three months ended June 30, 2024. This increase is due to additional invoices aged past 90 days.

General and Administrative

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

General and administrative expenses increased $435,204, or 155%, to $715,925, during the three months ended June 30, 2025, compared to $280,721 for the same period in 2024. The increase in general and administrative expenses was primarily due to an increase in software fees, legal fees and payroll expenses.

General and administrative expenses increased $733,750, or 118%, to $1,355,556, during the six months ended June 30, 2025, compared to $621,806 for the same period in 2024. The increase in general and administrative expenses was primarily due to an increase in share based expense for warrants issued, legal fees and payroll expenses.

Sales and Marketing

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

Sales and marketing expenses increased $94,642, or 12%, to $882,027 during the three months ended June 30, 2025, compared to $787,385 for the same period in 2024. The increase is primarily due to an increase in consulting fees and payroll expenses.

Sales and marketing expenses increased $293,814, or 20%, to $1,762,681 during the six months ended June 30, 2025, compared to $1,468,867 for the same period in 2024. The increase is primarily due to an increase in consulting fees and payroll expenses.

Engineering, Research & Development

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

Engineering, research & development expenses decreased $169,711, or 18%, to $748,663 during the three months ended June 30, 2025, compared to $918,374 for the same period in 2024. This decrease is primarily due to a decrease in payroll expense.

Engineering, research & development expenses decreased $309,321, or 17%, to $1,553,143 during the six months ended June 30, 2025, compared to $1,862,464 for the same period in 2024. This decrease is primarily due to a decrease in payroll expense.

Depreciation and Amortization

Depreciation and amortization expenses consist of depreciation on our equipment and amortization of our intangible assets.

Depreciation and amortization expense increased $1,945, or 60%, to $5,211 during the three months ended June 30, 2025 compared to $3,266 for the same period in 2024.This decrease is primarily due to increase in intangible and fixed assets.

Depreciation and amortization expense increased $67, or 1% to $13,242 during the six months ended June 30, 2025 compared to $13,175 for the same period in 2024.This decrease is primarily due to increase in intangible and fixed assets.

Interest Expense

Interest expense increased $186,213, or 37%, to $688,680 during the three months ended June 30, 2025, compared to $502,467 in the same period in 2024. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.

Interest expense increased $420,072, or 47%, to $1,320,013 during the six months ended June 30, 2025, compared to $899,941 in the same period in 2024. This increase in interest expense is primarily related to the increased balance on related party notes payable and the issuance of Convertible Notes.

Settlement Losses

Settlement losses consist of legal settlement for TCPA settlements.

Settlement losses for the three months ended June 30, 2025 and 2024 were $0 and $0, respectively.

Settlement losses for the six months ended June 30, 2025 and 2024 were $2,500 and $0, respectively.

Loss on Sale of Fixed Assets

Loss on sale of fixed assets consists of an asset being sold for less than its carrying value.

Loss on sale of fixed assets for three months ended June 30, 2025 and 2024 was $1 and $0, respectively

Loss on sale of fixed assets for six months ended June 30, 2025 and 2024 was $6,876 and $0, respectively

Foreign Currency

The Company's financial results are impacted by volatility in the Canadian/U.S. Dollar exchange rate. The average U.S. Dollar exchange rate for the three and six months ended June 30, 2025, was $1 Canadian equals $0.70 U.S. Dollars, respectively. This compares to an average rate of $1 Canadian equals $0.74 during the same period in 2024. The Company's functional or measurement currency is the U.S. Dollar. Based on a U.S. Dollar functional currency, the following are the key areas impacted by foreign currency volatility:

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

The change in foreign currency was a gain of $2,307 and a loss of $2,600 for the three months ended June 30, 2025 and 2024, respectively.

The change in foreign currency was a gain of $986 and a gain of $215,329 for the six months ended June 30, 2025 and 2024, respectively.

Liquidity and Capital Resources

As of June 30, 2025, we had current assets of $843,306, including $364,684 in cash, and current liabilities of $9,292,970, resulting in a working capital deficit of $8,449,664.

We believe as of the date of this report, we do not have the working capital on hand, along with our expected cash flow from operations and budget reductions, to sufficiently fund our current level of operations through the end of the next 12 months or beyond. We will require additional capital and will seek to obtain additional working capital through the sale of our securities and, if available, bank lines of credit. There can be no assurance we will be able to obtain access to capital as and when needed, or that the terms of any available financing will be commercially reasonable.

The Company entered in to a sublease on March 1, 2024 for its office facilities in Chandler, AZ through February 28, 2025. Monthly rental payments including rental of office furniture and excluding taxes, are $24,470. The Company has transition to a 100% remote work force and this has resulted in a decrease in monthly rental expense.

Cash Flows

		Six Months Ended
		June 30,
		2025				2024
Net cash provided by (used in):
Operating activities		$	(2,920,920	)		$	(4,378,336	)
Investing activities			(2,400	)			(13,947	)
Financing activities			2,025,000				4,042,965
Effect of foreign currency translation on cash flow			1,912				215,751
Net change in cash		$	(896,408	)		$	(133,567	)

Operating Activities

We used cash and restricted in operating activities totaling $2,920,920 during the six months ended June 30, 2025 and used cash and restricted cash in operating activities totaling during the six months ended June 30, 2024. Key drivers of the cash used in operating activities are the net loss of $5,301,274, a net gain from discontinued operations of $29,166, changes to accounts receivable of $996, accrued interest of $957,804, stock-based compensation of $266,921, stock-based compensation expense for RSU's of $162,497 accounts payable of $655,175, and amortization of debt discount of $357,371.

Investing Activities

Investing activities during the six months ended June 30, 2025 were $2,400 compared to $0 in the six months ended June 30, 2024 A total $2,400 was used for equipment purchases.

Financing Activities

Financing activities during the six months ended June 30, 2025 consisted of $1,775,000 of proceeds from related party convertible notes and $250,000 in convertible notes compared to $4,050,000 of related party convertible notes in the six months ended June 30, 2024 Payments of $0 were made on notes payable compared to $7,035 in the same period in 2024.

Critical Accounting Estimates

We have adopted various accounting policies to prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgments, and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the accompanying notes to the condensed consolidated financial statements. There were no material changes to our critical accounting policies and estimates during the six months ended June 30, 2025.

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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.