UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
| Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to__________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(
(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.
☒
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). ☒
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 | |
| ☐
|
||
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 ☒
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 11, 2023.
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 | 11 |
| Item 4: | Controls and Procedures | 11 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 13 |
| Item 1A: | Risk Factors | 13 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
| Item 3: | Defaults Upon Senior Securities | 13 |
| Item 4: | Mine Safety Disclosures | 13 |
| Item 5: | Other Information | 13 |
| Item 6: | Exhibits | 13 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our consolidated financial statements included in this Form 10-Q are as follows:
These unaudited consolidated financial statements are condensed and 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, 2023 are not necessarily indicative of the results that can be expected for the full year ended December 31, 2023.
| 3 |
BUBBLR INC.
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
| F-1 |
BUBBLR INC.
Consolidated Balance Sheets
June 30, 2023 and December 31, 2022
(Unaudited)
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Non-current Assets: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Loan payable, current | ||||||||
| Loan payable - related party, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Loan payable, non-current | ||||||||
| Loan payable - related party, non-current | ||||||||
| Warrant derivative liability | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Series C Convertible Preferred Stock, $ par value, authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at June 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
BUBBLR INC.
Consolidated Statement of Operations and Comprehensive Loss
For the three and six months ended June 30, 2023 and 2022
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Professional fees | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expense | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain (loss) on change in fair value of warrant derivative liability | ( | ) | ||||||||||||||
| Foreign currency transaction gain (loss) | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ||||||||||||||
| Net loss before income tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Provision for income tax | ||||||||||||||||
| Net loss after income tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation gain (loss) | ( | ) | ( | ) | ||||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Net comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
| F-3 |
BUBBLR INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the six months ended June 30, 2023 and 2022
(Unaudited)
2019 Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional | Accumulated Other | Total Stockholders’ | |||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Paid-in
Capital | Accumulated Deficit | Comprehensive Income (Loss) | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common shares for services - Executive Board | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for services - Consulting | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Equity Finance Agreement Incentive | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Shares | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Dividend Series C Preferred shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common shares for services - Consulting | ||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Shares | ||||||||||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| Issuance of common shares for services - Consulting | ||||||||||||||||||||||||||||||||||||||||
| Forfeit of restricted stock units | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of common shares for series C Preferred Shares Dividend | ||||||||||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance -March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common shares for services - Consulting | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for services – Professional Services | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for series C Preferred Shares Dividend | ||||||||||||||||||||||||||||||||||||||||
| Vesting of Share Options | ||||||||||||||||||||||||||||||||||||||||
| Dividend Series C Preferred Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||
| F-4 |
BUBBLR INC.
Consolidated Statement of Cashflows
For the six months ended June 30, 2023 and 2022
(Unaudited)
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Stock based finance incentive | ||||||||
| Vesting of stock-based compensation | ||||||||
| Forfeit of restricted stock units | ( | ) | ||||||
| Change in fair value of warrant derivative liability | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Amortization of intangible asset | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in other receivables | ||||||||
| Increase in accrued liabilities | ||||||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Payment of dividend | ( | ) | ||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Proceeds from loans payable - related party | ||||||||
| Repayment of loans payable - related party | ( | ) | ( | ) | ||||
| Net proceeds from issuance of Series C Preferred stock | ||||||||
| Proceeds from issuance of convertible notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Effects of exchange rate changes on cash | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Declared dividends | $ | $ | ||||||
| Common stock issued in satisfaction of dividend payable | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-5 |
BUBBLR INC.
Notes to the Unaudited Consolidated Financial Statements
June 30, 2023 and 2022
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
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 $
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.
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 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.
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.
| F-6 |
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. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable 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 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 year ended December 31, 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, 2023 and December 31, 2022, the warrant liabilities
balances were $
We follow 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). Restricted stock units (“RSUs”) issued as compensation in accordance with the Company’s 2022 Equity Incentive Plan are deemed to be unissued until fully vested. RSU compensation is recognized as expense over the vesting period. Upon repurchase of the award, any unrecognized compensation, net of cash payments, is expensed immediately. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense and any previously recognized costs are reversed in the period of forfeiture.
Employees – We account for share-based compensation under the fair value method which requires all such compensation to employees, including the grant of employee stock options, to be calculated based on its fair value at the measurement date (generally the grant date), and recognized in the consolidated statement of operations over the requisite service period.
| F-7 |
Nonemployees - Under the requirements of the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), we account for share-based compensation to non-employees under the fair value method which requires all such compensation to be calculated based on the fair value at the measurement date (generally the grant date), and recognized in the statement of operations over the requisite service 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 the 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.
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| (Shares) | (Shares) | |||||||
| Series C Preferred Stock | ||||||||
| Warrants | ||||||||
| Convertible Notes | ||||||||
| Total | ||||||||
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, | |||||||||||
| 2023 | 2022 | 2022 | ||||||||||
| Period-end GBP£:U.S.$ exchange rate | ||||||||||||
| Weighted average GBP£:U.S.$ exchange rate | ||||||||||||
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. Gains on foreign exchange
transactions totaling $
| F-8 |
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 carryforwards. 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, 2023 and December 31, 2022, 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 that 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 profit.” The DPT has had an 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).
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.
| F-9 |
Reclassifications
Certain accounts have been reclassified in prior periods to conform to current period presentation. Compensation expense that was previously reported separately has been combined with general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented.
NOTE 3 – OTHER RECEIVABLES
As of June 30, 2023 and December 31, 2022, accounts receivable consisted of the following:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Deposit | $ | $ | ||||||
| UK VAT Receivable | ||||||||
| Other receivables | $ | $ | ||||||
NOTE 4 - PROPERTY AND EQUIPMENT
As of June 30, 2023 and December 31, 2022, property and equipment consisted of the following:
| Motor Vehicles | Computer Equipment | Office Equipment | Total | |||||||||||||
| Cost | ||||||||||||||||
| At December 31, 2022 | $ | $ | $ | | $ | |||||||||||
| Additions | ||||||||||||||||
| Effects of currency translation | ||||||||||||||||
| At June 30, 2023 | ||||||||||||||||
| Less accumulated depreciation | ||||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | ||||||||||||
| Depreciation expense | ||||||||||||||||
| Effects of currency translation | ||||||||||||||||
| At June 30, 2023 | ||||||||||||||||
| Net book value | ||||||||||||||||
| At June 30, 2023 | ||||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | ||||||||||||
During
the six months ended June 30, 2023 and 2022, the Company recorded depreciation expenses of $
NOTE 5 - INTANGIBLE ASSETS
Patents
A Patent on the Internet-Search Mechanism (“IBSM”) has been granted in the United States, South Africa, New Zealand, Canada, and Australia The patent is currently pending in the European Union, and the United Kingdom.
Patents
are reported at cost, less accumulated amortization, and accumulated impairment loss. Costs include 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
| F-10 |
Intellectual Property
Intellectual
property capitalizes the costs of the Company’s qualifying internal research and developments. Intellectual property is
amortized over its useful life of
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 | |||||||
 |
Words and Color Device | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206383.EM.01 | |||||||
 |
Series of Logos | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206383.GB.01 | |||||||
|
Words and Color Device | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206383.GB.02 | |||||||
 |
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 |
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 assets will be impaired and charged to expense in the period of impairment.
As of June 30, 2023 and December 31, 2022, trademarks consisted of the following:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Trademarks: | ||||||||
| NewzMineTM | $ | $ | ||||||
| Citizens Journalist™ | ||||||||
| Effects of currency translation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
As of June 30, 2023 and December 31, 2022, intangible assets consisted of the following:
| Cost | Patents | Trademarks | Intellectual Property | Capitalized Acquisition Costs | Total | |||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Effects of currency translation | ||||||||||||||||||||
| At June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Less accumulated amortization | ||||||||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Amortization expense | ||||||||||||||||||||
| Effects of currency translation | ||||||||||||||||||||
| At June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Net book value | ||||||||||||||||||||
| At June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| F-11 |
During
the six months ended June 30, 2023 and 2022, the Company purchased $
| Capitalized | ||||||||||||||||
| Intellectual | Acquisition | |||||||||||||||
| Six months ended June 30, | Patents | Property | Costs | Total | ||||||||||||
| 6 months remaining 2023 | $ | $ | $ | $ | ||||||||||||
| 2024 | ||||||||||||||||
| 2025 | ||||||||||||||||
| 2026 | ||||||||||||||||
| 2027 | ||||||||||||||||
| 2028 | ||||||||||||||||
| Thereafter | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
NOTE 6 – ACCRUED LIABILITIES
As of June 30, 2023 and December 31, 2022, accrued liabilities consisted of the following:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accruals | $ | $ | ||||||
| Accrued interest | ||||||||
| Director fees | ||||||||
| Dividends payable | ||||||||
| Settlement payable | ||||||||
| Wages and salaries | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
NOTE 7 – LOAN PAYABLE
On
February 4, 2022, the Company issued a promissory note for the principal sum of $
In
November 2019, the Company purchased a vehicle under a capital finance arrangement. The term of this loan is
During
the six months ended June 30, 2023 and 2022, the Company made $
| F-12 |
At June 30, 2023, future minimum payments under the loan are as follows:
| Total | ||||
| 2023 (six months remaining in 2023) | $ | |||
| 2024 | ||||
| Less: Imputed interest | ||||
| Loan payable | ||||
| Loan payable – current | ||||
| Loan payable - non-current | $ | |||
NOTE 8 - RELATED PARTY TRANSACTIONS
Loans from Related Parties
The Company had received a loan from a minority shareholder of $ in February 2022 that bore interest at the rate of per annum. The principal of $, plus accrued interest of $, totaling $ was repaid on February 15, 2023. The related party loan of $ borrowed in Q4 2021, which bore interest, and was repaid in full by April 30, 2022.
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Beginning Balance | $ | $ | ||||||
| Effects of currency translation | ( | ) | ||||||
| Loan Payable | $ | $ | ||||||
| Addition | $ | |||||||
| Repayment | $ | ( | ) | $ | ( | ) | ||
| Ending Balance | $ | $ | ||||||
During the six months ended June 30, 2023 and 2022, the Company received proceeds on these loans of $ and $, respectively, made repayments of $ and $, respectively, and accrued interest of $ and $, respectively. The Loans from related parties were received in GBP, and any difference deduced is due to fluctuation in the exchange rate.
The
Company has loans from our founder, Stephen Morris, with a balance of $
Loan 1.
The loan is non-interest bearing and repayable on demand.
On
September 6, 2022, the Company entered into a second amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to add
$
On
December 20, 2022, the Company entered into a third amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to reduce
the outstanding principal amount of the loan by $
In
aggregate, the Company received $
Loan 2.
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for $
Activity on this loan to arrive at June 30, 2023 and December 31, 2022 balances is as follows:
| Six
Months Ended June 30, 2023 | Year Ended December 31, 2022 | |||||||
| Beginning balance current | $ | |||||||
| Effects of currency translation | ( | ) | ||||||
| Loan Payable | ||||||||
| Additions | ||||||||
| Conversion from preferred stock | ||||||||
| Assignment of advances receivable | ( | ) | ||||||
| Ending balance – Current | $ | $ | ||||||
| Beginning balance non-current | $ | $ | ||||||
| Additions | ||||||||
| Effects of currency translation | ||||||||
| Ending balance non-current | $ | |||||||
| Ending balance current and non-current | $ | $ | ||||||
NOTE 9 - WARRANT LIABILITY
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instruments 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 us to assess the fair market value of the 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, 2023. 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.
| F-13 |
For the period ended June 30, 2023, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:
| Six Months Ended | ||||
| June 30, 2023 | ||||
| Expected term | ||||
| Expected average volatility | % | |||
| Expected dividend yield | % | |||
| Risk-free interest rate | % | |||
The following table summarizes the changes in the warrant liabilities during the period ended June 30, 2023 and December 31, 2022:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
| Addition of new warrants | $ | |||
| Additional day-one loss | ( | ) | ||
| Change in fair value of warrant liability | ( | ) | ||
| Warrant liability as of December 31, 2022 | $ | |||
| Addition of new warrants | $ | |||
| Additional day-one loss | ||||
| Change in fair value of warrant liability | ||||
| Warrant liability as of June 30, 2023 | $ | |||
NOTE 10 - 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.
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, with a Stated Value of $ per share.
The Company has the right to redeem the Series C Convertible Preferred Stock in accordance with the following schedule:
| ● |
| ● |
| ● | The
Company shall pay a dividend of |
| F-14 |
The Series C Convertible Preferred Stock will vote together with the common stock on an as-converted basis subject to the Benefici