Bubblr Inc. - Quarter Report: 2022 June (Form 10-Q)
25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| ☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2022
| ☐ | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to__________
Commission File Number: 333-260902
Bubblr, Inc.
(Exact name of registrant as specified in its charter)
| Wyoming | 86-2355916 | |
| (State or
other jurisdiction of incorporation or organization) |
(IRS Employer
Identification No.) |
21 West 46th Street
New York, New York 10036
(Address of principal executive offices)
(647) 646 2263
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated Filer ☐ | Smaller reporting company ☒ | |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
Securities registered pursuant to Section 12(b) of the Act: None
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common shares as of August 22, 2022
\
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1: | Financial Statements | 3 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 10 |
| Item 4: | Controls and Procedures | 11 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 12 |
| Item 1A: | Risk Factors | 12 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 12 |
| Item 3: | Defaults Upon Senior Securities | 12 |
| Item 4: | Mine Safety Disclosures | 12 |
| Item 5: | Other Information | 12 |
| Item 6: | Exhibits | 12 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our consolidated financial statements included in this Form 10-Q are as follows:
| F-1 | Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited); | |
| F-2 | Consolidated Statements of Operations and Comprehensive Loss for the for the three and six months ended June 30, 2022 and 2021 (unaudited); | |
| F-3 | Consolidated Statement of Stockholders’ Deficit for the six months ended June 30, 2022 and 2021 (unaudited); | |
| F-4 | Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited); and | |
| F-5 | Notes to the Unaudited Consolidated Financial Statements. |
These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2022 are not necessarily indicative of the results that can be expected for the full year.
| 3 |
| BUBBLR, INC. |
| Consolidated Balance Sheets |
June 30, 2022 and December 31, 2021 (Unaudited) |
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 55,932 | $ | 62,967 | ||||
| Accounts receivable | 10,776 | 17,966 | ||||||
| Advances receivable | 73,020 | 80,251 | ||||||
| Total current assets | 139,728 | 161,184 | ||||||
| Non-current Assets: | ||||||||
| Property and equipment, net | 54,835 | 69,620 | ||||||
| Intangible assets, net | 1,300,341 | 1,627,010 | ||||||
| Total non-current assets | 1,355,176 | 1,696,630 | ||||||
| TOTAL ASSETS | $ | 1,494,904 | $ | 1,857,814 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 135,461 | $ | 200,666 | ||||
| Dividends payable | 16,754 | |||||||
| Accrued interest | 45,610 | 21,415 | ||||||
| Loan payable, current portion | 12,061 | 13,400 | ||||||
| Loan payable - related party | 403,644 | 509,339 | ||||||
| Total current liabilities | 613,530 | 744,820 | ||||||
| Non-current liabilities: | ||||||||
| Convertible note payable - net of discount of $34,856 and $69,714 | 2,252,924 | 2,218,066 | ||||||
| Loan payable, non-current portion | 15,398 | 22,518 | ||||||
| Warrant derivative liability | 441,945 | |||||||
| Total non-current liabilities | 2,710,267 | 2,240,584 | ||||||
| Total Liabilities | 3,323,797 | 2,985,404 | ||||||
| Stockholders' Deficit | ||||||||
| Preferred Stock, par value, shares authorized | ||||||||
| Special 2019 Series A Preferred Stock, par value, share authorized; and share(s) issued and outstanding at June 30, 2022 and December 31, 2021 | ||||||||
| Series C Convertible Preferred Stock, par value, authorized, and shares issued and outstanding at June 30, 2022 and December 31, 2021 | 1 | |||||||
| Common stock, par value, shares authorized; and shares issued and outstanding at June 30, 2022 and December 31, 2021 | 1,571,915 | 1,401,861 | ||||||
| Additional paid-in capital | 10,121,449 | 5,478,801 | ||||||
| Deferred stock compensation | (2,165,450 | ) | ||||||
| Accumulated deficit | (11,794,731 | ) | (8,385,496 | ) | ||||
| Accumulated other comprehensive income | 437,923 | 377,244 | ||||||
| Total Stockholders' Deficit | (1,828,893 | ) | (1,127,590 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 1,494,904 | $ | 1,857,814 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
| BUBBLR, INC. |
| Consolidated Statements of Operations and Comprehensive Loss |
For the three and six months ended June 30, 2022 and 2021 (Unaudited) |
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | $ | 16,309 | $ | 17,579 | $ | 27,428 | $ | 90,682 | ||||||||
| Professional fees | 2,095,727 | 877,149 | 2,288,556 | 1,672,295 | ||||||||||||
| Market and regulation costs | 44,595 | 19,691 | 82,188 | 33,022 | ||||||||||||
| Compensation | 172,547 | 176,360 | 313,491 | 345,323 | ||||||||||||
| Amortization and depreciation | 100,859 | 95,851 | 208,454 | 190,695 | ||||||||||||
| Research and development | 52,694 | 135,799 | 113,955 | 263,388 | ||||||||||||
| Total operating expense | 2,482,731 | 1,322,429 | 3,034,072 | 2,595,405 | ||||||||||||
| Operating loss | (2,482,731 | ) | (1,322,429 | ) | (3,034,072 | ) | (2,595,405 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 402 | 460 | 854 | 626 | ||||||||||||
| Gain on debt settlement | 5,000 | 5,000 | ||||||||||||||
| Interest expense | (30,420 | ) | (3,004 | ) | (445,264 | ) | (7,804 | ) | ||||||||
| Gain on change in fair value of warrant derivative liability | 275,178 | 251,287 | ||||||||||||||
| Foreign currency transaction loss | (121,307 | ) | (7,149 | ) | (162,014 | ) | (13,814 | ) | ||||||||
| Total other income (expense) | 123,853 | (4,693 | ) | (355,137 | ) | (15,992 | ) | |||||||||
| Net loss before income tax | $ | (2,358,878 | ) | $ | (1,327,122 | ) | $ | (3,389,209 | ) | $ | (2,611,397 | ) | ||||
| Provision for income tax | ||||||||||||||||
| Net loss after income tax | $ | (2,358,878 | ) | $ | (1,327,122 | ) | $ | (3,389,209 | ) | $ | (2,611,397 | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation gain | 47,306 | 6,394 | 60,679 | 27,353 | ||||||||||||
| Total other comprehensive income (loss) | 47,306 | 6,394 | 60,679 | 27,353 | ||||||||||||
| Net comprehensive loss | $ | (2,311,572 | ) | $ | (1,320,728 | ) | $ | (3,328,530 | ) | $ | (2,584,044 | ) | ||||
| Net loss per common share, basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | 141,753,945 | 140,102,076 | 141,124,825 | 140,102,076 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
BUBBLR, INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the six months ended June 30, 2022 and 2021
(Unaudited)
| 2019
Series A Preferred Stock | Series
B Preferred Stock | Series
C Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional
Paid-in Capital | Deferred Stock Compensation | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders' Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2020 | 1 | $ | 2 | $ | $ | 132,565,225 | $ | 1,325,652 | $ | 3,704,045 | $ | $ | (4,692,009 | ) | $ | 354,093 | $ | (60,000 | ) | $631,781 | |||||||||||||||||||||||||||||||||||
| Conversion of Preferred B shares to common shares | (2 | ) | 0 | 2,650 | 27 | 5,973 | 6,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Special 2019 Series A Preferred Stock from Treasury to related party in satisfaction of debt | 60,000 | 60,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Advisory Board | 306,120 | 3,061 | 701,015 | 704,076 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consultancy | 24,000 | 240 | 59,760 | 60,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (1,284,275 | ) | (1,284,275) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 20,959 | 20,959 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance -March 31, 2021 | 1 | $ | $ | $ | $ | 0 | 132,897,995 | $ | 1,328,980 | $ | 4,470,793 | $ | $ | (5,976,284 | ) | $ | 375,052 | $ | $198,541 | ||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Advisory Board | 204,080 | 2,041 | 826,524 | 828,565 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for debt conversion | 7,000,000 | 70,000 | 70,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (1,327,122 | ) | (1,327,122) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 6,394 | 6,394 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance -June 30, 2021 | 1 | $ | $ | $ | $ | 140,102,075 | $ | 1,401,021 | $ | 5,297,317 | $ | $ | (7,303,406 | ) | $ | 381,446 | $ | $(223,622) | |||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | 1 | $ | $ | $ | 140,186,096 | $ | 1,401,861 | $ | 5,478,801 | $ | $ | (8,385,496 | ) | $ | 377,244 | $ | $(1,127,590) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services Advisory Board | 147,960 | 1,480 | 73,980 | 75,460 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting | 19,250 | 193 | 8,787 | 8,980 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Equity Finance Agreement Incentive | 793,039 | 7,930 | 371,884 | 379,814 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Shares | 503 | 1 | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend Series C Preferred shares | (3,272 | ) | (3,272) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (1,030,331 | ) | (1,030,331) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 13,373 | 13,373 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance -March 31, 2022 | 1 | $ | $ | $ | 503 | $ | 1 | 141,146,345 | $ | 1,411,464 | $ | 5,933,451 | $ | $ | (9,419,099 | ) | $ | 390,617 | $ | $(1,683,566) | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting | 7,645,073 | 76,451 | 1,916,630 | 1,993,081 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares as deferred compensation | 8,400,000 | 84,000 | 2,175,600 | (2,259,600 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of common shares issued as deferred compensation | 94,150 | 94,150 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issue of Series C Preferred shares | 400 | 0 | 95,768 | 95,768 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | (16,754 | ) | (16,754) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (2,358,878 | ) | (2,358,878) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 47,306 | 47,306 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance -June 30, 2022 | 1 | $ | $ | $ | 903 | $ | 1 | 157,191,418 | $ | 1,571,915 | $ | 10,121,449 | $ | (2,165,450 | ) | $ | (11,794,731 | ) | $ | 437,923 | $(1,828,893) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
| BUBBLR, INC. |
Consolidated Statements of Cashflows For the six months ended June 30, 2022 and 2021 (Unaudited) |
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | (3,389,209 | ) | $ | (2,611,397 | ) | ||
| Adjustments for: | ||||||||
| Net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | 2,077,521 | 1,592,641 | ||||||
| Vesting of deferred stock based compensation | 94,150 | |||||||
| Stock based finance incentive | 379,814 | |||||||
| Gain on settlement of debt | (5,000 | ) | ||||||
| Gain on change in fair value of warrant derivative liability | (251,287 | ) | ||||||
| Amortization of debt discount | 39,856 | |||||||
| Amortization of intangible asset | 187,621 | 185,088 | ||||||
| Depreciation | 7,826 | 5,746 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase (decrease) in accounts receivable | 4,945 | (3,957 | ) | |||||
| Increase (decrease) in accrued interest | 24,283 | (12,262 | ) | |||||
| Increase (decrease) in accounts payables | (57,572 | ) | (10,662 | ) | ||||
| Net cash used in operating activities | (882,052 | ) | (859,803 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of fixed assets | — | (1,330 | ) | |||||
| Purchase of intangible assets | (19,228 | ) | (51,830 | ) | ||||
| Net cash used in investing activities | (19,228 | ) | (53,160 | ) | ||||
| Cash flows from financing activities | ||||||||
| Payment of dividends | (3,272 | ) | ||||||
| Proceeds from loans payable | 15,000 | |||||||
| Repayment of loans payable | (26,434 | ) | (5,338 | ) | ||||
| Repayment of loans payable - related party | (77,940 | ) | (303,068 | ) | ||||
| Proceeds from loans payable - related party | 19,709 | |||||||
| Net proceeds from issuance of Series C Preferred Stock | 789,000 | |||||||
| Proceeds from issuance of convertible notes payable | 2,007,578 | |||||||
| Net cash provided by financing activities | 716,063 | 1,699,172 | ||||||
| Effects of exchange rate changes on cash | 178,182 | 2,227 | ||||||
| Net Change in Cash | (7,035 | ) | 788,436 | |||||
| Cash - Beginning of Period/Year | 62,967 | 96,602 | ||||||
| Cash - End of Period/Year | $ | 55,932 | $ | 885,038 | ||||
| Supplemental information: | ||||||||
| Cash paid for interest | $ | 6,332 | $ | 7,804 | ||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Original issue discount on convertible notes | $ | $ | 104,572 | |||||
| Common stock issued for conversion of debt | $ | $ | 70,000 | |||||
| Special 2019 Series A Preferred Stock issued from Treasury to related party in satisfaction of debt | $ | $ | 60,000 | |||||
| Common stock issued to related party for conversion of Series B Preferred Stock | $ | $ | 6,000 | |||||
| Warrant liability | $ | 721,275 | $ | |||||
| Declared dividends | $ | 16,754 | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
BUBBLR, INC.
Notes to the Unaudited Consolidated Financial Statements
June 30, 2022 and 2021
NOTE 1 - ORGANIZATION, BUSINESS AND LIQUIDITY
Organization and Operations
On March 26, 2020 Bubblr Holdings Ltd. (a UK company formed on February 18, 2016) merged into U.S. Wireless Online, Inc. (“UWRL”), a Wyoming corporation formed on October 22, 2019, and became a 100% subsidiary of UWRL. On March 30, 2021, the Company’s corporate name was changed to Bubblr, Inc. (“the Company”).
Bubblr, Inc. is a Mobile Application software company that is currently developing its disruptive Internet Search Mechanism and seeking license opportunities for a next-generation solution designed to create an alternative economic model.
Going Concern Matters
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates the Company’s continuation as a going concern. The Company incurred a net comprehensive loss of $3,328,530 during the six months ended June 30, 2022 and has an accumulated deficit of $11,794,731 as of June 30, 2022. In addition, current liabilities exceed current assets by $473,802 as of June 30, 2022.
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. See Note 13 – Subsequent Events.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be required to curtail or cease its operations.
Due to uncertainties related to these matters, there exists a substantial doubt about the ability of the Company to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
COVID-19
A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. The Company instituted some temporary precautionary measures intended to help ensure the well-being of its employees and minimize business disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position as of at June 30, 2022.
Most of the restrictions imposed by governments worldwide have now been relaxed. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities at the date of issuance of these financial statements. These estimates may change, as new events occur, and additional information is obtained.
| F-5 |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated interim financial statements have been prepared in accordance with GAAP. The Company’s fiscal year-end is December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Bubblr Holdings Ltd., Bubblr Ltd., and Bubblr CLN Ltd. All significant inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP 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 expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.
Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The Company uses the Black Scholes Options Pricing Model to estimate the value of its derivative liabilities, and remeasures them at each reporting period.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The carrying value of the Company’s current assets and liabilities are deemed to be their fair value due to the short-term maturity and realization. During the six months ended June 30, 2022, the Company acquired warrant derivative liabilities, which are Level 3 financial instruments that are adjusted to fair market value on reporting dates. At June 30, 2022, the warrant liabilities balance was $441,945. There were no changes in the fair value hierarchy leveling during the six months ended June 30, 2022 and 2021.
| F-6 |
The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expense in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement, or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Pursuant to ASC 260, “Earnings Per Share,” basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
For the three and six months ended June 30, 2022 and 2021, the following outstanding stock was excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| (Shares) | (Shares) | |||||||
| Series C Preferred Stock | 3,384,135 | |||||||
| Warrants | 2,358,101 | |||||||
| Convertible Notes | 2,027,127 | 1,836,652 | ||||||
| Total | 7,769,363 | 1,836,652 | ||||||
Beneficial Conversion Feature
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early-adopted the new guidance on January 1, 2021. As the result of the adoption of this ASU, no beneficial conversion feature was recorded on convertible notes described in Note 7 – Convertible Notes Payable.
| F-7 |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British pounds (GBP). Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at weighted average rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
| June 30, | December 31. | |||||||
| 2022 | 2021 | |||||||
| Period-end GBP£:US$ exchange rate | 1.2174 | 1.3527 | ||||||
| Annual average GBP£:US$ exchange rate | 1.299 | 1.3767 | ||||||
Aggregate transaction gains or losses, including gains or losses related to foreign-denominated cash and cash equivalents and the re-measurement of certain inter-company balances, are included in the statement of operations as other income and expense. Losses on foreign exchange transactions totaling $162,014 and $13,814 were recognized during the six months ended June 30, 2022 and 2021, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
As of June 30, 2022 and December 31, 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.
UK Taxes
We do not consider ourselves to be engaged in a trade or business in the UK and, as such, do not expect to be subject to UK corporate income taxation. We have subsidiaries based in the UK that are subject to the tax laws of that country. Under current law, those subsidiaries are taxed at the applicable corporate income tax rates. Should any UK subsidiaries be deemed to undertake business activities in the US, they would be subject to US corporate income tax in respect of their US activities only. Relief would then be available against the UK tax liabilities in respect of the overseas taxes arising from US activities. At present, this is not applicable as our UK subsidiaries only undertake activities in the UK. Our UK subsidiaries file separate UK income tax returns.
UK Tax Risk
Companies which are incorporated outside the UK may become subject to UK taxes in a number of circumstances, including circumstances in which (1) they are deemed resident in the UK for tax purposes by reason of their central management and control being exercised from the UK or (2) they are treated as carrying on a trade, investing or carrying on any other business activity in the UK, whether or not through a UK Permanent Establishment (“PE”).
In addition, the Finance Act 2015 introduced a new tax known as the diverted profits tax (“DPT”) which is charged at 25% of any “taxable diverted profits”. The DPT has had effect since April 1, 2015 and may apply in circumstances including: (1) where arrangements are designed to ensure that a non-UK resident company does not carry on a trade in the UK through a PE; and (2) where a tax reduction is obtained through the involvement of entities or transactions lacking economic substance. We intend to operate in such a manner that none of our companies should be subject to the UK DPT and that none of our companies (other than those companies incorporated in the UK) should: (1) be treated as resident in the UK for tax purposes; (2) carry on a trade, invest or carry on any other business activity in the UK (whether or not through a UK PE).
| F-8 |
However, this result is based on certain legal and factual determinations, and since the scope and the basis upon which the DPT will be applied by HM Revenue & Customs (“HMRC”) in the UK remains uncertain and since applicable law and regulations do not conclusively define the activities that constitute conducting a trade, investment or business activity in the UK (whether or not through a UK PE), and since we cannot exclude the possibility that there will be a change in law that adversely affects the analysis, HMRC might successfully assert a contrary position. The terms of an income tax treaty between the UK and the home country of the relevant Bubblr subsidiary, if any, could contain additional protections against UK tax.
Any arrangements between UK-resident entities of Bubblr and other entities of Bubblr are subject to the UK transfer pricing regime. Consequently, if any agreement between a UK resident entity of Bubblr and any other Bubblr entity (whether that entity is resident in or outside of the UK) is found not to be on arm’s length terms and as a result a UK tax advantage is being obtained, an adjustment will be required to compute UK taxable profits as if such an agreement were on arm’s length terms. Any transfer pricing adjustment could adversely impact the tax charge incurred by the relevant UK resident entities of Bubblr.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
NOTE 3 – ACCOUNTS RECEIVABLE
As of June 30, 2022 and December 31, 2021, accounts receivable consisted of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Deposit | $ | 2,434 | $ | 2,682 | ||||
| UK VAT Receivable | 8,342 | 15,084 | ||||||
| Prepayments | 200 | |||||||
| Accounts receivable | $ | 10,776 | $ | 17,966 | ||||
Any nominal change in the deposit value is due to exchange rate fluctuation.
NOTE 4 – ADVANCES RECEIVABLE
As of June 30, 2022 and December 31, 2021, cash advances consisted of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Advance principal receivable -G | $ | 48,163 | $ | 54,529 | ||||
| Advance principal receivable -J | 19,480 | 21,643 | ||||||
| Interest due | 5,377 | 4,079 | ||||||
| Total advances receivable | $ | 73,020 | $ | 80,251 | ||||
The advance labelled Advance principal receivable-G carries an interest rate of 3%. The advance principal labelled Advance receivable -J is non-interest bearing. The Company has the expectation that both outstanding advances will be repaid to the Company within the next 12 months.
Any difference on the Advance principal is due to currency translation.
| F-9 |
NOTE 5 - PROPERTY AND EQUIPMENT
As of June 30, 2022 and December 31, 2021, property and equipment consisted of the following:
| Motor Vehicles | Computer Equipment | Office Equipment | Total | |||||||||||||
| Cost | ||||||||||||||||
| At December 31, 2021 | $ | 63,576 | $ | 31,500 | $ | 629 | $ | 95,705 | ||||||||
| Additions | ||||||||||||||||
| Effects of currency translation | (6,353 | ) | (3,149 | ) | (63 | ) | (9,565 | ) | ||||||||
| At June 30, 2022 | $ | 57,223 | $ | 28,351 | $ | 566 | $ | 86,140 | ||||||||
| Less accumulated depreciation | ||||||||||||||||
| At December 31, 2021 | $ | 14,092 | $ | 11,710 | $ | 283 | $ | 26,085 | ||||||||
| Depreciation expense | 3,044 | 4,725 | 57 | 7,826 | ||||||||||||
| Effects of currency translation | (1,407 | ) | (1,170 | ) | (29 | ) | (2,606 | ) | ||||||||
| At June 30, 2022 | $ | 15,729 | $ | 15,265 | $ | 311 | $ | 31,305 | ||||||||
| Net book value | ||||||||||||||||
| At June 30, 2022 | $ | 41,494 | $ | 13,086 | $ | 255 | $ | 54,835 | ||||||||
| At December 31, 2021 | $ | 49,484 | $ | 19,790 | $ | 346 | $ | 69,620 | ||||||||
During the six months ended June 30, 2022 and 2021, the Company recorded purchases of $0 and $1,330, respectively and depreciation expense of $7,826 and $5,746, respectively. There was no impairment, or disposals of property and equipment.
NOTE 6 - INTANGIBLE ASSETS
Patents
A Patent on the Internet-Search Mechanism (“IBSM”) has been granted in the United States, South Africa and New Zealand. A Notice of Approval has also been issued for Canada. The patent is currently pending in the following areas: Australia, European Union and the United Kingdom.
Patents are reported at cost, less accumulated amortization and accumulated impairment loss. Costs includes expenditure that is directly attributable to the acquisition of the asset. Once a patent is providing economic benefit to the Company, amortization is provided on a straight-line basis on all patents over their expected useful lives of 20 years.
Intellectual Property
Intellectual Property capitalizes costs of the Company’s qualifying internal research and developments. Intellectual property is amortized over its useful life of 7 years and reported at cost less accumulated amortization and accumulated impairment loss.
Trademarks
The Company has the following trademarks
| Mark | Category | Proprietor | Country | Class(es) | Status | Reg. Date. | File No. |
| CITIZENS JOURNALIST | Words | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206382.EM.01 |
| CITIZENS JOURNALIST | Word | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206382.GB.01 |
| CITIZENS JOURNALIST | Words | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206382.GB.02 |
| CITIZENS JOURNALIST | Word | Bubblr Limited | United States | 9 38 41 42 | REGD-DEC USE | 08-Feb-2022 | 206382.US.01 |
| CITIZENS JOURNALIST | Words and Colour Device | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206383.EM.01 |
| CITIZENS JOURNALIST | Series of Logos | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206383.GB.01 |
| CITIZENS JOURNALIST | Words and Colour Device | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206383.GB.02 |
| CITIZENS JOURNALIST | Words and Device | Bubblr Limited | United States | 9 38 41 42 | ACCEPTED | 206383.US.01 | |
| BAU NOT OK/BAU Not OK | Series of Marks | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 11-Oct-2019 | 208674.GB.01 |
| NEWZMINE/NewzMine | Series of Marks | Bubblr Limited | United Kingdom | 9 38 42 | REGISTERED | 25-Dec-2020 | 227753.GB.01 |
| F-10 |
The Company capitalizes trademark costs where the likelihood of acceptance is expected. Each trademark has been determined to have an infinite useful life and is assessed each reporting period for impairment. If there has been a reduction in the value of the trademark or if the trademark is not successfully registered, the asset will be impaired and charged to expense in the period of impairment.
As of June 30, 2022 and December 31, 2021, trademarks consisted of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Trademarks: | ||||||||
| NewzMineTM | $ | 9,636 | $ | 9,636 | ||||
| Citizens Journalist™ | 25,380 | 23,193 | ||||||
| Effects of currency translation | (3,282 | ) | ||||||
| $ | 31,734 | $ | 32,829 | |||||
As of June 30, 2022 and December 31, 2021, intangible assets consisted of the following:
| Cost | Patents | Trademarks | Intellectual Property | Capitalized Acquisition Costs | Total | |||||||||||||||
| At December 31, 2021 | $ | 151,860 | $ | 32,829 | $ | 2,861,906 | $ | 45,745 | $ | 3,092,340 | ||||||||||
| Additions | 17,041 | 2,187 | 19,228 | |||||||||||||||||
| Effects of currency translation | (15,179 | ) | (3,282 | ) | (286,042 | ) | (304,503 | ) | ||||||||||||
| At June 30, 2022 | $ | 153,722 | $ | 31,734 | $ | 2,575,864 | $ | 45,745 | $ | 2,807,065 | ||||||||||
| Less accumulated amortization | ||||||||||||||||||||
| At December 31, 2021 | $ | $ | $ | 1,463,042 | $ | 2,288 | $ | 1,465,330 | ||||||||||||
| Amortization expense | 2,489 | 183,988 | 1,144 | 187,621 | ||||||||||||||||
| Effects of currency translation | (146,227 | ) | (146,227 | ) | ||||||||||||||||
| At June 30, 2022 | $ | 2,489 | $ | $ | 1,500,803 | $ | 3,432 | $ | 1,506,724 | |||||||||||
| Net book value | ||||||||||||||||||||
| At June 30, 2022 | $ | 151,233 | $ | 31,734 | $ | 1,075,061 | $ | 42,313 | $ | 1,300,341 | ||||||||||
| At December 31, 2021 | $ | 151,860 | $ | 32,829 | $ | 1,398,864 | $ | 43,457 | $ | 1,627,010 | ||||||||||
During the six months ended June 30, 2022 and 2021, the Company purchased $19,228 and $51,830, respectively, in intangible assets, and recorded amortization expense of $187,621 and $185,088, respectively. During the six months ended June 30, 2022 and 2021, impairment of $0 and $0 was recorded. Based on the carrying value of definite-lived intangible assets as of June 30, 2022, we estimate our amortization expense for the next five years will be as follows:
| Six months ended June 30, | Patents | Intellectual Property | Capitalized Acquisition Costs | Total | ||||||||||||||||
| 6 months remaining 2022 | $ | 3,781 | $ | 76,790 | $ | 1,144 | $ | 81,715 | ||||||||||||
| 2023 | 7,562 | 153,580 | 2,288 | 163,430 | ||||||||||||||||
| 2024 | 7,562 | 153,580 | 2,288 | 163,430 | ||||||||||||||||
| 2025 | 7,562 | 153,580 | 2,288 | 163,430 | ||||||||||||||||
| 2026 | 7,562 | 153,580 | 2,288 | 163,430 | ||||||||||||||||
| Thereafter | 117,204 | 383,951 | 32,017 | 533,172 | ||||||||||||||||
| $ | 151,233 | $ | 1,075,061 | $ | 42,313 | $ | 1,268,607 | |||||||||||||
| F-11 |
NOTE 7 - CONVERTIBLE NOTES PAYABLE
In January 2021 the Company commenced an offering for a convertible promissory note. The offering closed June 30, 2021. Funds raised during the six months ended June 30, 2021 was $2,112,150, less an original issuance discount of $104,572, resulting in net proceeds of $2,007,578. The notes mature after eighteen (18) months from issue or on the following events:
Voluntary Conversion. Investor may, at his/her/its sole option, at any time after nine (9) months, convert all or any portion of the accrued interest and unpaid principal balance of this Note into fully paid and non-assessable shares of common stock of the Company at the conversion price of $1.15 per share.
Mandatory Conversion. Upon sixty (60) days from the date the Company files a Form 10 registration statement with the Securities and Exchange Commission (the “SEC”), all of the accrued interest and unpaid principal balance of this Note shall automatically convert into fully paid and non- assessable shares of common stock of the Company at the conversion price of $1.15 per share.
Interest at the rate equal to 2% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days will be due on all outstanding notes.
Interest accrual and debt discount amortization commenced July 1, 2021 upon the closing of the convertible promissory note offering.
In November 2021 the Company commenced an offering for a convertible promissory note. The offering closed November 30, 2021. Funds raised as of November 30, 2021 totaled $175,630. The notes mature after eighteen (18) months from issue or on the following events:
Voluntary Conversion. Investor may, at his/her/its sole option, at any time after nine (9) months, convert all or any portion of the accrued interest and unpaid principal balance of this Note into fully paid and non- assessable shares of common stock of the Company at the conversion price of $1.15 per share.
Mandatory Conversion. Upon sixty (60) days from the date the Company files a Form 10 registration statement with the Securities and Exchange Commission (the “SEC”), all of the accrued interest and unpaid principal balance of this Note shall automatically convert into fully paid and non- assessable shares of common stock of the Company at the conversion price of $1.15 per share.
Interest at the rate equal to 2% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days will be due on all outstanding notes.
Interest accrual commenced December 1, 2021 upon the closing of the convertible promissory note offering.
At June 30, 2022 and December 31, 2021, convertible notes consisted of the following
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Promissory notes - issued in fiscal year 2021 | $ | 2,287,780 | $ | 2,278,780 | ||||
| Total convertible notes payable | 2,287,780 | 2,278,780 | ||||||
| Less: unamortized debt discount | (34,856 | ) | (69,714 | ) | ||||
| Less: current portion of convertible notes | ||||||||
| Long-term convertible notes | $ | 2,252,924 | $ | 2,218,066 | ||||
During the six months ended June 30, 2022 and 2021, the Company recorded $22,874 and $0 interest expense and recognized $34,856 and $0 amortization of discount. Interest paid in the six months ended June 30, 2022 and 2021 was $0 and 6,255
| F-12 |
NOTE 8 – LOAN PAYABLE
On February 4, 2022 the Company issued a promissory note for the principal sum of $20,000 to White Lion Capital, LLC, a Nevada company. The note has an original issue discount of 25%. The principal of $20,000 was repaid in full on April 26, 2022. The net proceeds received by the Company totaled $15,000, and the $5,000 debt discount was amortized to interest expense during the period the loan was outstanding.
The Company has purchased a vehicle under a capital finance arrangement. The term of this loan is 5 years and annual interest rate is 6.90%. At June 30, 2022 and December 31, 2021, loan payable obligations included in current liabilities were $12,061 and $13,400, respectively, and loan payable obligations included in long-term liabilities were $15,398 and $22,518, respectively. During the six months ended June 30, 2022 and 2021, the Company made $6,434 and $5,338 respectively, in loan payments, of which $1,332 and $1,549 were interest.
At June 30, 2022, future minimum payments under the loan, are as follows:
| Total | ||||
| 2022 (six months remaining in 2022) | $ | 6,434 | ||
| 2023 | 12,867 | |||
| 2024 | 11,816 | |||
| Thereafter | ||||
| 31,117 | ||||
| Less: Imputed interest | (3,658 | ) | ||
| Loan payable | 27,459 | |||
| Loan payable – current | 12,061 | |||
| Loan payable - non-current | $ | 15,398 | ||
NOTE 9 - RELATED PARTY TRANSACTIONS
Loans from Related Parties
The Company has a loan from our founder, Stephen Morris, with a balance of $385,381 and $428,177 at June 30, 2022 and December 31, 2021, respectively. On May 23, 2022, the Company entered an amendment to the Loan Agreement between Bubblr Limited and Mr. Morris to change the loan from a demand loan to have maturity date on the earlier of (i) the completion of an offering by Bubblr, Inc., in the amount of no less than $7,500,000 in a public offering, or (ii) two years from the date of the amendment.
In addition, on a date no later than five (5) business days from the completion of bridge financing of no less than $1.5 million USD the Company shall pay to Mr. Morris an amount equal to £115,000 GBP as an installment payment on the principal of the Loan, and the balance of the principal of the Loan shall be paid at the Maturity Date
The Company received $0 and $0 proceeds and made repayments of $0 and $66,000 during the six months ended June 30, 2022 and 2021. Activity on this loan to arrive at the June 30, 2022 and December 31, 2021 balances is as follows:
| Six
Months Ended June 30, | Year Ended December 31, | |||||||
| 2022 | 2021 | |||||||
| Beginning balance | $ | 428,177 | $ | 500,915 | ||||
| Effects of currency translation | (42,796 | ) | (6,738 | ) | ||||
| Loan Payable | 385,381 | 494,177 | ||||||
| Less: conversions into preferred stock | — | (66,000 | ) | |||||
| Ending balance | $ | 385,381 | $ | 428,177 | ||||
| F-13 |
At December 31, 2020, the Company had loans from two minority shareholders totalling . During the fourth quarter of 2021, the Company received an additional loan from one of these minority shareholders totalling . The loan is non-interest bearing and due for repayment on February 28, 2022. Agreement was reached to extend repayment of the loan to April 30, 2022, with no penalties. All outstanding amounts were paid by this date. During the six months ended June 30, 2022 and 2021, the Company received proceeds on these loans of and , respectively, and made repayments of and , respectively. Activity on this loan to arrive at the June 30, 2022 and December 31, 2021 balances is as follows:
| Six Months Ended June 30, | Year Ended December 31, | |||||||
| 2022 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Effects of currency translation | (4,668 | ) | 6,062 | |||||
| Loan Payable | 76,494 | 303,068 | ||||||
| Add: additions | 19,709 | 81,162 | ||||||
| Less: repayments | (77,940 | ) | (303,068 | ) | ||||
| Ending balance | $ | $ | ||||||
NOTE 10 - WARRANT LIABILITY
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 11) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instrument should be classified as a liability due to reset provisions and variability in exercise price resulting in there being no fixed value or explicit limit to the number of shares to be delivered upon exercise.
ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
The Company determined our warrant liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of June 30, 2022. The Black Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black Scholes valuation model.
For the period ended June 30, 2022, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:
| Six Months Ended | |||
| June 30, | |||
| 2022 | |||
| Expected term | - years | ||
| Expected average volatility | - | ||
| Expected dividend yield | |||
| Risk-free interest rate | – | ||
| F-14 |
The following table summarizes the changes in the warrant liabilities during the period ended June 30, 2022:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
| Warrant liability as of December 31, 2021 | $ | |||
| Addition of new warrant liabilities | 421,000 | |||
| Day-one loss | 28,043 | |||
| Change in fair value of warrant liability | (4,152 | ) | ||
| Warrant liability as of March 31, 2022 | $ | 444,891 | ||
| Addition of new warrant liabilities | 368,000 | |||
| Day-one gain | (95,768 | ) | ||
| Change in fain value of warrant Liability | (275,178 | ) | ||
| Warrant liability as of June 30, 2022 | $ | 441,945 | ||
NOTE 11 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized preferred shares with a par value of per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
Special 2019 Series A Preferred Stock
The Company has designated one () share of Series A Preferred Stock, par value .
On March 12, 2021, the Company amended the designation of the Special 2019 Series A Preferred shares and removed the right of the holder to convert the Special 2019 Series A Preferred share to 500,000,000 shares of common stock of the Company.
The holder of the Special 2019 Series A Preferred Stock is entitled to 60% of all votes entitled to vote at each meeting of stockholders of the Corporation (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration.
As of June 30, 2022 and December 31, 2021, the Company had share of 2019 Series A Preferred stock issued and outstanding, which is held by our Chief Technology Officer, Stephen Morris. As such, Mr. Morris has substantial voting control of the Company.
Series B Preferred Stock
At June 30, 2022 and December 31, 2021, the Company had designated and shares of Series B Preferred Stock, par value . On March 31, 2021 the Company amended and restates its Articles of Incorporation and in doing so, retired the Series B Preferred Stock.
Prior to the retirement of the Series B Preferred Stock, the following designations were in effect:
Holders of the Series B Preferred Stock shall after two years of issuance, convert this Class B Preferred Stock based on each Class B Preferred Share equaling .00001% of the total issued and outstanding Common shares of the Company. In the event of a merger, reorganization, recapitalization or similar event of or with respect to the Corporation (other than a Corporate Change in which the Corporation is the surviving entity), this Class B Preferred Stock shall be converted based on each Class B Preferred Share equaling .00001% of the total issued and outstanding shares of common stock of the Company
| F-15 |
During 2021, the Company converted the shares of Series B Preferred to shares of common stock valued at $6,000 to the Company’s Founder in satisfaction of debt (Note 9 Related Party Transactions).
As of June 30, 2022 and December 31, 2021, the Company had and , shares of Series B preferred stock issued and outstanding, respectively.
Series C Convertible Preferred Stock
On March 4, 2022, the Company filed a Certificate of Designation with the Wyoming Secretary of State, which established shares of the Company’s Series C Convertible Preferred Stock, Stated Value $1,200 per share.
As of June 30, 2022 the Company recorded the following transaction in respect of the dividend due on its Series C Convertible Preferred Stock
| Dividend liability as of December 31, 2021 | $ | ||
| Dividend declared | 3,272 | ||
| Dividend liability as of March 31, 2022 | $ | 3,272 | |
| Dividend paid | (3,272 | ) | |
| Dividend declared | 16,754 | ||
| Dividend liability as of June 30, 2022 | $ | 16,754 |
The Company has the right to redeem the Series C Convertible Preferred Stock, in accordance with the following schedule:
| · | If all of the Series C Convertible Preferred Stock are redeemed within 90 calendar days from the issuance date thereof, the Company shall have the right to redeem the Series C Convertible Preferred Stock upon three business days’ of written notice at a price equal to 115% of the Stated Value together with any accrued but unpaid dividends. | |
| · | If all of the Series C Convertible Preferred Stock are redeemed after 90 calendar days from the issuance date thereof, the Company shall have the right to redeem the Series C Convertible Preferred Stock upon three business days of written notice at a price equal to 120% of the Stated Value together with any accrued but unpaid dividends; and | |
| · | The Company shall pay a dividend of 8% per annum on the Series C Convertible Preferred Stock. Dividends shall be paid quarterly, and at the Company’s discretion, in cash or Series C Convertible Preferred Stock. Dividend shall be deemed to accrue from the date of issuance of the Series C Convertible Preferred Stock whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. |
The Series C Convertible Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forth in the Certificate of Designation).
Each share of the Series C Convertible Preferred Stock is convertible, at any time and from time to time from and after the issuance at the option of the Holder thereof, into that number of shares of Common Stock (subject to Beneficial Ownership Limitations) determined by dividing the Stated Value of $1,200 of such share by the Conversion Price of $0.3202 . As per section 5(b) the fixed conversion price will be 80% of the lowest traded price for the Company’s common stock during the fifteen(15) Trading Days immediately preceding, but not including the conversion date.
On March 4, 2022, the Company entered into a Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to $700,000 of the Company’s Series C Convertible Preferred Stock in exchange for shares of Series C Convertible Preferred Stock.
| F-16 |
On March 4, 2022, the Company issued to GHS the first tranche of shares of Series C Convertible Preferred Stock, as well as commitment shares of shares of Series C Convertible Preferred Stock and warrant shares (the “GHS Warrant”). Warrant shares represent 75% of the number of shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock (the “GHS Warrant Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series C Convertible Preferred Stock and the GHS Warrant Shares.
GHS delivered gross proceeds of $266,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On March 9, 2022, the Company entered a Securities Purchase Agreement with Proactive Capital Partners LP (“Proactive”), whereby Proactive agreed to purchase shares of Series C Preferred Stock.
The Company agreed to issue Proactive commitment shares of shares of Series C Convertible Preferred Stock and warrant shares (the “Warrant”). Warrant shares represent 75% of the number of shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock (the “Warrant Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series C Convertible Preferred Stock and the Warrant Shares.
On March 9, the Company issued shares of Series C Convertible Preferred stock to Proactive Capital Partners LP as per the Securities Purchase Agreement. Proactive delivered gross proceeds of $155,000 to the Company (excluded were legal fees).
On April 24, 2022 the Company issued the second tranche of shares of Series C Convertible Preferred Stock and warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $184,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On May 25, 2022 the Company issued the third tranche of shares of Series C Convertible Preferred Stock and warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $92,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On June 24, 2022 the Company issued the fourth tranche of shares of Series C Convertible Preferred Stock and warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $92,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
As a result of the above transactions, the Company received total net proceeds of $789,000, of which $721,275 has been allocated to the warrants and Series C Preferred Stock based on the warrants’ fair market values on each contract date, with the residual loss of $28,043 allocated to day-one loss on warrant liability associated with the March 2022 issuances, and excess proceeds of $95,768 allocated to the Series C Preferred Stock associated with the April, May, and June 2022 issuances. As at June 30, 2022 and 2021, the Company had and shares of Series C Preferred Stock issued and outstanding, respectively.
Common Stock
The Company has authorized common shares with a par value of per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
During the six months ended June 30, 2022 and 2021, the Company issued common shares as follows:
Six months ended June, 2021
| · | shares for Advisory Board services valued at $1,532,641 |
| · | shares for Investor Relations services valued at $60,000 |
| · | shares for conversion of B preferred shares in satisfaction of related party debt of |
| · | 7,000,000 shares for the conversion of debt valued at $70,000 |
| F-17 |
Six months ended June 30, 2022
| · | shares for the 2022 Incentive Scheme award (see Note 11- Equity Incentive Plan) deferred compensation valued at |
| · | shares for Executive Board Chair services valued at $75,460 |
| · | shares for Investor Relations and Consulting services valued at $2,002,061 |
| · | shares as commitment shares under the Equity Financing Agreement with GHS valued at |
| · | shares to White Lion Capital, LLC as a result of a Termination and Release Agreement. |
As at June 30, 2022 and December 31, 2021, the Company had and shares, respectively, of common stock issued and outstanding.
Warrants
The Company identified conversion features embedded within warrants issued during the period ended June 30, 2022. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision which could cause adjustments in redemption value and number of shares issued upon exercise (see Note 10 Warrant Liability).
A summary of activity during the period ended June 30, 2022 follows:
| Warrants Outstanding | Weighted Average | ||||||||||||
| Number of | Weighted Average | Remaining life | |||||||||||
| Warrants | Exercise Price | (years) | |||||||||||
| Outstanding, December 31, 2021 | $ | ||||||||||||
| Granted | |||||||||||||
| Exercised | |||||||||||||
| Forfeited/canceled | |||||||||||||
| Outstanding, June 30, 2022 | $ | 0.32 | |||||||||||
| Exercisable Warrants, June 30, 2022 | $ | 0.32 | |||||||||||
The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2022:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||
| Number of | Weighted Average Remaining Contractual life | Weighted Average | Number of | Weighted Average | ||||||||||||||
| Warrants | (in years) | Exercise Price | Shares | Exercise Price | ||||||||||||||
| $ | 0.34 | $ | 0.34 | |||||||||||||||
| 0.34 | 0.34 | |||||||||||||||||
| 0.35 | 0.35 | |||||||||||||||||
| 0.22 | 0.22 | |||||||||||||||||
| 0.22 | 0.22 | |||||||||||||||||
| $ | 0.32 | $ | 0.32 | |||||||||||||||
As at June 30, 2022 the intrinsic value of the warrants is .
| F-18 |
Equity Incentive Plan
On May 25, 2022, our board of directors and majority shareholders approved the adoption of the Bubblr, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”) and, unless earlier terminated, will continue until May 25, 2032. A total of shares of common stock may be issued under the 2022 Equity Incentive Plan. The purpose of the 2022 Equity Incentive Plan is to foster and promote our long-term financial success and increase stockholder value by motivating performance through incentive compensation. The 2022 Equity Incentive Plan is intended to encourage participants to acquire and maintain ownership interests in our company and to attract and retain the services of talented individuals upon whose judgment and special efforts the successful conduct of our business is largely dependent.
If the employee is terminated for cause, the employee will forfeit the Restricted Stock Units awarded to date.
During the six months ended June 30, 2022, the Company issued pursuant to the 2022 Equity Incentive Plan, a total of shares of common stock to two Company executives as restricted stock units pursuant to their employment agreements. See Note 12 – Commitments and Contingencies.
The shares were valued at $2,259,600, based on the market price of the common stock on the respective dates of the agreements, which was $0.269 per share, and amortized over their two-year vesting period on a straight-line basis. During the six months ended June 30, 2022, the Company recorded stock-based compensation of $94,150 and had unamortized deferred stock compensation of $2,165,450 as of June 30, 2022.
The following table shows the deferred stock compensation activity during the six months ended June 30, 2022:
| Deferred stock compensation at December 31, 2021 | $ | |||
| Awards issued | ||||
| Vesting of stock compensation | (94,150 | ) | ||
| Deferred stock compensation at June 30, 2022 | $ | 2,165,450 |
NOTE 12 - COMMITMENTS AND CONTINGENCIES
During the six months ended June 30, 2022 and 2021, the Company paid $4,264 and $5,115 for its rented premises in Dunfermline, Scotland. The 12-month lease was not renewed in March 2021 and the Company has given notice on the premises to vacate on July 14, 2022 and is exempt from ASC 842 lease accounting due to its short term.
During the six months ended June 30, 2022 and 2021, the Company paid $1,200 and $0 for use of premises in New York, New York. The 12-month agreement was signed in August 2021 for twelve months, at a monthly rate of $200, and is exempt from ASC 842 lease accounting due to its short term.
.
.
On May 31, 2022, our board of directors approved amended and restated employment agreements in favor of our Chief Executive Officer, Rik Willard, and our Chief Commercial Officer, Steven Saunders.
| F-19 |
.
On March 25, 2022, the Company entered into a service agreement with PCG Advisory, Inc. The term is six months commencing April 1, 2022. PCG Advisory, Inc. will receive cash of $7,000, plus stock compensation per month. The number of shares will be determined based on the closing price on the last trading day of the previous month.
NOTE 13 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date of issuance of these consolidated financial statements and noted the following significant events requiring disclosure.
On July 27, 2022, shares of common stock valued at $7,000 were issued to a consultant for investor relation services.
| F-20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Business Overview
Bubblr, Inc is a company founded on the principles of digital disruption, innovation and the emerging importance of ethical Internet applications. We call this emergent global movement The Ethical Web (or, WEB.Ɛ).
The 5 pillars of WEB.Ɛ are:
| · | An internet that decentralizes profits. |
| · | An internet that consecrates citizens’ rights to privacy. |
| · | An internet that levels the playing field for businesses |
| · | An internet that combats social and cultural division |
| · | An internet that is not corrupted by advertising |
Mission
Our goal is to fix a broken internet model that currently suffers from the following failures:
| 1. | Systematic abuse of an individual’s personal data; |
| 2. | Prohibitively expensive and complex businesses marketing channels for SMEs; and |
| 3. | A lack of financial incentives to develop and sustain new Internet economic models. |
Bubblr brings a holistic approach to the above problems in a fundamentally unique way. Building on its patented alternative online search mechanism and engaging with the global digital developer community, we plan to build a new economic platform that we believe will be sustainable and fair to users, online businesses, and all online stakeholders. Our mission is twofold:
| 4 |
| 1) | Empower the developers of a new Internet in creating Ethical Technologies both through in-house Intellectual Property, providing advanced digital tools that enable developers and creators to build fair-forward solutions to build a new Ethical Internet Ecosystem (the “Ethical Web” or WEB.Ɛ), and |
| 2) | Acquire/Commercialize/Invest in WEB.Ɛ products and services developed on our global platform and/or with corporate partners. |
Open-Code Ecosystem
Understanding that the WEB.Ɛ concept is larger than any one entity, requiring various layers of technologies across multiple business sectors, we are building an Open-Code Platform (OSP) to engage and incentivize the world’s developers and engineers in our mission for a more equitable Internet, at the DNA level.
With our own intellectual property at its core, we will construct our OCP with economic incentives for the developer community in mind, incorporating a number of related digital tools that support the ethical development of new mobile applications that adhere to and reflect the highest standards of WEB.Ɛ.
We believe that our software as a service (SAAS) Open-Code Platform will allow the open-source community, companies and not-for-profits to be able to build their own mobile applications using templates downloadable from a central code repository. We intend to focus on Low-Code and No-Code applications as much as possible to attract a larger pool of developers. As partners register onto our platform, they are provisioned with online dashboards that allow them to fully utilize the SAAS platform and will have their own sandbox provisioned to test their apps.
Mobile-First
All of the consumer-based products subsequently developed by our registered partners are designed to deliver the presentation layer through mobile-first consumer experiences.
While we are a mobile-first company, we understand the need for flexibility in order to maximize market penetration. To this end we plan to develop relationships with the new wave of security-first browsers such as Brave, TOR and others.
Monetization and Market-Making
We are developing our platform by concentrating on proven value methodologies designed to exponentially increase the adoption of our IP through the following four-tiered process:
1. Research, Development and Commercialization. We are creating an Open-Code Initiative designed to evolve our IP (developed under patent) as well as that of our partners and future potential acquisitions. This will allows us to identify growth areas and expand ecosystems, platforms, and products within those areas, positioning us for commercialization opportunities across a wide range of business sectors.
2. Licensing and SAAS. We will provide revenue opportunities through partnerships with select start-ups and established corporations to further our reach and rapid development of platform applications. The SAAS platform will allow low volume, free community access. However, platform usage is metered, and those partners who start using the platform for larger volume will be obliged to pay an appropriate license fee.
3. Venture Funding. We will license or otherwise provide our technology to select start-ups, teams and developers, and fund early stage startups that develop promising applications arising from the platform. This will allow us to grow a multi-sector ecosystem and maximize reach and revenues through multiple streams.
| 5 |
Advanced Tools and Future Services
We have developed a data-driven conversations (DDC) capability that is in the process of being implemented into our platform and app technologies. This generic application can be used by developers with access to our toolkit and will allow Bubblr to build and alter conversation search dialogues to optimize searching for information and content.
Additionally, are building complex AI and machine learning to optimize search results regarding relevance and salience for searching for critical information. Our plans include adding these algorithms to the Open-Code platform and development ecosystems and to our overall Software Development Kit (SDK).
The systems architecture to support these innovations continues to evolve and our plan is designed to evolve with it. Our belief is that a collection of technologies, geared to incentivize developed and create multiple revenue streams for Bubblr, is the perfect strategy to create exponential value for the Company and significantly enhance our shareholders’ interests.
Our headquarters is located at 21 West 46th Street, New York, New York 10036. Our phone number is (647) 646 2263. General information about us can be found at www.bubblr.com. The information contained on or connected to our website is not incorporated by reference into this quarterly report on Form 10-Q and should not be considered part of this or any other report filed with the SEC.
Results of Operation for Three and Six Months Ended June 30, 2022 and 2021
Revenues
We did not achieve revenues from our current operations for the three or six months ended June 30, 2022 or 2021. We will not achieve revenues unless we are able to market, support and deliver our product and service offerings. There can be no assurances that we will achieve revenues despite our efforts.
Operating Expenses
Operating expenses increased to $2,482,731 for the three months ended June 30, 2022, as compared with $1,322,429 for the same period ended 2021. For the three months ended June 30, 2022, our operating expenses mainly consisted of $2,095,727 in professional fees, of which $1,993,081for consulting and was paid by the issuance of common stock. Additional operating expenses consisted of $172,547 in compensation, $100,859 in amortization and depreciation, $52,694 in research and development, $44,595 in market and regulation costs, and $16,309 in general and administrative expenses. For the three months ended June 30, 2021, our operating expenses mainly consisted of $877,149 in professional fees, of which $828,565 was charged for Advisory Board members and were paid by the issuance of common stock., $176,360 in compensation expense, $135,799 in research and development expense, $95,851 in amortization and depreciation, $19,691 in market and regulation costs and $17,579 in general and administrative costs.
Operating expenses increased to $3,034,072 for the six months ended June 30, 2022, as compared with $2,595,405 for the same period ended 2021. For the six months ended June 30, 2022, our operating expenses mainly consisted of $2,288,556 in professional fees, of which $2,077,522 was charged for consultant and Advisory Board fees that were paid by the issuance of common stock. Additional operating expenses consisted of $313,491 in compensation, $208,454 in amortization and depreciation, $113,922 in research and development, $82,188 in market and regulation costs, and $27,428 in general and administrative expenses. For the six months ended June 30, 2021, our operating expenses mainly consisted of $1,672,295 in professional fees, of which $1,592,641 was charged for Advisory Board members and consultant compensation that was paid by the issuance of common stock, $345,323 in compensation expense, $263,388 in research and development expense, $190,695 in amortization and depreciation, $90,682 in general and administrative costs and $33,022 in market and regulation costs.
Provided we obtain financing, our operating expenses are expected to increase in future quarters with additional human resources and R&D expenditures as we implement our Open-Code Initiative, and the added administrative and legal expenses associated with being a reporting company with the Securities and Exchange Commission.
Other Income (Expenses)
We had net other income of $123,853 for the three months ended June 30, 2022, as compared with net other expense of $4,693 for the same period ended 2021. For the three months ended June 30, 2022, our other income (expense) consisted primarily of $275,178 gain on fair market value of warrant derivative liability and interest income of $402, offset by expenses of $121,307 currency transaction loss and interest expense of $30,420. Our other income (expense) for the same period ended 2021 consisted of a gain in debt settlement of $5,000 and interest income of $460, offset by expenses of $7,149 in foreign currency transaction losses and $3,004 interest expense.
We had other expense of $355,137 for the six months ended June 30, 2022, as compared with other expense of $15,992 for the same period ended 2021. For the six months ended June 30, 2022, our other expense consisted primarily of $445,264 interest expense, $162,014 currency transaction loss, offset by a gain on fair market value of warrant derivative liability of $251,287. Our other expenses for the same period ended 2021 consisted of $13,814 in foreign currency transaction losses, $7,804 interest expense, offset by a gain on debt settlement of $5,000, and interest income of $626.
Net Loss and Comprehensive Loss
We finished the six months ended June 30, 2022 with a net loss of $3,389,209, as compared to a net loss of $2,611,397 during the six months ended June 30, 2021. Foreign currency translation gains of $60,679 and $27,353, respectively, for the six months ended June 30, 2022 and 2021, resulted in net comprehensive loss of $3,328,530 and $2,584,044, respectively.
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Liquidity and Capital Resources
As of June 30, 2022 and December 31, 2021, we had total current assets of $139,728, and $161,184, respectively, and total current liabilities of $613,530 and $744,820, respectively, resulting in a working capital deficit of $473,802 and $583,683, respectively.
Our operating activities used $882,052 during the six months ended June 30, 2022 as compared with $859,803 used in operating activities in the six months ended June 30, 2021. Our negative operating cash flows for both periods in 2022 and 2021 is largely the result of our net loss for the periods.
We used $19,228 and $53,160 in investing activities during the six months ended June 30, 2022 and 2021, respectively, for the purchase of intangible and fixed assets.
Financing activities provided $716,063 during the six months ended June 30, 2022 compared with $1,699,172 provided during the six months ended June 30, 2021. During the six months ended June 30, 2022, we received $789,000 for issue of Series C Preferred Stock, $15,000 in loans payable, and $19,709 from loans payable – related party, and made repayments of $77,940 in loans payable – related party and $6,434 in loans payable and payment of $3,272 in dividend due on Series C Preferred Stock. During the six months ended June 30, 2021, we received proceeds of $2,007,578 in convertible notes, offset by $308,406 in repayments of unsecured loans.
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements.
On March 4, 2022, we entered a Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to Seven Thousand Dollars ($700,000) of the Company’s Series C Convertible Preferred Stock in exchange for Seven Hundred (700) shares of Series C Convertible Preferred Stock. The first tranche, promptly upon execution of the Securities Purchase Agreement, was for the purchase of Three Hundred (300) shares of Series C Convertible Preferred Stock for Three Hundred Thousand Dollars ($300,000). The remaining tranches of shares shall occur so long as certain conditions are met as described in the GHS Securities Purchase Agreement.
The Company issued to GHS commitment shares of Thirty-Five (35) shares of Series C Convertible Preferred Stock and a warrant (the “GHS Warrant”) to purchase 75% of the number of shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock (the “GHS Warrant Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series C Convertible Preferred Stock and the GHS Warrant Shares.
GHS delivered gross proceeds of $266,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
We also entered into a Securities Purchase Agreement on March 9, 2022 with another accredited investor, whereby the investor agreed to purchase One Hundred and Sixty (160) shares of Series C Preferred Stock for One Hundred and Sixty Thousand ($160,000).
The Company issued to this investor commitment shares of Eight (8) shares of Series C Convertible Preferred Stock and a warrant (the “Warrant”) to purchase 75% of the number of shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock (the “Warrant Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series C Convertible Preferred Stock and the Warrant Shares. Net proceeds of $155,000 were realized by the Company.
Also on March 9, 2022, the Company entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”) with GHS. Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to Fifteen Million ($15,000,000) upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”).
| 7 |
Following effectiveness of the Registration Statement, the Company shall have the discretion to deliver puts to GHS and GHS will be obligated to purchase shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) based on the investment amount specified in each put notice. The maximum amount that the Company shall be entitled to put to GHS in each put notice shall not exceed two hundred and fifty percent (250%) of the average daily trading dollar volume of the Company’s Common Stock during the ten (10) trading days preceding the put, in an amount equaling less than ten thousand dollars ($10,000) or greater than one million dollars ($1,000,000). Pursuant to the Equity Financing Agreement, GHS and its affiliates will not be permitted to purchase, and the Company may not put shares of the Company’s Common Stock to GHS that would result in GHS’s beneficial ownership equaling more than 4.99% of the Company’s outstanding Common Stock. The price of each put share shall be equal to eighty percent (80%) of the Market Price (as defined in the Equity Financing Agreement). Following an up-list to the NASDAQ or an equivalent national exchange by the Company, the Purchase price shall mean ninety percent (90%) of the Market Price, subject to a floor of $.01 per share. Puts may be delivered by the Company to GHS until the earlier of twenty-four (24) months after the effectiveness of the Registration Statement or the date on which GHS has purchased an aggregate of $15,000,000 worth of Common Stock under the terms of the Equity Financing Agreement.
Additionally, concurrently with the execution of definitive agreements, the Company shall issue common shares to the Investor representing a dollar value equal to one percent (1.0%) of the Commitment Amount (the “Commitment Shares”). The Commitment Shares shall be calculated at the applicable Purchase Price on the trading day immediately preceding the execution of definitive agreements.
The Registration Rights Agreement provides that the Company shall (i) use its best efforts to file with the Commission the Registration Statement within 30 days of the date of the Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the Commission within 30 days after the date the Registration Statement is filed with the Commission, but in no event more than 90 days after the Registration Statement is filed.
On March 24, 2022, the Company and White Lion executed a Termination and Release Agreement dated March 22, 2022, to terminate the Purchase Agreement and Registration Rights Agreement dated February 1, 2022 for an equity line of up to $10 million and registration rights. In consideration, the Company agreed to issue to White Lion 103,000 shares of common stock and to register all White Lion’s 206,000 shares.
On April 24, 2022 the Company issued the second tranche of 200 shares of Series C Convertible Preferred Stock and 562,149 warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $184,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On May 25, 2022 the Company issued the third tranche of 100 shares of Series C Convertible Preferred Stock and 281,074 warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $92,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
On June 24, 2022 the Company issued the fourth tranche of 100 shares of Series C Convertible Preferred Stock and 281,074 warrant shares as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”), of March 4, 2022. GHS delivered gross proceeds of $92,000 to the Company (excluded were legal fees and a transaction fee charged by Spartan Capital).
We also plan to seek additional financing in a private or public equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
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Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this prospectus, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe our most critical accounting policies and estimates relate to the following:
| § | Foreign Currency Translations | |
| § | Intangible Assets | |
| § | Long-lived Assets | |
| § | Income Taxes | |
| § | Stock-based Compensation | |
| § | Common Stock Purchase Warrants and Derivative Financial Instruments | |
| § | Convertible Financial Instruments | |
| § | Fair Value of Financial Instruments |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British pounds (GBP). Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at weighted average rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.
Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expense in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement, or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Recent Accounting Pronouncements
For discussion of recently issued and adopted accounting pronouncements, please see Note 2 to the unaudited consolidated financial statements as of and for the quarter ended June 30, 2022 and 2021 included herein.
Off Balance Sheet Arrangements
As of June 30, 2022, there were no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2022. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our interim Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and interim Chief Financial Officer concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of June 30, 2022, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2022: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2022 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are averse to us or have a material interest adverse to us.
Item 1A: Risk Factors
See risk factors included in our Registration Statement on Form S-1/A filed on June 7, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.
In the six months ended June 30, 2022, the Company issued the following unregistered securities:
| · | 8,400,000 shares for the 2022 Incentive Scheme award deferred compensation valued at $2,259,600. |
| · | 147,960 shares for Executive Board Chair services valued at $75,460; |
| · | 67,079 shares for Investor Relations services valued at $22,980; | |||
| · | 7,597,244 shares for Consultancy in regards the Merger with U.S. Wireless Online, Inc valued at $1,979,082; |
| · | 587,039 shares as commitment shares under the Equity Financing Agreement with GHS; |
| · | 206,000 shares to White Lion Capital, LLC as a result of a Termination and Release Agreement; and |
| · | 503 shares of Series C Preferred Stock and 75% warrant coverage in connection with Securities Purchase Agreements with GHS and Proactive. |
Subsequent to the reporting period, the Company issued 29,045 shares of Common Stock in connection with Investor Relation Services.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits
| Exhibit Number | Description of Exhibit | |
| 31.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-K for the quarter ended June 30, 2022 formatted in Extensible Business Reporting Language (XBRL). | |
| **Provided herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Bubblr, Inc. | ||
| Date: | August 22, 2022 | |
| By: | /s/ Rik Willard | |
| Rik Willard | ||
| Title: | Chief Executive Officer (principal executive officer) | |
| By: | /s/ Virginia Mackin | |
| Virginia Mackin | ||
| Title: | Interim Chief Financial Officer (principal financial officer and principal accounting officer) |
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