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: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act. (Check one):

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 ☐ No ☒

As of August ~~9, 2021,~~12, 2022, there were 28,389,493 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

	June 30,			December 31,			June 30,			December 31,
	2021			2020			2022			2021
ASSETS	(unaudited)						Unaudited
Current Assets
Cash and Cash Equivalents	$	831,191		$	161,744		$	472,434		$	372,581
Restricted Cash and Cash Equivalents		199,737			189,179			169,337			202,761
Accounts Receivable, Net of Allowance for Doubtful Accounts of $0 and $30,000 respectively		283,633			113,906
Accounts Receivable, Net of Allowance for Doubtful Accounts of $15,000 and $0, respectively								155,133			80,875
Prepaid Expenses and Other Current Assets		74,306			43,286			58,388			50,304
Total Current Assets		1,388,867			508,115			855,292			706,521

Operating Lease Right-of-Use Asset		428,142			512,124			254,544			342,383
Total Assets	$	1,817,009		$	1,020,239		$	1,109,836		$	1,048,904

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts Payable	$	26,092		$	155,850		$	104,748		$	83,942
Interest Payable		183,921			271,868			15,617			17,646
Other Liabilities And Accrued Expenses		263,839			237,750			165,459			156,986
Operating Lease Liability Current		149,525			161,936			149,525			149,525
Contract With Customer Liability		676,990			649,789			431,910			464,162
First PPP Loan, Current		0			423,067
Bank Loan		5,000,000			0			0			5,000,000
Total Current Liabilities		6,300,367			1,900,260			867,259			5,872,261

Second PPP Loan		542,000			0
First PPP Loan, Long-Term		0			119,033
Bank Loan								5,000,000			0
Operating Lease Liability		365,115			432,058			196,594			282,534
Convertible Notes Payable, Net of Discount		0			972,108
Bank Loan		0			5,000,000
Total Liabilities		7,207,482			8,423,459			6,063,853			6,154,795

Commitments and Contingencies (Note 3)
Stockholders' Deficit
Preferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, Including 1,750,000 Authorized and Designated for Series A Convertible Preferred Shares: 1,300,687 Issued and Outstanding as of June 30, 2021 and 1,166,297 Issued and Outstanding as of December 31, 2020.		114,072,014			103,649,344
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At June 30, 2021 and December 31, 2020; 28,389,493 Shares Issued and Outstanding at June 30, 2021 and 28,389,493 Shares Issued and Outstanding at December 31, 2020.		28,390			28,390
Stockholders’ Deficit
Preferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, Including 1,750,000 Authorized and Designated for Series A Convertible Preferred Shares: 1,521,179 Issued and Outstanding as of June 30, 2022 and 1,403,276 Issued and Outstanding as of December 31, 2021.								132,459,976			127,162,277
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized at June 30, 2022 and December 31, 2021; 28,389,493 Shares Issued and Outstanding at June 30, 2022 and 28,389,493 Shares Issued and Outstanding at December 31, 2021.								28,390			28,390
Additional Paid-in Capital - Common Shares		131,796,969			130,103,361			122,056,344			123,015,819
Accumulated Deficit		(251,287,846	)		(241,184,315	)		(259,498,727	)		(255,312,377	)
Total Stockholders' Deficit		(5,390,473	)		(7,403,220	)
Total Liabilities and Stockholders' Deficit	$	1,817,009		$	1,020,239
Total Stockholders’ Deficit								(4,954,017	)		(5,105,891	)
Total Liabilities and Stockholders’ Deficit							$	1,109,836		$	1,048,904

The accompanying notes are an integral part of these condensed financial statements.

	3 Months Ended			3 Months Ended			6 Months Ended			6 Months Ended			3 Months Ended			3 Months Ended			6 Months Ended			6 Months Ended
	June 30,			June 30,			June 30,			June 30,			June 30,			June 30,			June 30,			June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
REVENUES:
Subscription and Support	$	398,358		$	491,367		$	816,343		$	1,010,766		$	295,607		$	398,358		$	625,509		$	816,343
Services and Other		0			116,405			0			221,578
Total Revenue		398,358			607,772			816,343			1,232,344			295,607			398,358			625,509			816,343

COST OF REVENUE:
Subscription and Support		199,944			181,221			405,247			346,622			148,249			199,944			271,820			405,247
Services and Other		0			0			9,000			93,162			0			0			0			9,000
Total Cost of Revenues		199,944			181,221			414,247			439,784			148,249			199,944			271,820			414,247

GROSS PROFIT		198,414			426,551			402,096			792,560			147,358			198,414			353,689			402,096

OPERATING EXPENSES:
Selling and Marketing		476,147			301,052			1,004,441			668,366			343,810			476,147			721,693			1,004,441
Research and Development		858,571			750,438			1,734,237			1,378,233			997,667			858,571			2,064,863			1,734,237
General and Administrative		705,489			824,517			1,611,373			1,649,318			801,104			705,489			1,633,038			1,611,373
Total Operating Expenses		2,040,207			1,876,007			4,350,051			3,695,917			2,142,581			2,040,207			4,419,594			4,350,051
LOSS FROM OPERATIONS		(1,841,793	)		(1,449,456	)		(3,947,954	)		(2,903,357	)		(1,995,223	)		(1,841,793	)		(4,065,905	)		(3,947,954	)

OTHER INCOME (EXPENSE):
Other Income		596			5,682			598			11,686
Interest Expense, Net		(48,671	)		(1,759,173	)		(191,138	)		(3,610,276	)		(72,874	)		(48,075	)		(120,445	)		(190,540	)
Gain on Debt Extinguishment - PPP Loan Forgiveness		0			0			542,100			-			0			0			0			542,100
Loss on Debt Extinguishment		0			(4,864,750	)		(6,507,137	)		(4,864,750	)
Losses on Debt Extinguishments														0			0			0			(6,507,137	)
Total Other Expense		(48,075	)		(6,618,241	)		(6,155,577	)		(8,463,340	)		(72,874	)		(48,075	)		(120,445	)		(6,155,577	)

NET LOSS	$	(1,889,868	)	$	(8,067,697	)	$	(10,103,531	)	$	(11,366,697	)	$	(2,068,097	)	$	(1,889,868	)	$	(4,186,350	)	$	(10,103,531	)

Plus: Dividend on Series A Convertible Preferred Stock														0			0			(2,597,699	)		0
Plus: Deemed Dividend on Series A Convertible Preferred Stock		(1,000,000	)		0			(6,269,401	)		0			(979,020	)		(1,000,000	)		(4,443,425	)		(6,269,401	)

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(2,889,868	)	$	(8,067,697	)	$	(16,372,932	)	$	(11,366,697	)	$	(3,047,117	)	$	(2,889,868	)	$	(11,227,474	)	$	(16,372,932	)

NET LOSS PER COMMON SHARE:
Basic and Fully Diluted from Continuing Operations	$	(0.10	)	$	(0.28	)	$	(0.58	)	$	(0.40	)	$	(0.11	)	$	(0.10	)	$	(0.40	)	$	(0.58	)

WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE: Basic And Fully Diluted		28,389,493			28,389,493			28,389,493			28,389,493
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN,COMPUTING NET LOSS PER COMMON SHARE: Basic And Fully Diluted														28,389,493			28,389,493			28,389,493			28,389,493

The accompanying notes are an integral part of these condensed financial statements.

	6 Months Ended			6 Months Ended			6 months ended			6 Months Ended
	June 30,			June 30,			June 30,			June 30,
	2021			2020			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(10,103,531	)	$	(11,366,697	)	$	(4,186,350	)	$	(10,103,531	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization		0			12,506
Bad Debt Expense								15,000			0
Amortization of Debt Discount		78,120			1,585,823			0			78,120
Share Based Compensation		1,693,608			1,502,457			1,638,224			1,693,608
Gain of Debt Extinguishment (PPP Loan Forgiveness)		(542,100	)		0			0			(542,100	)
Losses on Debt Extinguishments		6,507,137			4,864,750			0			6,507,137
Changes in Assets and Liabilities:
Accounts Receivable		(169,727	)		(199,097	)		(89,258	)		(169,727	)
Prepaid Expenses and Other Assets		(31,020	)		30,254			(8,084	)		(31,020	)
Accounts Payable		(129,758	)		(117,274	)		20,806			(129,758	)
Contract Liability		27,201			(189,752	)		(32,252	)		27,201
Operating Lease Right-of-use Asset		83,982			80,088			87,839			83,982
Operating Lease Liability		(79,354	)		(73,272	)		(85,940	)		(79,354	)
Accrued and Other Expenses		41,747			(1,559,991	)		6,444			41,747
Net Cash Used in Operating Activities		(2,623,695	)		(5,430,205	)		(2,633,571	)		(2,623,695	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Issuance of Subordinated Promissory Notes, Related Party		0			1,250,000
Proceeds From Issuance of Convertible Notes Payable, Related Party		0			1,200,000
Proceeds From Issuance of Convertible Notes Payable		0			2,900,000
Repayments of Financing Lease Obligations		0			(6,378	)
Proceeds From First PPP Loan		0			542,100
Proceeds From Second PPP Loan		542,000			0			0			542,000
Proceeds From Issuance of Shares of Series A Preferred Stock		2,761,700			0			2,700,000			2,761,700
Net Cash Provided by Financing Activities		3,303,700			5,885,722			2,700,000			3,303,700

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		680,005			455,517			66,429			680,005
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		350,923			314,967			575,342			350,923
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	1,030,928		$	770,484		$	641,771		$	1,030,928

Composition of Cash, Cash Equivalents and Restricted Cash Balance:
Cash and Cash Equivalents	$	831,191		$	582,568		$	472,434		$	831,191
Restricted Cash		199,737			187,916			169,337			199,737
Total Cash, Cash Equivalents and Restricted Cash	$	1,030,928		$	770,484		$	641,771		$	1,030,928

Supplemental Disclosures of Cash Flow Information:
Operating Lease Payments	$	102,863		$	111,550		$	103,080		$	102,863
Cash Paid During the Period for Interest	$	97,319		$	3,825,607		$	120,454		$	97,319

Non-Cash Investing and Financing Activities:
Recorded Debt Discount Associated with Beneficial Conversion Feature	$	0		$	8,035,278

Issued Series A Preferred Shares Valued at $7,760,970 in Exchange for Carrying Value of Debt (Including Accrued Interest, Premiums and Discounts) of $1,153,832	$	6,507,137		$	0
Recorded Beneficial Conversion Feature Associated with Issuance of Series A Preferred	$	6,269,401		$	0
Conversion Of Notes Payable Into Common Shares	$	0		$	156,980
Recorded Discount Associated with Beneficial Conversion Feature on Issuance of Series A Convertible Preferred Shares							$	4,443,425		$	6,269,401
Issued Series A Preferred Shares Fair Valued At $7,660,970 in Exchange for Carrying Value of Debt (Including Accrued Interest, Premiums And Discounts) of $1,153,833							$	0		$	6,507,137
Issued 54,966 Shares of Series A Preferred Shares Fair Valued at $2,597,699 as Dividend Paid in Kind							$	2,597,699		$	0

The accompanying notes are an integral part of these condensed financial statements.

	Series A Convertible Preferred Stock, Shares		Series A Convertible Preferred Stock, $0.001 Par Value		Additional Paid-In Capital, Series A Convertible Preferred Stock			Common Stock, Shares		Common Stock, $0.001 Par Value		Additional Paid-In Capital, Common Stock		Accumulated Deficit			Totals
BALANCES, JANUARY 1, 2020		-	$	0	$	0			28,271,598	$	28,272	$	118,431,878	$	(169,774,475	)	$	(51,314,325	)
Equity-Based Compensation													721,681					721,681
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Convertible Debt													2,000,000					2,000,000
Conversion of Notes Payable to Common Stock									48,951		49		65,191					65,240
Net Loss															(3,299,000	)	$	(3,299,000	)
BALANCES, MARCH 31, 2020		-	$	0	$	0			28,320,549	$	28,321	$	121,218,750	$	(173,073,475	)		(51,826,404	)

Equity-Based Compensation													780,776					780,776
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Convertible Debt													6,035,278					6,035,278
Conversion of Notes Payable to Common Stock									68,944		69		91,671					91,740
Net Loss															(8,067,697	)		(8,067,697	)
BALANCES, JUNE 30, 2020		-	$	0	$	0			28,389,493	$	28,390	$	128,126,475	$	(181,141,172	)	$	(52,986,307	)
																				Series A Convertible Preferred Stock, Shares		Series A Convertible Preferred Stock, $0.001 Par Value		Additional Paid-In Capital, Series A Convertible Preferred Stock			Common Stock, Shares		Common Stock, $0.001 Par Value		Additional Paid-In Capital, Common Stock			Accumulated Deficit			Totals
BALANCES, JANUARY 1, 2021		1,166,297	$	1,166	$	103,648,178			28,389,493	$	28,390	$	130,103,361	$	(241,184,315	)	$	(7,403,220	)		1,166,297	$	1,166	$	103,648,178			28,389,493	$	28,390	$	130,103,361		$	(241,184,315	)	$	(7,403,220	)
Equity-Based Compensation													886,935					886,935														886,935						886,935
Exchange of Debt for Series A Convertible Preferred Shares on January 28, 2021		70,014		70		7,660,900												7,660,970			70,014		70		7,660,900													7,660,970
Issuance of Series A Convertible Preferred for Cash		41,066		41		1,761,659												1,761,700			41,066		41		1,761,659													1,761,700
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares of $5,269,401						5,269,401												5,269,401
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares																									5,269,401													5,269,401
Deemed Dividend to the Holders of Series A Preferred Shares Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature						(5,269,401	)											(5,269,401	)						(5,269,401	)												(5,269,401	)
Net Loss															(8,213,663	)		(8,213,663	)																(8,213,663	)		(8,213,663	)
BALANCES, MARCH 31, 2021		1,277,377	$	1,277	$	113,070,737			28,389,493	$	28,390	$	130,990,296	$	(249,397,978	)	$	(5,307,278	)		1,277,377	$	1,277	$	113,070,737			28,389,493	$	28,390	$	130,990,296		$	(249,397,978	)	$	(5,307,278	)
Equity-Based Compensation													806,673					806,673														806,673						806,673
Issuance of Series A Convertible Preferred for Cash		23,310		23		999,977												1,000,000			23,310		23		999,977													1,000,000
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares						1,000,000												1,000,000							1,000,000													1,000,000
Resulting From Amortization of Discount Associated with the																									(1,000,000	)												(1,000,000	)
Net Loss																																			(1,889,868	)		(1,889,868	)
BALANCES, JUNE 30, 2021																					1,300,687	$	1,300	$	114,070,714			28,389,493	$	28,390	$	131,796,969		$	(251,287,846	)	$	(5,390,473	)

BALANCES, JANUARY 1, 2022																					1,403,276	$	1,402	$	127,160,875			28,389,493	$	28,390	$	123,015,819		$	(255,312,377	)	$	(5,105,891	)
Equity-Based Compensation																																817,522						817,522
Exchange of Debt for Series A Convertible Preferred Shares																					-
Issuance of Series A Convertible Preferred Shares for Cash																					39,627		40		1,699,960			-		0		0			0			1,700,000
Issuance of Dividend on Series A Convertible Preferred Shares																					54,966		55		2,597,644			-		0		(2,597,699	)		0			0
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares																					-		0		3,464,405			-		0		0			0			3,465,405
Deemed Dividend to the Holders of Series A Preferred Shares Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature						(1,000,000	)											(1,000,000	)		-		0		(3,464,405	)		-		0		0			0			(3,465,405	)
Net Loss															(1,889,868	)		(1,889,868	)		-		0		0			-		0		0			(2,118,253	)		(2,118,253	)
BALANCES, JUNE 30, 2021		1,300,687	$	1,300	$	114,070,714			28,389,493	$	28,390	$	131,796,969	$	(251,287,846	)	$	(5,390,473	)
BALANCES, MARCH 31, 2022																					1,497,869	$	1,497	$	131,458,479			28,389,493	$	28,390	$	121,235,642		$	(257,430,630	)	$	(4,706,622	)
Equity-Based Compensation																																820,702						820,702
Exchange of Debt for Series A Convertible Preferred Shares																					-																	0
Issuance of Series A Convertible Preferred Shares for Cash																					23,310		23		999,977			-		0		0			0			1,000,000
Issuance of Dividend on Series A Convertible Preferred Shares																					-		0		0			-		0					0			0
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares																					-		0		699,300			-		0		0			0			699,300
Deemed Dividend to the Holders of Series A Preferred Shares Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature																					-		0		(699,300	)		-		0		0			0			(699,300	)
Net Loss																					-		0		0			-		0		0			(2,068,097	)		(2,068,097	)
BALANCES, JUNE 30, 2022																					1,521,179	$	1,520	$	132,458,456			28,389,493	$	28,390	$	122,056,344		$	(259,498,727	)	$	(4,954,017	)

The accompanying notes are an integral part of these condensed financial statements.

MobileSmith, Inc. (referred to herein as the “Company,” “us,” “we,” or “our”) was incorporated as Smart Online, Inc. in the State of Delaware in 1993. The Company changed its name to MobileSmith, Inc. effective July 1, 2013. The same year the Company focused exclusively on development of do-it-yourself customer facing platform that enabled organizations to rapidly create, deploy, and manage custom, native smartphone and tablet apps deliverable across iOS and Android mobile platforms without writing a single line of code. During 2017 the Company concluded that it had its highest rate of success with clients within the Healthcare industry and concentrated its development and sales and marketing efforts in that industry. During 2018 we further refined our Healthcare offering and redefined our product - a suite of e-health mobile solutions that consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019 and 2020 we consolidated our current solutions under a single offering branded Peri™. Peri™ is a cloud-based collection of applications that run ofon our architected healthcare technology ecosystem. The architecture is designed ~~to do the following:~~to:

~~Our~~During 2021 we advanced our flagship PeriOp offering to be market ready. PeriOp is an EMR integrated mobile ~~app based~~app-based set of ~~pre-~~pre and postoperative instructions (which we refer to as Clinical Pathways), that establishes a direct two-way clinical procedure management process between a patient and a healthcare provider and by doing so improves patient engagement and procedural adherence. PeriOp digitizes and streamlines for both patients and providers “the last mile of healthcare delivery” between scheduled procedure and day of surgery with an emphasis on patient’s readiness. PeriOp digitizes and streamlines “the first mile” of post-surgery recovery journey with a focus on maintaining positive surgical outcomes and avoidance of readmissions.

PeriOp has not yet generated significant revenue. Most of our revenue is generated from App Blueprint solutions and related supporting services, where applicable.

The Company prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its financial position, results of operations, cash flows, and stockholders’ deficit as of June 30, ~~2021.~~2022. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These condensed financial statements and accompanying notes should be read in conjunction with the audited annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 on file with the SEC (the “Annual Report”).

Except as otherwise noted, there have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report. The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the six months ended June 30, ~~2021,~~2022, the Company incurred net losses as well as negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations and positive cash flows. ~~Since November 2007, the~~The Company has been funding its operations, in part, from the proceeds from the issuance of notes under a convertible secured subordinated note purchase agreement facility which was established in 2007 (the "2007 NPA"), and an unsecured convertible subordinated note purchase agreement facility established in 2014 (the "2014 NPA"), and subordinated promissory notes to related parties. In December of 2020 and January of 2021, we exchanged all our non-bank debt, including the debt issued under the 2007 NPA and the 2014 NPA, into Series A Convertible Preferred Stock (the "Series A Preferred Stock") with the same investors. We expect to finance our operations through the issuance ofits Series A Preferred Stock ~~going forward. If financing~~(with the terms set forth in Note 4 below) to related parties. However, there can be no assurance that the Company will in fact be able to raise additional capital through ~~issuance of~~t its Series A Preferred Stock ~~becomes unavailable, we will need to seek~~or even from other sources on commercially accepted terms, if at all, or to be able to negotiate additional extensions of ~~funding.~~the Comerica LSA on terms acceptable to the Company, if at all. As such, there is substantial doubt about the ~~Company's~~Company’s ability to continue as a going concern.

Recently Issued Accounting Pronouncements and Their Impact on Significant Accounting Policies

The ~~Company's~~Company’s significant accounting policies are detailed in ~~"Note~~“Note 2: Significant Accounting ~~Policies"~~Policies” of the ~~Company's~~Company’s Annual Report.

On August 5, 2020, the FASB issued ASU 2020-06 "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is not expected to have a material impact on the financial statements of the Company. For the Company the ASU is not effective until fiscal year 2024, but early adoption is permitted as early as current fiscal year ending December 31, 2021.

The table below summarizes the ~~Company's~~Company’s debt outstanding on June 30, ~~2021~~2022 and December 31, ~~2020:~~ 2021:

The Company has an outstanding Loan and Security Agreement with Comerica Bank ~~("Comerica"~~(“Comerica”) dated June 9, 2014 (the ~~"LSA"~~“LSA”) in the amount of $5,000,000, with an extended maturity of June 9, 2022. On May 31, 2022 the Company and Comerica Bank entered into Fourth Amendment to the LSA, which extended the maturity of the LSA to June 9, 2024, as reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2022. The LSA is secured by an extended irrevocable letter of credit issued by UBS AG (Geneva, Switzerland) ("(“UBS ~~AG"~~AG”) with a renewed term expiring on May 31, ~~2022,~~2023, which term is renewable for one year periods, unless notice of non-renewal is given by UBS AG at least 45 days prior to the then current expiration date.

On January 28, 2021 the Company exchanged its remaining unsecured Convertible Subordinated Notes (the “2014 NPA Notes”) under its existing unsecured Convertible Subordinated Note Purchase Agreement dated December 10, 2014 (the “2014 NPA”) for Series A Preferred Stock. The carrying value of 2014 NPA Notes of $1,075,713 consisting of face value of $2,900,000 net of unamortized discount of $1,849,773 plus accrued interest of $103,605 was exchanged for 70,014 shares of Series A Preferred Stock ("the January 2021 Debt Exchange"). The January 2021 Debt Exchange was accounted for as debt extinguishment and the newly issued shares of Series A Preferred Stock were recorded at fair value in accordance with ASC 470 "Debt". The issued shares were fair valued at $7,660,970. The difference between the carrying amount of extinguished debt and fair value of the Series A Preferred Stock issued resulted in loss recorded on the statement of operations of $6,507,137.

On February 9 2021, the Company received $542,000 of proceeds from a note payable issued under either the Small Business Administration "the SBA" Paycheck Protection Program ("PPP") under section 7(a)(36) of the Small Business Act or the SBA's Paycheck Protection Program Second Draw Loans under Section 7(a)(37) of the Small Business Act. The note matures in five years and bears interest at 1% per year. Similar to the Company's initial PPP Loan, the second loan contains a loan forgiveness covered period of six months from the date of issuance in which the Company will not be obligated to make any payments of principal or interest. If the Company does not submit a loan forgiveness application within ten months after the end of the loan forgiveness covered period, the Company must begin making principal and interest after that period (the "Loan Forgiveness Application Submission Period"). Interest continues to accrue during the deferment period. If the Company is unable to or does not follow those guidelines for the loan to be forgiven by the SBA, the Company would be required to repay a portion of or the entire balance of the loan proceeds in full. If any portion of the loan is not forgiven, the Company may start making payments on, but not before February of 2022 - the end of the Loan Forgiveness Application Submission Period.

On February 18, 2021 our first PPP Loan was forgiven by the SBA in its entirety. The forgiveness was accounted for as debt extinguishment which resulted in a gain of $542,100 recorded in our statement of operations.

From time to time, the Company may be subject to routine litigation, claims or disputes in the ordinary course of business. The Company defends itself vigorously in all such matters. In the opinion of management, no pending or known threatened claims, actions or proceedings against the Company are expected to have a material adverse effect on its financial position, results of operations or cash flows. However, the Company cannot predict with certainty the outcome or effect of any such litigation or investigatory matters or any other pending litigations or claims. There can be no assurance as to the ultimate outcome of any such lawsuits and investigations. The Company will record a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. The Company periodically evaluates developments in its legal matters that could affect the amount of liability that it has previously accrued, if any, and makes adjustments as appropriate. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters, and the Company’s judgment may be incorrect. The outcome of any proceeding is not determinable in advance. Until the final resolution of any such matters that the Company may be required to accrue for, there may be an exposure to loss in excess of the amount accrued, and such amounts could be material.

On ~~January 28, 2021 and as a result of the January 2021 Debt Exchange transaction~~February 24, 2022 the Company issued ~~70,014~~a total of 54,966 shares of Series A Preferred ~~Stock. On~~Stock as payment in kind for dividends declared by the ~~date~~board of directors, with respect to the ~~January 2021 Debt Exchange the market value~~then outstanding Series A Preferred Stock.. The issuance of ~~the common stock was above~~ the Series A Preferred Stock ~~conversion price of $1.43, which resulted in the conversion feature that was beneficial to the holder on the date of the exchange. The resulting beneficial conversion feature~~ was recorded at fair value on February 24, 2022 as a discount and amortized in its entirety as a deemed dividend on the date of the January 2021 Debt Exchange and charged to loss attributable to common shareholders on the Company's Statement of Operations in the amount of $3,507,701. determined below:

In addition, during the six month period ended June 30, 2022 the Company issued ~~64,376~~62,937 shares of Series A Preferred Stock in exchange for ~~$2,761,700~~$2,700,000 in cash funding. The shares were issued with beneficial conversions feature discount and resulted in a deemed dividend with charge to loss attributable to common stock shareholders of ~~$2,761,700.~~$ 2,399,300.

The following is a summary of the stock option activity for the six months ended June 30, ~~2021:~~ 2022:

Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock on June 30, ~~2021,~~2022, and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock on June 30, ~~2021,~~2022, as reported on the OTCQB, was ~~$3.50~~$3.39 per share.

On June 30, ~~2021,~~2022, an amount of ~~$11,495,025~~$7,161,694 unvested expense related to outstanding stock options has yet to be recorded over a weighted average period of ~~3.3~~2.9 years.

We are required to provide financial statement users with information about assets and liabilities measured at fair value in the balance sheet or disclosed in the notes to the financial statements regarding (1) the valuation techniques and inputs used to develop fair value measurements, including the related judgments and assumptions made, (2) the uncertainty in the fair value measurements as of the reporting date, and (3) how changes in the measurements impact the performance and cash flows of the entity.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by the accounting literature contains three levels as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimations.

The ~~January 2021 Debt Exchange~~February 24, 2002 issuance of Series A Preferred Stock as payment in kind for dividends resulted in transaction which required the Company to ~~recognize debt extinguishment and to~~ record newly issued ~~financing instrument~~Series A Preferred Stock at fair value at the date of the transaction on a non-recurring basis. Fair value measurement was categorized as Level 3 fair value measurement due to use of various unobservable inputs to the pricing model. ~~A single most significant factor included in pricing models was~~The Company used a valuation method that takes into consideration both the Level 1 input of observable market value of MobileSmith common stock on the date of the transaction, as quoted on the ~~OTCQB. Despite the~~OTCQB, that, although being thinly traded, ~~nature of the Company stock, the quoted market value~~ could not be ignored and Level 3 inputs resulting from a Fundamental Analysis to arrive at Company Enterprise Value. The single most significant factor included in ~~determination of~~the valuation is the weighting between values resulting from Level 1 and Level 3 input models.

The fair value inof Series A Preferred Stock was determined to be $2,597,699. The fair value calculated by three valuation methods and by weighting the ~~transaction.~~results of each method calculation to arrive at the final fair value.

Method 1. Monte Carlo simulation based on the OTCQB quoted value of Common Stock

The Company used the income (discounted cash flow) approach to arrive at the fair value of the Series A Preferred Stock on ~~January 28, 2021 - the date of the exchange.~~February 24, 2022. Using this approach, the value of Series A Preferred Stock is equal to the present value of the cash flow streams that can be expected to be generated by the ~~holder~~Company in ~~a combination of dividends and conversion of preferred shares into common and subsequent sale of~~ the ~~common shares.~~future. The Company used the Geometric Brownian Motion/Monte Carlo model to simulate future movement of ~~our common stock~~equity securities and discounted the results back to ~~January 28, 2021~~the February 24, 2022 transaction date. The model used the following notable inputs:

Method 2. Monte Carlo simulation based on the value of Common Stock determined using Fundamental analysis

The Company used the income (discounted cash flow) approach to arrive at the fair value of the Series A Preferred Stock on February 24, 2022. Using this approach, the value of Series A Preferred Stock is equal to the present value of the cash flow streams that can be expected to be generated by the Company in the future. The Company used the Geometric Brownian Motion/Monte Carlo model to simulate future movement of equity securities and discounted the results back to the February 24, 2022 transaction date. The model used the following notable inputs:

Method 3. Monte Carlo simulation of total equity value based on the Fundamental Analysis

The Company used the income (discounted cash flow) approach to arrive at the fair value of the Series A Preferred Stock on February 24, 2022. Using this approach, the total equity value payouts were simulated, allocated to Series A Preferred Stock and discounted back to the date of the transaction. The Company used the Geometric Brownian Motion/Monte Carlo model to simulate future movement of total equity. The model used the following notable inputs:

The Company performed Fundamental Analysis to arrive at Business Enterprise Value (“BEV”) as of February 24, 2022 of approximately $39,000,000.

The tables below depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors, such as type of customer and type of contract.

For the six months ended June 30, 2022, two customers accounted for 75% of the accounts receivable balance and no customer accounted for more than 10% of total revenue.

For the six months ended June 30, 2021, three customers accounted for 70% of the accounts receivable balance and no customer accounted for more than 10% of total revenue.

~~For the six months ended June 30, 2020, four customers accounted for 74% of the accounts receivable balance and one customer accounted for 18% of total revenue.~~

We are a lessee for a non-cancellable operating lease for our corporate office in Raleigh, North Carolina. ~~We are also a lessee for a non-cancellable finance lease for a corporate vehicle and office furniture. Financing leases are not significant in terms of both balances and period expenses.~~ The operating lease for the corporate office expires on April 30, 2024.

Maturities of operating lease liability as of June 30, 2021 were as follows:	Operating Lease Expense		Variable Lease Expense		Total Lease Expense
2021 (remaining 6 months)	$	95,537	$	6,843	$	102,380
Maturities of operating lease liability as of June 30, 2022 were as follows:								Operating Lease Expense		Variable Lease Expense		Total Lease Expense
2022		191,074		14,096		205,170		$	95,537	$	7,048	$	102,585
2023		191,074		14,519		205,593			191,074		14,519		205,593
2024		63,691		4,840		68,531			63,691		4,840		68,531
Total lease payments	$	541,376	$	40,298		581,674		$	350,302	$	26,407		376,709
Less imputed interest						(67,034	)						(30,590	)
Total					$	514,640						$	346,119

Subsequent to June 30, ~~2021~~2022, to the date of the filing of this Form 10-Q, the Company issued 17,483 shares of Series A Preferred Stock in exchange for $750,000 of cash investment.

On August 8, 2022, the Company granted ~~approximately 760,000 of~~2,250,000 stock options to certain ~~employees.~~employees and contractors. The ~~newly~~options are issued ~~stock options replaced stock options previously expired unexercised. The newly issued stock options have an~~under standard Company terms: term of ten years, vesting over five years and exercise price ~~equal to the~~at or above fair market ~~price of $1.63~~value on the date of ~~grant, 10-year term and 5-year vesting.~~grant.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information set forth in this Quarterly Report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and other laws. Forward-looking statements consist of, among other things, trend analyses, statements regarding future events, future financial performance, our plan to build our business and the related expenses, our anticipated growth, trends in our business, our ability to continue as a going concern, and the sufficiency of our capital resources including funds that we may be able to raise through our Series A Preferred Stock, our ability to raise financing from other sources and/or ability to defer expenditures, the impact of the liens on our assets securing amounts owed to third parties, expectation regarding competitors as more and larger companies attempt to market products/services competitive to our company, market acceptance of our new product offerings, including updates to our Platform, rate of new user subscriptions, market penetration of our products and expectations regarding our revenues and expense, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of our management. Words such as “expect,” “anticipate,” “project,” “intend,” “plan,” “estimate,” variations of such words, and similar expressions also are intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Readers are directed to risks and uncertainties identified under Part I, Item 1A, “Risk Factors,” in the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and our subsequent periodic reports filed with the SEC for factors that may cause actual results to be different than those expressed in these forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

The following discussion is designed to provide a better understanding of our unaudited condensed financial statements, including a brief discussion of our business and products, key factors that impacted our performance, and a summary of our operating results. The following discussion should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited annual financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual ~~Report.~~Report on the Form 10-K for the period ended December 31, 2021 filed with the SEC on March 25, 2022. Historical results and percentage relationships among any amounts in the condensed financial statements are not necessarily indicative of trends in operating results for any future periods.

MobileSmith is a developer of software applications for the healthcare industry. Our software products include a cloud-based collection of applications that run on our architected healthcare technology ecosystem. The architecture is designed to do the following:

Since 2013 the Company focused exclusively on the development of do-it-yourself customer facing platform that enabled organizations to rapidly create, deploy, and manage custom, native smartphone and tablet apps deliverable across iOS and Android mobile platforms without writing a single line of code. During 2017 the Company concluded that it had its highest rate of success with clients within the Healthcare industry and concentrated its development and sales and marketing efforts in that industry. During 2018 we further refined our Healthcare offering and redefined our product - a suite of e-health mobile solutions that consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019 and 2020 we consolidated our current solutions under a single offering branded Peri™. Peri™ is designed to bridge the gap between healthcare industry system tools and healthcare consumer's mobile device.

~~From time~~During 2021 we advanced our flagship PeriOp offering to ~~time,~~be market ready. PeriOp is an EMR integrated mobile app-based set of pre and postoperative instructions (which we ~~have provided custom software development services. Such~~refer to as Clinical Pathways), that establishes a direct two-way clinical procedure management process between a patient and a healthcare provider and, by doing so, improves patient engagement and procedural adherence and also removes manual paper based pre and post procedural processes. PeriOp digitizes and streamlines for both patients and providers “the last mile of healthcare delivery” between scheduled procedure and day of surgery with emphasis on patient’s readiness. PeriOp digitizes and streamlines “the first mile” of post-surgery recovery journey with a focus on maintaining positive surgical outcomes and avoidance of readmissions.

PeriOp has not yet generated significant revenue. Most of our revenue is generated from App Blueprint solutions and related supporting services, ~~are not core to our business model and will likely decrease in significance in the future.~~ where applicable.

During 2017 we completed a strategic shift and focused our business and research and development activities primarily on the Healthcare industry in the United States.

In 2018 we refined our healthcare focus by identifying two target markets: (i) healthcare providers (including hospitals, hospital systems and the United States Veterans Health Administration) and (ii) healthcare payer market (including insurance companies and insurance brokers).

In 2021 we further refined our focus within the healthcare providers. We concentrated our efforts on hospital systems with large employed physician groups who use either Cerner or Epic Systems as their primary EMRs (electronic medical records). Additionally, we are investigating ambulatory surgery centers (ASC) market for feasibility.

Both markets are targeted with a diversified sales workforce that includes direct sales and resellers, such as channel partners.

Our success depends on the performance of employees and contractors that make up our team of about 3025 individuals. The team is by far our largest investment and cost. We make significant investments in technical skills and knowledge of the healthcare industry. As such, expansion of the team often comes with additional recruiting expenses. All of our employees are currently based in the United States, but our contractors may be located in jurisdictions outside of the United States. During ~~2020~~2021 we invested in remote work environment, which allowed us to expand our employee hiring practices geographically from local markets to include the entire United States.

Comparison of the Three Months Ended June 30, ~~2021 (the “2021 Period”)~~2022 to the Three Months Ended June 30, ~~2020 (the “2020 Period”).~~2021.

~~Revenue~~ decreased by $209,414 or 34%. A decrease of $105,000 accounted for completion of a large contract with a government agency during the three months ended June 30, 2020. The remainder of the decrease is associated with loss of customers due to non-renewals of contracts and new sales below target.

~~Cost of Revenue~~ ~~increased by $18,723 or 10%. The increase is attributed to an increase in payroll costs for a delivery team and increase in hosting costs.~~

~~Gross Profit~~ ~~decreased by $228,137 or 53%. The decrease is primarily attributable to a decrease in revenue.~~

~~Selling and Marketing~~ expense increased by $175,095 or 58%. During 2020 we kept certain sales positions unfilled, as we evaluated the impact of COVID-19 on the healthcare industry. In last quarter of 2020 and during the first quarter of 2021 we started expanding our sales and marketing team, which resulted in an increase in payroll costs of $137,000 and increase in stock based compensation of $75,000. During the same period, we incurred an offsetting decrease of $42,000 in marketing campaigns, PR and marketing outsourced services.

~~Research and Development~~ expense increased by $108,133 or 14%. In 2021 we invested in our product development team by expanding it and the team spent less time on efforts associated with delivery of services revenue. As a result, payroll and related expenses increased by approximately $55,000 and stock based compensation increased by $63,000.

Revenue decreased by $102,751 or 26%. The entirety of the decrease is associated with loss of healthcare customers due to non-renewals of contracts and renewals for smaller value.

Cost of Revenue decreased by $51,695 or 26%. The decrease is a direct result of decreased costs for the clients we currently maintain.

Gross Profit decreased by $51,056 or 26%. The decrease is primarily attributed to the decrease in revenue.

Selling and Marketing expense decreased by $132,337 or 28%. Personnel and related recruiting costs decreased by approximately $95,000 as the Company adjusted its selling strategy under the leadership of our new CEO Chris Caramanico. Equity based compensation decreased by approximately $58,000. These decreases were partially offset by an increase in outsourced marketing costs of $18,000.

Research and Development expense increased by $139,096 or 16%. Personnel and related contractor expense increased payroll costs by approximately $59,000 and related equity based compensation by $78,000.

General and Administrative expense ~~decreased~~increased by ~~$119,028~~$95,615 or 14% ~~predominantly due to decrease~~. The increase is a result of increased legal and compliance costs of $42,000, increase in board of directors’ compensation of $23,000 and an increase in stock based compensation of ~~$110,000.~~$19,000.

Interest Expense ~~decreased~~increased by ~~$1,710,502~~$24,799 or ~~97%~~52%. ~~Decrease~~The increase is a direct result of the Comerica loan extension related interest and cost and overall increase in interest ~~expense is associated with the debt elimination transactions.~~

~~Loss on Debt Extinguishments~~ ~~of $4,864,750 in 2020 Period resulted from modifications of convertible notes.~~rate.

Comparison of the Six Months Ended June 30, ~~2021 (the “2021 Period”)~~2022 to the Six Months Ended June 30, ~~2020 (the “2020 Period”).~~2021.

	Six months ended June 30, 2021		Six months ended June 30, 2020		Increase (Decrease)$			Increase (Decrease)%			Six Months ended June 30, 2022		Six Months ended June 30, 2021		Increase (Decrease) $			Increase Decrease %
Revenue	$	816,343	$	1,232,344	$	(416,001	)		-34	%	$	625,509	$	816,343	$	(190,834	)		-23	%
Cost of Revenue		414,247		439,784		(25,537	)		-6	%		271,820		414,247		(142,427	)		-34	%
Gross Profit		402,096		792,560		(390,464	)		-49	%		353,689		402,096		(48,407	)		-12	%

Selling and Marketing		1,004,441		668,366		336,075			50	%		721,693		1,004,441		(282,748	)		-28	%

Research and Development		1,734,237		1,378,233		356,004			26	%		2,064,863		1,734,237		330,626			19	%
General and Administrative		1,611,373		1,649,318		(37,945	)		-2	%		1,633,038		1,611,373		21,665			1	%
																		��
Interest Expense		191,138		3,610,276		(3,419,138	)		-95	%		120,445		190,540		(70,095	)		-37	%
Loss on Debt Extinguishment		6,507,137		4,864,750		1,642,387			34	%		-		6,507,137		(6,507,137	)		-100	%

Gain on Debt Extinguishment - PPP Loan Forgiveness	$	542,000	$	-	$	542,000			0	%	$	-	$	542,100	$	(542,100	)		-100	%

Revenue decreased by ~~$416,001~~$190,834 or ~~34%~~23%. ~~A decrease of $105,000 accounted for completion of a large contract with a government agency.~~ The ~~remainder~~entirety of the decrease is associated with loss of healthcare customers due to non-renewals of contracts and ~~new sales below target.~~renewals for smaller value.

Cost of Revenue decreased by ~~$25,537~~$142,427 or 6%34%. The decrease is primarily attributed to ~~a completion~~the restructuring of ~~a single large contract with a government agency during the three months ended June 30, 2020.~~our delivery team.

Gross Profit decreased by ~~$390,464~~$48,407 or ~~49%~~12%. The decrease is ~~primarily attributable to~~ a ~~decrease in revenue.~~direct result of decreased costs for the clients we currently maintain.

Selling and Marketing expense ~~increased~~decreased by ~~$336,075~~$282,748 or ~~50%~~28%. ~~During 2020 we kept certain sales positions unfilled,~~Personnel and related recruiting costs decreased by approximately $212,000 as ~~we evaluated~~ the ~~impact~~Company adjusted its selling strategy under the leadership of ~~COVID-19 on the healthcare industry. In last quarter of 2020 and during the first quarter of 2021 we started expanding~~ our ~~sales and marketing team, which resulted in~~new CEO Chris Caramanico. Equity based compensation decreased by approximately $103,000. The decreases were partially offset by an increase in ~~payroll~~travel related costs of $232,000, increase in related recruiting costs of $41,000 and increase in stock based compensation of $134,000. During the same period, we incurred offsetting decreases of $15,000 in travel costs and $77,000 decrease in marketing campaigns, PR and marketing outsourced services.$26,000.

Research and Development expense increased by ~~$356,004~~$330,626 or ~~26%~~19%. ~~In 2021 we invested~~During the first quarter of 2022, the Company expanded its product team, which resulted in ~~our product development team by expanding it and the team spent less time on efforts associated with delivery of services revenue. As a result,~~increase in payroll ~~and related expenses increased~~cost by approximately ~~$184,000~~$164,000 and ~~stock~~equity based compensation ~~increased~~ by ~~$145,000.~~

~~General and Administrative~~ ~~expense decreased by $37,945 or 2%. The decrease can be attributed~~$165,000 for the six month period ended June 30, 2022 compared to ~~fluctuations~~the similar period in ~~various general and administrative costs.~~

~~Interest Expense~~ ~~decreased by $3,419,138 or 95%. Decrease in interest expense is associated with the debt elimination transactions.~~2021.

~~Gain on Debt Extinguishment - PPP Loan Forgiveness~~General and Administrative expense increased by $21,665 or 1%. The ~~Company's first PPP loan was forgiven during the 2021 Period.~~increase is predominantly attributed to increase in board member compensation of $21,000.

Interest Expense decreased by $70,095 or 37%. The decrease is primarily a result of the decrease in interest expense associated with the debt elimination transactions, which completed on January 28, 2021.

Loss on Debt Extinguishments of $6,507,137 resulted from a debt exchange transaction ~~which took place~~ on January 28, 2021.

Gain on Debt Extinguishments-PPP Loan Forgivenessof ~~2021. For more information about~~$542,100 was due to the ~~transaction refer to "Debt" footnote of the financial statements included in this Form 10Q. In 2020 Period loss~~Company’s first PPP loan being forgiven on ~~debt extinguishment resulted from modifications of convertible notes.~~February 19, 2021.

We have not yet achieved positive cash flows from operations, and our main source of funds for our operations continues to be the sale of our Series A Preferred Stock. We will continue to rely on this source until we are able to generate sufficient cash from revenues to fund our operations or obtain alternate sources of financing. We believe that anticipated cash flows from operations, and additional funding under the Series A Preferred Stock, of which no assurance can be provided, together with cash on hand, will provide sufficient funds to finance our operations for the next 12 months. Changes in our operating plans, lower than anticipated sales, increased expenses, impact of COVID-19 pandemic (as described in ~~"Risk Factors"~~“Risk Factors” of our Annual Report on Form 10-K for the period ending December 31, ~~2020~~2021 filed with the SEC) or other events may cause us to seek additional equity or debt financing in future periods. There can be no guarantee that financing will continue to be available to us through the sale of our Series A Preferred Stock or otherwise on acceptable terms or at all. Additional equity and convertible debt financing will be dilutive to the holders of shares of our common stock.

Nonetheless, there are factors that can impact our ability to continue to fund our operating activities for the next twelve months. These include:

In addition, we have an outstanding Loan and Security Agreement (the ~~"LSA"~~“LSA”) with Comerica Bank in the amount of $5 million, which matures in June of ~~2022~~2024 and is secured by an extended irrevocable letter of credit issued by UBS AG (Geneve, Switzerland) ("(“UBS ~~AG"~~AG”) with a renewed term expiring on May 31, ~~2022.~~2023.

Our capital expenditures are limited to the purchase of new office equipment and new mobile devices that are used for testing. Cash used for investing activities was not significant and we do not plan any significant capital expenditures in the near future.

Our independent registered public accounting firm has issued an emphasis of matter paragraph in their report included in the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 in which they express substantial doubt as to our ability to continue as a going concern. The condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern depends on our ability to generate sufficient cash flows to meet our obligations on a timely basis, to obtain additional financing that is currently required, and ultimately to attain profitable operations and positive cash flows. There can be no assurance that our efforts to raise capital or increase revenue will be successful. If our efforts are unsuccessful, we may have to cease operations and liquidate our business.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures for the three months ended June 30, ~~2021.~~2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow for timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, ~~2021,~~2022, our disclosure controls and procedures were effective at a reasonable ~~level of~~ assurance.

During the quarter ended June 30, ~~2021,~~2022, there were no changes made in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial ~~reporting.~~reporting, with exception of changes in controls over valuation process referred to above.

The following paragraph sets forth certain information with respect to all securities sold by us during the three months ended June 30, ~~2021~~2022 without registration under the Securities Act of 1933, as amended (the ~~"Securities Act"~~“Securities Act”):

Between April 1, ~~2021~~2022 and June 30, ~~2021,~~2022, we issued to an accredited investor 23,310 shares of our Series A Preferred Stock for an aggregate purchase price of $1,000,000. The proceeds were used to finance shortfalls in working capital.

All of the securities issued in the transactions described above were issued without registration under the Securities Act in reliance upon the exemptions provided in Section 4(2) of the Securities Act. The recipient of securities in such transaction acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. Appropriate legends were affixed to the share certificates issued in all of the above transactions. The recipient represented that it was an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in its common stock. The recipient had adequate access, through their relationships with the Company and its officers and directors, to information about the Company. None of the transactions described above involved general solicitation or advertising.

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.

Delaware		95-4439334
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated ~~filer~~Filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒
		(Do not check if a smaller reporting company)	Emerging growth company	☐

		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Balance Sheets as of June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	3

	Condensed Statements of Operations (unaudited) for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021	4

	Condensed Statements of Cash Flows (unaudited) for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021	5

	Condensed Statements of ~~Stockholders'~~Stockholders’ Deficit (unaudited) for the three and six months ~~periods~~ ended June 30, ~~2021~~2022 and June 30, ~~2020~~2021	6

	Notes to Condensed Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	18

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 2.	Unregistered Sales of Equity Security and Use of Proceeds	19

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Mine Safety Disclosures	19

Item 5.	Other Information	19

Item 6.	Exhibits	20

	Signatures	21

Debt Description	June 30,		December 31,
	2021		2020		Maturity	Rate

Comerica Bank Loan and Security Agreement	$	5,000,000	$	5,000,000	June, 2022		3.85	%
Second PPP Loan		542,000		0	February, 2026		1.00	%
First PPP Loan		0		542,100	April, 2022		1.00	%
Convertible notes, net of discount of $1,927,892 as of December 31, 2020		0		972,108	November, 2022		8.00	%
Total debt		5,542,000		6,514,208

Less: current portion of long term debt		0		423,067
Debt - long term	$	5,542,000	$	6,091,141

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, December 31, 2020	$	10,683,300		$	1.85		7.4	$	17,060,533
Cancelled		(902,500	)		1.57
Issued		1,475,000			3.10
Outstanding, June 30, 2021	$	11,255,800			2.04		7.9		21,752,184
Vested and exercisable, June 30, 2021	$	5,195,821		$	1.85		7.3	$	11,032,574

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding, December 31, 2021		10,883,300		$	2.06		7.6	$	9,553,832
Cancelled		(1,774,610	)		1.93
Issued		500,000			2.55
Outstanding, June 30, 2022		9,608,690			2.11		7.4		12,275,437
Vested and exercisable, June 30, 2022		5,462,850		$	1.96		6.8	$	7,786,913

	6 Months Ended June 30, 2022				6 Months Ended June 30, 2021
	Billings		GAAP Revenue		Billings		GAAP Revenue
Top 5 Customers (Measured By Amounts Billed)	$	392,000	$	235,785	$	342,000	$	221,640
All Other Customers		201,257		389,724		501,543		594,703
	$	593,257	$	625,509	$	843,543	$	816,343

	6 Months Ended June 30, 2021				6 Months Ended June 30, 2020
	Billings		GAAP Revenue		Billings		GAAP Revenue
Top 5 Customers (Measured By Amounts Billed)	$	342,000	$	221,640	$	433,010	$	435,747
All Other Customers	$	501,543	$	594,703	$	615,259	$	796,597
	$	843,543	$	816,343	$	1,048,269	$	1,232,344

	6 Months Ended June 30, 2022				6 Months Ended June 30, 2021
	Billings		GAAP Revenue		Billings		GAAP Revenue
Customers In Existence As Of The Beginning Of The Period (Including Upgrades)	$	593,257	$	625,509	$	843,543	$	816,343
Customers Acquired During The Period		0		0		0		0
	$	593,257	$	625,509	$	843,543	$	816,343

The following table summarizes the information about operating lease:	Six Months Ended June 30, 2022
Operating lease expense	$	103,080
Remaining Lease Term (Years)		1.83
Discount Rate		8	%

The following table summarizes the information about operating lease:	Six Months Ended June 30, 2021
Operating lease expense	$	102,863
Remaining Lease Term (Years)	2.7 years
Discount Rate		8	%

	Three months ended June 30, 2021		Three months ended June 30, 2020		Increase (Decrease)$			Increase (Decrease)%
Revenue	$	398,358	$	607,772	$	(209,414	)		-34	%
Cost of Revenue		199,944		181,221		18,723			10	%
Gross Profit		198,414		426,551		(228,137	)		-53	%

Selling and Marketing		476,147		301,052		175,095			58	%
Research and Development		858,571		750,438		108,133			14	%
General and Administrative		705,489		824,517		(119,028	)		-14	%

Interest Expense		48,671		1,759,173		(1,710,502	)		-97	%
Loss on Debt Extinguishment	$	-	$	4,864,750	$	(4,864,750	)		-100	%

	Three months ended June 30, 2022		Three months ended June 30, 2021		Increase (Decrease) %			Increase Decrease %
Revenue	$	295,607	$	398,358	$	(102,751	)		-26	%
Cost of Revenue		148,249		199,944		(51,695	)		-26	%
Gross Profit		147,358		198,414		(51,056	)		-26	%

Selling and Marketing		343,810		476,147		(132,337	)		-28	%
Research and Development		997,667		858,571		139,096			16	%
General and Administrative		801,104		705,489		95,615			14	%

Interest Expense		72,874		48,075		24,799			52	%

Exhibit No.		Description

31.1		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) (Filed herewith)

31.2		Certification of Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a) (Filed herewith)

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)

32.2		Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)

101.1		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2021,~~2022, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Cash Flows, (iv) the Condensed Statement of Stockholders’ Deficit and (v) related notes to these condensed financial statements, tagged as blocks of text and in detail (Filed herewith).

	MOBILESMITH, INC.

August ~~10, 2021~~12, 2022	By:	/s/ ~~Jerry Lepore~~Chris Caramanico
		~~Jerry Lepore~~Chris Caramanico
		Chief Executive Officer (Principal Executive Officer)

August ~~10, 2021~~12, 2022	By:	/s/ Gleb Mikhailov
		Gleb Mikhailov
		Chief Financial Officer (Principal Financial and Accounting Officer)