Positioning

BUBBLR INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) – Marketscreener.com





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.
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.?).
The 5 pillars of WEB.? 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
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
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:
1) Empower the developers of a new Internet in creating Ethical Technologies both
2) Acquire/Commercialize/Invest in WEB.? products and services developed on our
Understanding that the WEB.? 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.?.
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.
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.
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
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 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.
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.
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”).
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.
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
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.
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 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.
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.
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).
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.
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