Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 05, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | MobileSmith, Inc. | |
Entity Central Index Key | 1,113,513 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
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 | 19,827,542 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 366,258 | $ 580,220 |
Restricted cash | 73,527 | 124,988 |
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $16,050 | 396,163 | 183,350 |
Prepaid expenses and other current assets | 71,382 | 69,552 |
Total current assets | 907,330 | 958,110 |
Property and equipment, net | 94,912 | 98,963 |
Capitalized software, net | 363,512 | 390,518 |
Intangible assets, net | 50,725 | 55,099 |
Other assets | 2,502 | 6,264 |
Total Other Assets | 511,651 | 550,844 |
TOTAL ASSETS | 1,418,981 | 1,508,954 |
Current liabilities | ||
Trade Accounts Payable | 101,048 | 45,717 |
Accrued Expenses | 200,628 | 247,858 |
Accrued interest | 355,395 | 350,613 |
Capital Lease Obligations | 31,535 | 30,877 |
Deferred revenue | 1,315,122 | 1,007,970 |
Bank Loan | 5,000,000 | 5,000,000 |
Convertible Notes Payable, Related Parties, Net of Discount | 34,662,120 | 33,363,488 |
Convertible Notes Payable, Net of Discount | 680,640 | 680,640 |
Total current liabilities | 42,346,488 | 40,727,163 |
Long-term liabilities: | ||
Capital Lease Obligations | 75,626 | 83,761 |
Deferred Rent | 50,928 | 53,592 |
Total long-term liabilities | 126,554 | 137,353 |
Total liabilities | $ 42,473,042 | $ 40,864,516 |
Commitments and Contingencies (Note 3) | ||
Stockholders' deficit: | ||
Preferred Stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2016 and December 31, 2015 | $ 0 | $ 0 |
Common Stock, $0.001 par value, 45,000,000 shares authorized, 19,827,542 shares issued and outstanding at March 31, 2016 and December 31, 2015 | 19,828 | 19,828 |
Additional paid-in capital | 97,965,453 | 97,545,601 |
Accumulated deficit | (139,039,342) | (136,920,991) |
Total stockholders' deficit | (41,054,061) | (39,355,562) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 1,418,981 | $ 1,508,954 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts | $ 16,050 | $ 16,050 |
Stockholders' equity: | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 45,000,000 | 45,000,000 |
Common stock, issued | 19,827,542 | 19,827,542 |
Common stock, outstanding | 19,827,542 | 19,827,542 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
REVENUES: | ||
Subscription and Support | $ 471,130 | $ 396,188 |
Professional Services and Other | 0 | 30,000 |
Total revenues | 471,130 | 426,188 |
COST OF REVENUES | ||
Subscription and Support | 115,321 | 59,469 |
Professional Services and Other | 5,063 | 9,273 |
Total Cost of Revenue | 120,384 | 68,742 |
GROSS PROFIT | 350,746 | 357,446 |
OPERATING EXPENSES: | ||
Sales and marketing | 235,724 | 292,199 |
Research and development | 406,543 | 340,140 |
General and administrative | 352,973 | 314,566 |
Total operating expenses | 995,240 | 946,905 |
LOSS FROM OPERATIONS | (644,494) | (589,459) |
OTHER INCOME (EXPENSE): | ||
Other Income | 8,039 | 379 |
Interest expense, net | (1,481,896) | (1,267,136) |
Total Other Expense | (1,473,857) | (1,266,757) |
NET LOSS | $ (2,118,351) | $ (1,856,216) |
NET LOSS PER COMMON SHARE: | ||
Basic and Fully Diluted | $ (0.11) | $ (0.09) |
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE: | ||
Basic and fully diluted | 19,827,542 | 19,827,542 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (2,118,351) | $ (1,856,216) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 40,630 | 40,567 |
Bad Debt Expense (Gain on Reversal of Bad Debt) | 0 | (6,000) |
Amortization of Debt Discount | 697,233 | 583,432 |
Share Based Compensation | 21,251 | 21,308 |
Changes in assets and liabilities: | ||
Accounts Receivable | (212,813) | 75,871 |
Prepaid Expenses and Other Assets | 1,932 | (18,138) |
Accounts Payable | 55,331 | 11,292 |
Deferred revenue | 307,152 | (101,110) |
Accrued and other expenses | (45,112) | (177,651) |
Net Cash Used in Operating Activities | (1,252,747) | (1,426,645) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Payments to Acquire Property, Plant and Equipment | (5,199) | (4,916) |
Net Cash Used in Investing Activities | (5,199) | (4,916) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Restricted cash used to pay interest expense | 51,461 | 49,752 |
Proceeds from Issuance of Long Term Debt | 1,000,000 | 1,700,000 |
Repayments of debt borrowings | (7,477) | (6,871) |
Net cash provided by financing activities | 1,043,984 | 1,742,881 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (213,962) | 311,320 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 580,220 | 320,286 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 366,258 | 631,606 |
Supplemental disclosures of cash flow information: | ||
Cash paid during the period for: Interest | 775,723 | 804,328 |
The Company Recorded Debt Discount Associated with Beneficial Conversion Feature | $ 398,601 | $ 0 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) - 3 months ended Mar. 31, 2016 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, shares at Dec. 31, 2015 | 19,827,542 | |||
Beginning Balance, amount at Dec. 31, 2015 | $ 19,828 | $ 97,545,601 | $ (136,920,991) | $ (39,355,562) |
Equity-Based Compensation | 21,251 | 21,251 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 398,601 | 398,601 | ||
Net loss | (2,118,351) | (2,118,351) | ||
Ending Balance, shares at Mar. 31, 2016 | 19,827,542 | |||
Ending Balance, amount at Mar. 31, 2016 | $ 19,828 | $ 97,965,453 | $ (139,039,342) | $ (41,054,061) |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 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 Company develops software products and services and targets businesses whose need is to connect with their stakeholders (customers, employees, broader public) through a variety of mobile devices and do so with the fastest time to market possible, while by-passing the need to write a single line of code. The Companys flagship product is the MobileSmith® Platform (the Platform). The Platform is an innovative app development platform that enables 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. These condensed consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, which was created to explore the concept of a consumer targeted mobile app development platform. From time to time, the Company may create additional wholly-owned subsidiaries in order to test various new services as a part of its research and development process. The subsidiary has not had material activity in 2016. The Companys principal products and services include: ● subscription to its Software as a Service (SaaS) cloud based mobile app development platform to customers who design and build their own apps; ● dedicated internal and secure mobile development platform for the U.S. Department of Defense and related contractors; ● custom mobile application design and development services; ● mobile application marketing services; and ● mobile strategy implementation consulting. The Company prepared the accompanying unaudited condensed consolidated 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 consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In managements 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 March 31, 2016. The Companys 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 consolidated financial statements and accompanying notes should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2015 on file with the SEC (the Annual Report). Except as otherwise noted, there have been no material changes to the Companys significant accounting policies as compared to the significant accounting policies described in the Annual Report. The accompanying condensed consolidated 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 three months ended March 31, 2016 and 2015, the Company incurred net losses as well as negative cash flows from operations. These factors raise substantial doubt about the Companys ability to continue as a going concern. The accompanying condensed consolidated 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. Recently Issued Accounting Pronouncements The Company evaluates new significant accounting pronouncements at each reporting period. For the period ended March 31, 2016, the Company did not adopt any new pronouncement that had or is expected to have a material effect on the Companys presentation of its condensed consolidated financial statements. All pronouncements that are expected to affect future year financial statements are disclosed in the Annual Report on Form 10-K for the year ended December 31, 2015. |
2. DEBT
2. DEBT | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
2. DEBT | The table below summarizes the Companys debt at March 31, 2016 and December 31, 2015: Debt Description March31, December31, 2016 2015 Maturity Rate Comerica Bank LSA $ 5,000,000 $ 5,000,000 June 2016 3.85 % Capital lease obligations - Noteholder lease 86,800 92,270 August 2019 8.00 % Capital lease obligations - office furniture 20,361 22,368 September 2016 9.80 % Convertible notes - related parties, net of discount of $1,712,111 and $2,010,743, respectively 34,662,120 33,363,488 November 2016 8.00 % Convertible notes, net of discount of $50,129 680,640 680,640 November 2016 8.00 % Total debt 40,449,921 39,158,766 Less: current portion of long term debt Capital lease obligations 31,535 30,877 Comerica Bank LSA 5,000,000 5000000 Convertible notes - related parties, net of discount of $1,712,111 and $2,010,743, respectively 34,662,120 33,363,488 Convertible notes, net of discount of $50,129 680,640 680,640 Total current portion of long term debt 40,374,295 39,075,005 Debt - long term $ 75,626 $ 83,761 Convertible Notes During the three months ended March 31, 2016, the Company privately placed $1,000,000 in principal amount of additional unsecured Convertible Subordinated Notes unsecured Convertible Subordinated Note Purchase Agreement dated December 10, 2014 The table below summarizes convertible notes issued as of March 31, 2016 by type: Convertible Notes Type: Balance 2007 NPA notes, net of discount $ 29,082,353 2014 NPA notes, net of discount 6,260,407 Total convertible notes, net of discount $ 35,342,760 |
3. COMMITMENTS AND CONTINGENCIE
3. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
3. 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 amount financed under these capital leases at March 31, 2016 was $107,161. This obligation is included within the Companys total debt. The table below summarizes Companys future obligations under its capital leases: Year: 2016 $ 29,444 2017 39,259 2018 34,189 2019 19,412 122,304 Less amount representing interest (15,143 ) Capital lease obligations $ 107,161 The Company leases its office space in Raleigh, North Carolina pursuant to a lease with an initial term that expires in March 2019. The lease contains an option to renew for two three-year terms. In addition, the Company leases a vehicle pursuant to a lease that expires in July 2016. The table below summarizes the Companys future obligations under its office and vehicle operating leases: Year: 2016 $ 124,146 2017 167,786 2018 172,418 2019 44,082 Total $ 508,432 Legal Proceedings 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 Companys 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. |
4. EQUITY COMPENSATION
4. EQUITY COMPENSATION | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
4. EQUITY COMPENSATION | The following is a summary of the stock option activity for the three months ended March 31, 2016: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2015 361,349 $ 1.44 Cancelled (75,000 ) 1.50 Issued - - Outstanding, March 31, 2016 286,349 $ 1.42 2.62 $ 166,338 Vested and exercisable, March 31, 2016 223,285 $ 1.36 2.93 $ 142,084 Aggregate intrinsic value represents the difference between the closing price of the Companys common stock at March 31, 2016 and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock at March 31, 2016, as reported on the Over-the-Counter Bulletin Board, was $2.00 per share. At March 31, 2016, $39,690 |
5. MAJOR CUSTOMERS AND CONCENTR
5. MAJOR CUSTOMERS AND CONCENTRATION | 3 Months Ended |
Mar. 31, 2016 | |
Risks and Uncertainties [Abstract] | |
5. MAJOR CUSTOMERS AND CONCENTRATION | For the three months ended March 31, 2016, one major customer accounted for 15% of total revenues and one customer accounted for 62% of the accounts receivable balance. For the three months ended March 31, 2015, three major customers accounted for 44% of total revenues and three customers accounted for 66% of the accounts receivable balance. |
6. SUBSEQUENT EVENTS
6. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
6. SUBSEQUENT EVENTS | On April 14, 2016, the Company issued one 2014 NPA Note to UBP in the principal amount of $700,000 on the same terms as the currently outstanding 2014 NPA Notes. The note matures on November 14, 2016. |
2. DEBT (Tables)
2. DEBT (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Company's debt | Debt Description March31, December31, 2016 2015 Maturity Rate Comerica Bank LSA $ 5,000,000 $ 5,000,000 June 2016 3.85 % Capital lease obligations - Noteholder lease 86,800 92,270 August 2019 8.00 % Capital lease obligations - office furniture 20,361 22,368 September 2016 9.80 % Convertible notes - related parties, net of discount of $1,712,111 and $2,010,743, respectively 34,662,120 33,363,488 November 2016 8.00 % Convertible notes, net of discount of $50,129 680,640 680,640 November 2016 8.00 % Total debt 40,449,921 39,158,766 Less: current portion of long term debt Capital lease obligations 31,535 30,877 Comerica Bank LSA 5,000,000 5000000 Convertible notes - related parties, net of discount of $1,712,111 and $2,010,743, respectively 34,662,120 33,363,488 Convertible notes, net of discount of $50,129 680,640 680,640 Total current portion of long term debt 40,374,295 39,075,005 Debt - long term $ 75,626 $ 83,761 |
Summary of convertible notes | Convertible Notes Type: Balance 2007 NPA notes, net of discount $ 29,082,353 2014 NPA notes, net of discount 6,260,407 Total convertible notes, net of discount $ 35,342,760 |
3. COMMITMENTS AND CONTINGENC14
3. COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Company's future obligations under its capital leases | Year: 2016 $ 29,444 2017 39,259 2018 34,189 2019 19,412 122,304 Less amount representing interest (15,143 ) Capital lease obligations $ 107,161 |
Company's future obligation under the new office and vehicle leases | Year: 2016 $ 124,146 2017 167,786 2018 172,418 2019 44,082 Total $ 508,432 |
4. EQUITY COMPENSATION (Tables)
4. EQUITY COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Equity Compensation Tables | |
Schedule of Stock Options Outstanding | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2015 361,349 $ 1.44 Cancelled (75,000 ) 1.50 Issued - - Outstanding, March 31, 2016 286,349 $ 1.42 2.62 $ 166,338 Vested and exercisable, March 31, 2016 223,285 $ 1.36 2.93 $ 142,084 |
2. DEBT (Details)
2. DEBT (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Debt Details | ||
Comerica Bank LSA | $ 5,000,000 | $ 5,000,000 |
Capital leases obligations - Noteholder lease | 86,800 | 92,270 |
Capital lease obligations - Office furniture | 20,361 | 22,368 |
Convertible notes - related parties, net of discount of $1,712,111 and $2,010,743, respectively | 34,662,120 | 33,363,488 |
Convertible notes, net of discount of $50,129 | 680,640 | 680,640 |
Total debt | 40,449,921 | 39,158,766 |
Less: current portion of long term debt | ||
Capital lease obligations | 31,535 | 30,877 |
Comerica Bank LSA | 5,000,000 | 5,000,000 |
Convertible notes - related parties, net of discount of $2,010,743 | 34,662,120 | 33,363,488 |
Convertible notes, net of discount of $50,129 | 680,640 | 680,640 |
Total current portion of long term debt | 40,374,295 | 39,075,005 |
Debt - long term | $ 75,626 | $ 83,761 |
2. DEBT (Details 1)
2. DEBT (Details 1) | Mar. 31, 2016USD ($) |
Convertible notes, net of discount | $ 35,342,760 |
2007 NPA notes, net of discount | |
Convertible notes, net of discount | 29,082,353 |
2014 NPA notes | |
Convertible notes, net of discount | $ 6,260,407 |
3. COMMITMENTS AND CONTINGENC18
3. COMMITMENTS AND CONTINGENCIES (Details) | Mar. 31, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,016 | $ 29,444 |
2,017 | 39,259 |
2,018 | 34,189 |
2,019 | 19,412 |
Thereafter | 122,304 |
Less amount representing interest | (15,143) |
Capital lease obligations | $ 107,161 |
3. COMMITMENTS AND CONTINGENC19
3. COMMITMENTS AND CONTINGENCIES (Details 1) | Mar. 31, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,016 | $ 124,146 |
2,017 | 167,786 |
2,018 | 172,418 |
2,019 | 44,082 |
Total | $ 508,432 |
4. EQUITY COMPENSATION (Details
4. EQUITY COMPENSATION (Details) | 3 Months Ended |
Mar. 31, 2016USD ($)$ / sharesshares | |
Equity Compensation Details | |
Number of Shares Outstanding, Beginning | shares | 361,349 |
Number of Shares Cancelled | shares | (75,000) |
Number of Shares Issued | shares | 0 |
Number of Shares Outstanding, Ending | shares | 286,349 |
Stock Options Vested and Exercisable Number of Shares | shares | 223,285 |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 1.44 |
Weighted Average Exercise Price Cancelled | $ / shares | 1.50 |
Weighted Average Exercise Price Issued | $ / shares | 0 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | 1.42 |
Weighted Average Exercise Price Vested and exercisable, Ending | $ / shares | $ 1.36 |
Weighted Average Remaining Contractual Life (in years) Outstanding | 2 years 7 months 13 days |
Weighted Average Remaining Contractual Life (in years) Vested and expected to vest | 2 years 11 months 5 days |
Aggregate Intrinsic Value Outstanding | $ | $ 166,338 |
Aggregate Intrinsic Value vested and expected to vest | $ | $ 142,084 |
5. MAJOR CUSTOMERS AND CONCEN21
5. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details Narrative) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
One Customers | ||
Percentage of revenues from major customers | 15.00% | |
Percentage of accounts receivables from major customers | 62.00% | |
Three Customers | ||
Percentage of revenues from major customers | 44.00% | |
Percentage of accounts receivables from major customers | 66.00% |