MobileSmith (MOSTQ) 10-Q/A 25 Nov 13 2013 Q3 Quarterly report (amended) Financial data

Document_and_Entity_Informatio

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 14, 2013
Document And Entity Information	'	'
Entity Registrant Name	'MobileSmith, Inc.	'
Entity Central Index Key	'0001113513	'
Document Type	'10-Q	'
Document Period End Date	30-Sep-13	'
Amendment Flag	'true	'
Amendment Description	'This amendment is being filed to comply with regulations.	'
Current Fiscal Year End Date	'--12-31	'
Is Entity a Well-known Seasoned Issuer?	'No	'
Is Entity a Voluntary Filer?	'No	'
Is Entity's Reporting Status Current?	'Yes	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	18,352,542
Document Fiscal Period Focus	'Q3	'
Document Fiscal Year Focus	'2013	'

CONDENSED_BALANCE_SHEETS

CONDENSED BALANCE SHEETS (USD $)	Sep. 30, 2013	Dec. 31, 2012
ASSETS	'	'
Cash and cash equivalents	$236,745	$58,458
Restricted cash	198,423	131,103
Accounts receivable, net	78,899	36,050
Prepaid expenses and other current assets	65,331	96,670
Total current assets	579,398	322,281
Property and equipment, net	87,288	149,107
Capitalized software, net	818,387	618,557
Intangible assets, net	132,868	130,057
Other assets	53,864	19,440
Assets of discontinued operations	'	15,834
TOTAL ASSETS	1,671,805	1,255,276
LIABILITIES AND STOCKHOLDERS' DEFICIT	'	'
Accounts payable	71,005	217,174
Notes payable	5,025,142	5,041,741
Deferred revenue	144,178	82,308
Settlement related financial instrument liability	1,917,500	2,065,000
Accrued interest	288,502	221,404
Other accrued liabilities	385,046	148,936
Liabilities of discontinued operations	'	5,638
Total current liabilities	7,831,373	7,782,201
Long-term liabilities:	'	'
Notes payable - Related Party	14,557,051	14,557,051
Notes payable - other	9,205,570	6,075,267
Deferred revenue	'	1,028
Total long-term liabilities	23,762,621	20,633,346
Total liabilities	31,593,994	28,415,547
Commitments and contingencies	'	'
Stockholders' deficit:	'	'
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2013 and December 31, 2012	'	'
Common stock, $0.001 par value, 45,000,000 shares authorized, 18,352,542 shares issued and outstanding at September 30, 2013 and December 31, 2012	18,353	18,353
Additional paid-in capital	90,321,324	67,157,841
Accumulated deficit	-120,261,866	-94,336,465
Total stockholders' deficit	-29,922,189	-27,160,271
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$1,671,805	$1,255,276

CONDENSED_BALANCE_SHEETS_Paren

CONDENSED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Stockholders' equity:	'	'
Preferred stock, par value	$0.00	$0.00
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	$0.00	$0.00
Common stock, authorized	45,000,000	45,000,000
Common stock, issued	18,352,542	18,352,542
Common stock, outstanding	18,352,542	18,352,542

CONDENSED_STATEMENTS_OF_OPERAT

CONDENSED STATEMENTS OF OPERATIONS (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
REVENUES:	'	'	'	'
Mobile Platform License and Services Fees	$102,326	$29,405	$227,534	$94,328
Total revenues	102,326	29,405	227,534	94,328
COST OF REVENUES	120,939	44,976	396,166	90,585
GROSS PROFIT (LOSS)	-18,613	-15,571	-168,632	3,743
OPERATING EXPENSES:	'	'	'	'
Sales and marketing	214,428	206,287	766,881	599,638
Research and development	195,660	40,363	585,876	73,625
General and administrative	317,049	427,398	1,081,558	968,749
Loss on disposal of fixed assets	72,016	'	110,952	'
Total operating expenses	799,153	674,048	2,545,267	1,642,012
LOSS FROM OPERATIONS	-817,766	-689,619	-2,713,899	-1,638,269
OTHER (EXPENSE):	'	'	'	'
Interest expense, net	-611,082	-428,726	-1,592,780	-1,203,037
(Gain) on legal settlements and insurance claims	51,030	3,713	56,265	3,815
Loss on debt extinguishment	'	'	-21,793,055	'
Change in market value of settlement related financial instrument	147,500	'	147,500	-442,500
Total other expense	-412,552	-425,013	-23,182,070	-1,641,722
LOSS FROM CONTINUING OPERATIONS	-1,230,318	-1,114,632	-25,895,969	-3,279,991
Income (loss) from discontinued operations	-14,941	46,207	-14,778	110,726
Impairment of assets of discontinued operations	'	'	-14,654	'
NET LOSS	($1,245,259)	($1,068,425)	($25,925,401)	($3,169,265)
NET LOSS PER COMMON SHARE:	'	'	'	'
Basic and fully diluted from continuing operations	($0.07)	($0.06)	($1.41)	($0.18)
Basic and fully diluted from discontinued operations	$0	$0	$0	$0.01
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE:	'	'	'	'
Basic and fully diluted	18,352,542	18,352,542	18,352,542	18,352,542

CONDENSED_STATEMENT_OF_STOCKHO

CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT (USD $)	Common Stock	Additional Paid-In Capital	Retained Earnings / Accumulated Deficit	Total
Beginning balance, amount at Dec. 31, 2012	$18,353	$67,157,841	($94,336,465)	($27,160,271)
Beginning balance, shares at Dec. 31, 2012	18,352,542	'	'	'
Equity-based compensation	'	12,181	'	12,181
Net loss	'	'	-1,427,804	-1,427,804
Ending balance, amount at Mar. 31, 2013	18,353	67,170,022	-95,764,269	-28,575,894
Ending balance, shares at Mar. 31, 2013	18,352,542	'	'	'
Equity-based compensation	'	11,917	'	11,917
Beneficial conversion feature recorded as a result of June 27, 2013 debt modification	'	22,218,055	'	22,218,055
Net loss	'	'	-23,252,338	-23,252,338
Ending balance, amount at Jun. 30, 2013	18,353	89,399,994	-119,016,607	-29,598,260
Ending balance, shares at Jun. 30, 2013	18,352,542	'	'	'
Equity-based compensation	'	11,526	'	11,526
Beneficial conversion feature recorded as a result of June 27, 2013 debt modification	'	909,804	'	909,804
Net loss	'	'	-1,245,259	-1,245,259
Ending balance, amount at Sep. 30, 2013	$18,353	$90,321,324	($120,261,866)	($29,922,189)
Ending balance, shares at Sep. 30, 2013	18,352,542	'	'	'

CONDENSED_STATEMENTS_OF_CASH_F

CONDENSED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:	'	'
Net loss	($25,925,401)	($3,169,265)
Adjustments to reconcile net loss to net cash used in operating activities:	'	'
Depreciation and amortization	113,308	76,425
Loss on disposal of assets	125,606	'
Non cash amortization of debt discount	72,364	'
Equity-based compensation expense	35,624	26,109
Loss on debt extinguishment	21,793,055	'
Changes in assets and liabilities:	'	'
Accounts receivable	-42,849	-91,408
Contracts receivable	'	-6,200
Prepaid expenses	31,339	-85,706
Other assets	-34,424	-168
Accounts Payable	-146,169	92,351
Deferred revenue	55,206	217,806
Accrued and other expenses	155,708	394,385
Net cash used in operating activities	-3,766,633	-2,545,671
CASH FLOWS FROM INVESTING ACTIVITIES:	'	'
Purchases of furniture and equipment	-21,834	-25,530
Purchase of software license	'	-75,000
Capitalized patent development costs	-14,440	-17,248
Capitalized software	-287,628	-749,160
Net cash used in investing activities	-323,902	-866,938
CASH FLOWS FROM FINANCING ACTIVITIES:	'	'
Restricted cash used to pay IDB interest expense	135,566	152,904
Deposit of cash to IDB restricted account	-202,886	-281,341
Proceeds from debt borrowings	4,375,000	3,639,253
Repayments of debt borrowings	-38,858	-12,172
Net cash provided by financing activities	4,268,822	3,498,644
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	178,287	86,035
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	58,458	165,139
CASH AND CASH EQUIVALENTS, END OF PERIOD	236,745	251,174
Supplemental disclosures of cash flow information:	'	'
Cash paid during the period for: Interest	1,525,682	748,778
Financed purchase of office furniture	40,000	'
Recorded debt discount associated with beneficial conversion feature	$1,334,804	'

1_DESCRIPTION_OF_BUSINESS_AND_

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	9 Months Ended
	Sep. 30, 2013
Accounting Policies [Abstract]	'
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	'
	MobileSmith, Inc. (the “Company”) 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 Company develops and markets software products and services tailored to users of mobile devices. The Company’s flagship product is The MobileSmith™ Platform.  The MobileSmith™ Platform is an innovative, patents pending mobile app development platform that enables organizations to rapidly create, deploy, and manage custom, native smartphone apps deliverable across iOS and Android mobile platforms.
	The Company’s principal products and services include:
	●	Licensing of our SaaS (“Software as a Service”) Mobile App Development Platform to our customers who design and build their own apps;
	●	Custom mobile application design and development services provided by the Company;
	●	Mobile application marketing services;
	●	Mobile strategy implementation consulting; and
	●	Cloud-based software hosting and management services.
	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, we have condensed or omitted certain information and footnote disclosures we normally include in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations, cash flows and stockholder deficit as of September 30, 2013. Our 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 financial statements and accompanying notes should be read in conjunction with the audited financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as amended, on file with the SEC (our “Annual Report”).
	There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.
	The accompanying 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 nine months ended September 30, 2013 and 2012, the Company incurred net losses as well as negative cash flows and had deficiencies in working capital. These factors indicate that the Company may be unable to continue as a going concern.
	Certain prior year balances were reclassified in connection with the presentation of discontinued operations of legacy domain hosting operations and the presentation of debt balances as of September 30, 2013.

2_BALANCE_SHEET_ACCOUNTS

2. BALANCE SHEET ACCOUNTS	9 Months Ended
	Sep. 30, 2013
Notes to Financial Statements	'
2. BALANCE SHEET ACCOUNTS	'
	Capitalized software consists of the following:
		September 30,				December 31,
		2013				2012
	Capitalized software		$	952,139			$	672,359
	Less accumulated amortization			(133,752	)			(53,802	)
	Capitalized software, net		$	818,387			$	618,557
	Office furniture and equipment:
	During the quarter ended September 30, 2013, the Company finalized its plans to move to a new office location.  During the nine month period then ended  the Company purchased $21,834 of new equipment and tradeshow furniture, in addition to purchasing $40,000 of new office furniture, which was financed.
	As a result of the office move, the Company disposed of  $125,606 of certain  undepreciated assets which were not moved to the new location.
	Financial instruments:
	The fair value of the financial liability related to issuance of 1,475,000 shares of our common stock, par value $0.001 per share (the “Common Stock”), resulting from the settlement of the Class Action lawsuit on July 1, 2011 was $1,917,500 and $2,065,000 at September 30, 2013 and December 31, 2012, respectively.
	The Company recognized a gain of $147,500 and a loss of $442,500 in relation to the change in value of the financial liability during the nine-month periods ended September 30, 2013 and 2012, respectively.

3_DEBT

3. DEBT	9 Months Ended
	Sep. 30, 2013
Debt Disclosure [Abstract]	'
3. DEBT	'
	The table below summarizes the Company’s debt at September 30, 2013 and December 31, 2012:
	Note Description		September 30,		December 31,
			2013		2012		Maturity	Rate
	IDB Bank		$	5,000,000	$	5,000,000	14-May		4	%
	Insurance premium note			-		23,987	13-Jun		6.9	%
	Capital lease obligations - Noteholder lease			136,893		150,072	19-Aug		8	%
	Capital lease obligations - Office furniture			38,310		-	18-Sep		9.8	%
	Convertible notes - Related parties			14,557,051		14,557,051	16-Nov		8	%
	Convertible notes, net of discount			9,055,509		5,942,949	16-Nov		8	%
	Total debt			28,787,763		25,674,059
	Less:  current portion of long term debt
	Capital lease obligations			25,142		17,754
	IDB Bank			5,000,000		5,000,000
	Insurance premium note			-		23,987
	Total current portion of long term debt			5,025,142		5,041,741
	Debt - long term		$	23,762,621	$	20,632,318
	Convertible Notes
	On June 26, 2013, the Company entered into the Sixth Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement, Fourth Amendment to Convertible Secured Subordinated Promissory Notes and Fifth Amendment and Agreement to Join as a Party to Registration Rights Agreement (the “Sixth Amendment”), with the holders of a majority of the aggregate outstanding principal amount of the Convertible Secured Subordinated Promissory Notes (the “Notes”), issued by the Company under the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, as amended (as so amended, the “Note Purchase Agreement”), and an additional purchaser of the Notes, Grasford Investments Ltd (“Grasford”) (together, the “Noteholders”).  The modification to our convertible instrument applied to $23,075,000 of Notes outstanding as of the date of modification and to all future Notes.  As amended by the Sixth Amendment, the convertible instrument has the following characteristics:
	●	a maturity date of November 16, 2016;
	●	an interest rate of 8% per year;
	●	optional conversion at a Noteholders’ request;
	●	the borrowing commitment was increased by $10 million to $33.3 million;
	●	a conversion price that is the greater of (i) 80% of the lowest closing price of the Common Stock in the twelve-month period immediately preceding the date of conversion  or (ii) $0.50; and
	●	if at the time any particular requested conversion the Company does not have the number of authorized shares of Common Stock sufficient to allow for such particular conversion, the Noteholders may request that the Company call a special meeting of the stockholders specifically for the purpose of increasing the number of the authorized shares of Common Stock to cover the remaining portion of the Notes outstanding.
	The modification of the Note Purchase Agreement was accounted for as debt extinguishment.  The total value of the convertible instrument immediately after the modification was determined to be $44,868,055, of which $21,793,055 was allocated to the intrinsic value of the embedded conversion feature of the instrument immediately after the modification (beneficial conversion feature) in accordance with ASC 470 “Debt” and recorded as part of additional paid-in capital.
	The difference between the fair value of the new convertible instrument and the carrying value of the old convertible notes in the amount of $21,793,055 was recognized as loss on extinguishment of debt in the statement of operations.
	Subsequent to modification and through September 30, 2013 the Company sold $1,800,000 in additional Notes to Union Bancaire Privée (“UBP”) under the amended Note Purchase Agreement at conversion prices ranging between $0.72 and $0.82 on the date of sale.  The Company recorded a beneficial conversion feature of $1,334,804 and corresponding debt discount, which will be amortized into interest expense through the maturity of the Notes.
	During the nine-month period ended September 30, 2013, the Company sold Notes to UBP totaling $4,375,000 (including the $1,800,000 in Notes described above) under the same terms as previously-sold Notes under the convertible instrument.
	Fair Value of Modified Convertible Notes
	The modified convertible debt instrument was recorded at fair value of $44,868,055.  The Company used a binomial model to determine the fair value of the instrument.  The binomial model method uses significant unobservable inputs and falls within Level III measurement method under Fair Value Hierarchy under ASC 820 “Fair Value Measurements”
	The significant unobservable inputs and information used to develop those inputs include the following:
	●	volatility of stock price was determined to be 47% and was based on the volatility of the Company’s stock price as quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) for the period of 3.4 years, which approximates the period remaining until maturity of the convertible instrument;
	●	the risk free rate of 1.41%;
	●	the credit spread over the risk free rate was determined to be approximately 20%, which was derived from a combination of the credit spread of CCC rated bonds with added premium for lack of marketability of the convertible instrument;
	●	the nodes of the binomial model were extended for 3 years, which approximates the time period until maturity of the convertible instrument; and
	●	the conversion ratio varied from approximately 1.39 to .56 shares per dollar, depending on the node of the conversion tree.  The conversion ratio varied due to projected change in value of the stock driven by historical volatility of 47%.
	IDB Credit Facility
	On June 28, 2013, the Company extended its secured credit facility (the “IDB Credit Facility”), with Israel Discount Bank of New York (“IDB”), as lender, effective as of May 31, 2013, for an additional one-year period for the $5,000,000 already outstanding, and we maintain $250,000 in a Restricted Cash Account held at IDB for future interest payments.  All other terms remained unchanged.  To date, the Company has borrowed $5,000,000 under the IDB Credit Facility.   Borrowings under the IDB Credit Facility are guaranteed by Atlas Capital SA (“Atlas”), a majority Noteholder and a related party, and further secured by an extended irrevocable standby letter of credit issued by UBS Private Bank (“UBS”) with an expiration date of November 30, 2015.

4_COMMITMENTS_AND_CONTINGENCIE

4. COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]	'
4. COMMITMENTS AND CONTINGENCIES	'
	Aggregate future lease commitments
	The Company leases computers, office equipment and office furniture under capital lease agreements that expire through August 2019. Total amounts financed under these capital leases were $175,203 and $150,072 at September 30, 2013 and December 31, 2012, respectively. These obligations are included within the Company’s total debt.
	The table below summarizes Company’s future obligations under its capital leases:
	Year:
	2013	$	9,818
	2014		39,259
	2015		39,259
	2016		39,259
	2017		39,259
	Thereafter		53,601
			220,455
	Less amount representing interest		(45,252	)
	Capital lease obligations	$	175,203
	The Company rents its office space pursuant to a lease that expires on November 15, 2013.
	On July 29, 2013, the Company signed a sixty-five month lease for new office space in Raleigh, North Carolina, effective October 30, 2013.  The landlord built the space to the Company’s specifications and provided the Company with five months free rent, as an incentive.  Rent expense will be recognized over the entire sixty-five month term of the lease on a straight-line basis. The lease contains an option to renew for two three-year terms.  Monthly rent is approximately $13,000 per month.
	In addition, on July 17, 2013, the Company leased a vehicle for a period of thirty-six months with monthly payments of $300.  The vehicle is mostly used for transporting equipment to and from tradeshows that often take place within reasonable driving distance from the Company’s office.
	The table below summarizes the Company’s future obligations under the new office and vehicle leases:
	Year:
	2013	$	897
	2014		119,775
	2015		162,528
	2016		165,678
	2017		167,786
	Thereafter		216,500
	Total	$	833,164
	Legal Proceedings
	The Company may be subject to legal proceedings and litigation arising in the ordinary course of business, including, but not limited to, certain pending patent and privacy matters, including class action lawsuits, as well as inquiries investigations, audits and other regulatory proceedings.
	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 June 18, 2010, the Company entered into a Stipulation and Agreement of Settlement (the "Stipulation") with the lead plaintiff in the securities class action involving the Company in the case captioned Mary Jane Beauregard vs. Smart Online, Inc., et al., filed in the District Court (the “Class Action”). The Stipulation provides for the settlement of the Class Action on the terms described below. The District Court issued an order preliminarily approving the settlement on January 13, 2011.  The final settlement hearing was held on May 11, 2011.  As of the date of this report, the 1,475,000 shares of Common Stock had not been issued and, according to GAAP, the Company now carries the obligation as a financial instrument on its balance sheet.
	The Stipulation provides for the certification of a class consisting of all persons who purchased the Company's publicly traded securities between May 2, 2005 and September 28, 2007, inclusive. As per the terms of the Stipulation, the settlement class has received total consideration of a cash payment of $350,000 made by the Company, and a cash payment of $112,500 made by Maxim Group.  In addition, Henry Nouri is required to transfer 25,000 shares of Company Common Stock to the settlement class and the Company is required to issue 1,475,000 shares of Company Common Stock to the class. Under the terms of the Stipulation, counsel for the settlement class may sell some or all of the Common Stock received in the settlement before distribution to the class, subject to the limitation that it cannot sell more than 10,000 shares in one day or 50,000 shares in 30 calendar days. Subject to the terms of the Stipulation, we paid the lead plaintiff $75,000 on July 14, 2010, $100,000 on September 15, 2010, $100,000 on December 14, 2010 and $75,000 on March 14, 2011.  On July 1, 2011, the District Court issued the Final Judgment and Order of Partial Dismissal with Prejudice in the Class Action case. The Court approved the Stipulation and directed the terms of how the Stipulation should be consummated.  On July 1, 2011, the Company recorded the Class Action obligation as a financial instrument liability.
	On January 13, 2011 (the "Effective Date"), the District Court issued the Order Preliminarily Approving Settlement and Providing Notice.  Based upon the Settlement Agreement and the January 13, 2011 District Court Order Preliminarily Approving Settlement and Providing Notice, we paid for the benefit of Dennis Michael Nouri, Reza Eric Nouri, Henry Nouri and Ronna Loprete Nouri, collectively, the Nouri Parties, a total of $1,332,773 between January 2011 and February 2012. The Company was ordered by a court of proper jurisdiction to withhold $67,227 for future payment of adjudicated debt owed by the Nouri Parties’. Under the terms of the Settlement Agreement, to the extent the Nouri Parties’ legal costs are less than $300,000, the Company is owed the difference. The Settlement Agreement also provides for the exchange of mutual releases by the parties.

5_EQUITY_COMPENSATION

5. EQUITY COMPENSATION	9 Months Ended
	Sep. 30, 2013
Equity [Abstract]	'
5. EQUITY COMPENSATION	'
	The following is a summary of the stock option activity for the nine-months period ended September 30, 2013:
		Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual		Aggregate
							Term		Intrinsic
									value
	Outstanding, December 31, 2012		450,900		$	2.02
	Cancelled		(164,900	)		1.53
	Issued		249,370			1.62
	Outstanding, September 30, 2013		535,370		$	1.96		5.2		24,300
	Vested and exercisable, September 30, 2013		191,750		$	2.76		4.9		17,825
	Aggregate intrinsic value represents the difference between the closing stock price at September 30, 2013 of the Company’s Common Stock and the exercise price of outstanding, in-the-money options. The Company’s closing stock price as reported on the OTCBB as of September 30, 2013 was $1.30.
	At September 30, 2013, there remains $329,219 of unvested expense yet to be recorded related to all options outstanding.

6_MAJOR_CUSTOMERS_AND_CONCENTR

6. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK	9 Months Ended
	Sep. 30, 2013
Notes to Financial Statements	'
6. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK	'
	During the nine-month period ended September 30, 2013, two major customers accounted for 27% of total revenues.  For the nine-month period ended September  30, 2012, six major customers accounted for 82% of total revenues.

7_DISCONTINUED_OPERATIONS

7. DISCONTINUED OPERATIONS	9 Months Ended
	Sep. 30, 2013
Accounting Policies [Abstract]	'
DISCONTINUED OPERATIONS	'
	In May 2013, the Company’s management agreed to discontinue the Company’s legacy business of domain hosting and e-commerce effective as of July 31, 2013.   Results of legacy operations are presented as discontinued operations in the Condensed Statements of Operations.  The Company has impaired all remaining assets associated with the legacy business, which included a number of servers, and recorded an impairment charge in the amount of approximately $15,000.  Remaining liabilities of $6,600 include deferred revenue for the recently renewed subscriptions.

8_SUBSEQUENT_EVENTS

8. SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2013
Subsequent Events [Abstract]	'
8. SUBSEQUENT EVENTS	'
	Subsequent to September 30, 2013, the Company sold four Notes totaling $840,000 to UBP on the same terms as previously sold Notes.  The Notes will mature on November 14, 2016.
	Effective November 1, 2013 Atlas transferred all of its interest in the Notes to Grasford Investments, Ltd. (“Grasford”).  Grasford is an entity controlled by Avy Lugassy, beneficial owner of both Company equity and the Notes interests formerly held by Atlas. As a result of the transaction, Avy Lugassy continues to control those interests through control of Grasford in the same manner that he used to control the same interests through control of Atlas.

2_BALANCE_SHEET_ACCOUNTS_Table

2. BALANCE SHEET ACCOUNTS (Tables)	9 Months Ended
	Sep. 30, 2013
Notes to Financial Statements	'
Capitalized software	'
	Capitalized software consists of the following:
		September 30,				December 31,
		2013				2012
	Capitalized software		$	952,139			$	672,359
	Less accumulated amortization			(133,752	)			(53,802	)
	Capitalized software, net		$	818,387			$	618,557

3_DEBT_Tables

3. DEBT (Tables)	9 Months Ended
	Sep. 30, 2013
Debt Disclosure [Abstract]	'
Company's debt	'
	The table below summarizes the Company’s debt at September 30, 2013 and December 31, 2012:
	Note Description	September 30,		December 31,
		2013		2012		Maturity	Rate
	IDB Bank	$	5,000,000	$	5,000,000	14-May		4	%
	Insurance premium note		-		23,987	13-Jun		6.9	%
	Capital lease obligations - Noteholder lease		136,893		150,072	19-Aug		8	%
	Capital lease obligations - Office furniture		38,310		-	18-Sep		9.8	%
	Convertible notes - Related parties		14,557,051		14,557,051	16-Nov		8	%
	Convertible notes, net of discount		9,055,509		5,942,949	16-Nov		8	%
	Total debt		28,787,763		25,674,059
	Less:  current portion of long term debt
	Capital lease obligations		25,142		17,754
	IDB Bank		5,000,000		5,000,000
	Insurance premium note		-		23,987
	Total current portion of long term debt		5,025,142		5,041,741
	Debt - long term	$	23,762,621	$	20,632,318

4_COMMITMENTS_AND_CONTINGENCIE1

4. COMMITMENTS AND CONTINGENCIES (Tables)	9 Months Ended
	Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]	'
Company's future obligations under its capital leases	'
	The table below summarizes Company’s future obligations under its capital leases:
	Year:
	2013	$	9,818
	2014		39,259
	2015		39,259
	2016		39,259
	2017		39,259
	Thereafter		53,601
			220,455
	Less amount representing interest		(45,252	)
	Capital lease obligations	$	175,203
Company's future obligation under the new office and vehicle leases	'
	Table below summarizes Company’s future obligation under the new office and vehicle leases:
	Year:
	2013	$	897
	2014		119,775
	2015		162,528
	2016		165,678
	2017		167,786
	Thereafter		216,500
	Total	$	833,164

5_EQUITY_COMPENSATION_Tables

5. EQUITY COMPENSATION (Tables)	9 Months Ended
	Sep. 30, 2013
Equity Compensation Tables	'
Schedule of Stock Options Outstanding	'
	The following is a summary of the stock option activity for the nine-months period ended September 30, 2013:
		Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual		Aggregate
							Term		Intrinsic
									value
	Outstanding, December 31, 2012		450,900		$	2.02
	Cancelled		(164,900	)		1.53
	Issued		249,370			1.62
	Outstanding, September 30, 2013		535,370		$	1.96		5.2		24,300
	Vested and exercisable, September 30, 2013		191,750		$	2.76		4.9		17,825

2_BALANCE_SHEET_ACCOUNTS_Detai

2. BALANCE SHEET ACCOUNTS (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Balance Sheet Accounts Details	'	'
Capitalized software	$952,139	$672,359
Less accumulated amortization	-133,752	-53,802
Capitalized software, net	$818,387	$618,557

3_DEBT_Details

3. DEBT (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Debt Details	'	'
IDB credit facility	$5,000,000	$5,000,000
Insurance premium note	'	23,987
Capital leases obligations - Noteholder lease	136,893	150,072
Capital lease obligations - Office furniture	38,310	'
Convertible notes - related parties	14,557,051	14,725,000
Convertible notes, net of discount	9,055,509	5,975,000
Total debt	28,787,763	25,674,059
Less: current portion of long term debt	'	'
Capital lease obligations	25,142	17,754
IDB Bank	5,000,000	5,000,000
Insurance premium note	'	23,987
Total current portion of long term debt	5,025,142	5,041,741
Debt - long term	$23,762,621	$20,633,346

4_COMMITMENTS_AND_CONTINGENCIE2

4. COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]	'
2013	$9,818
2014	39,259
2015	39,259
2016	39,259
2017	39,259
Thereafter	53,601
Capital Leases, Future Minimum Payments Due	220,455
Less amount representing interest	-45,252
Capital lease obligations	$175,203

4_COMMITMENTS_AND_CONTINGENCIE3

4. COMMITMENTS AND CONTINGENCIES (Details 1) (USD $)	Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]	'
2013	$897
2014	119,775
2015	162,528
2016	165,678
2017	167,786
Thereafter	216,500
Total	$833,164

5_EQUITY_COMPENSATION_Details

5. EQUITY COMPENSATION (Details) (USD $)	9 Months Ended
	Sep. 30, 2013
Equity Compensation Details	'
Number of Shares Outstanding, Beginning	450,900
Number of Shares Cancelled	-164,900
Number of Shares Issued	249,370
Number of Shares Outstanding, Ending	535,370
Stock Options Vested and Exercisable Number of Shares	191,750
Weighted Average Exercise Price Outstanding, Beginning	$2.02
Weighted Average Exercise Price Cancelled	$1.53
Weighted Average Exercise Price Issued	$1.62
Weighted Average Exercise Price Outstanding, Ending	$1.96
Weighted Average Exercise Price Vested and exercisable, Ending	$2.76
Weighted Average Remaining Contractual Life (in years) Outstanding	'5 years 2 months 12 days
Weighted Average Remaining Contractual Life (in years) Vested and expected to vest	'4 years 10 months 24 days
Aggregate Intrinsic Value Outstanding	$24,300
Aggregate Intrinsic Value vested and expected to vest	$17,825

6_MAJOR_CUSTOMERS_AND_CONCENTR1

6. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details Narrative)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Customer A	'	'
% of Total Revenues (Three customers in 2013; Two customers in 2012)	27.00%	82.00%
Customer B	'	'
% of Total Revenues (Three customers in 2013; Two customers in 2012)	27.00%	82.00%
Customers C	'	'
% of Total Revenues (Three customers in 2013; Two customers in 2012)	'	82.00%
Customers D	'	'
% of Total Revenues (Three customers in 2013; Two customers in 2012)	'	82.00%
Customers E	'	'
% of Total Revenues (Three customers in 2013; Two customers in 2012)	'	82.00%
CustomersF	'	'
% of Total Revenues (Three customers in 2013; Two customers in 2012)	'	82.00%