MobileSmith (MOSTQ) 10-K 22 Mar 17 2016 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Mar. 20, 2017	Jun. 30, 2016
Document And Entity Information
Entity Registrant Name	MobileSmith, Inc.
Entity Central Index Key	1,113,513
Document Type	10-K
Document Period End Date	Dec. 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 Public Float			$ 12,300,000
Entity Common Stock, Shares Outstanding		19,827,542
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,016

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Current assets
Cash and Cash Equivalents	$ 548,146	$ 580,220
Restricted Cash	116,577	124,988
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $0 and $16,050, Respectively	273,091	183,350
Prepaid Expenses and Other Current Assets	64,642	69,552
Total Current Assets	1,002,456	958,110
Property and Equipment, Net	104,129	98,963
Capitalized Software, Net	274,833	390,518
Intangible Assets, Net	37,593	55,099
Other Assets	0	6,264
Total Other Assets	416,555	550,844
Total Assets	1,419,011	1,508,954
Current Liabilities
Trade Accounts Payable	43,518	45,717
Accrued Expenses	193,836	247,858
Accrued Interest	455,269	350,613
Capital Lease Obligations	36,950	30,877
Deferred Revenue	1,404,951	1,007,970
Bank Loan	0	5,000,000
Convertible Notes Payable, Related Parties, Net of Discount	0	33,363,488
Convertible Notes Payable, Net of Discount	0	680,640
Total Current Liabilities	2,134,524	40,727,163
Long-term Liabilities:
Bank Loan	5,000,000	0
Convertible Notes Payable, Related Parties, Net of Discount	39,655,579	0
Convertible Notes Payable, Net of Discount	680,640	0
Capital Lease Obligations	63,834	83,761
Deferred Rent	42,189	53,592
Total Long-term Liabilities	45,442,242	137,353
Total Liabilities	47,576,766	40,864,516
Stockholders' deficit:
Preferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, No Shares Issued and Outstanding at December 31, 2016 and December 31, 2015	0	0
Common Stock, $0.001 Par Value, 100,000,000 and 45,000,000 Shares Authorized At December 31, 2016 and December 31, 2015, Respectively; 19,827,542 Shares Issued and Outstanding at December 31, 2016 and December 31, 2015	19,828	19,828
Additional Paid-in Capital	98,245,063	97,545,601
Accumulated Deficit	(144,422,646)	(136,920,991)
Total Stockholders' Deficit	(46,157,755)	(39,355,562)
Total Liabilities and Stockholders' Deficit	$ 1,419,011	$ 1,508,954

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
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	100,000,000	45,000,000
Common stock, issued	19,827,542	19,827,542
Common stock, outstanding	19,827,542	19,827,542

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
REVENUES:
Subscription and Support	$ 1,861,459	$ 1,657,867
Professional Services and Other	4,154	162,939
Total revenues	1,865,613	1,820,806
COST OF REVENUES
Subscription and Support	509,247	358,257
Professional Services and Other	62,546	100,342
Total Cost of Revenue	571,793	458,599
GROSS PROFIT	1,293,820	1,362,207
OPERATING EXPENSES:
Sales and Marketing	1,153,336	1,175,636
Research and Development	1,700,617	1,427,172
General and Administrative	1,378,730	1,231,137
Other	(3,144)	7,020
Total Operating Expenses	4,229,539	3,840,965
LOSS FROM OPERATIONS	(2,935,719)	(2,478,758)
OTHER INCOME (EXPENSE):
Other Income	166,676	3,085
Interest expense, net	(4,732,612)	(5,241,236)
Total other expense	(4,565,936)	(5,238,151)
NET LOSS	$ (7,501,655)	$ (7,716,909)
NET LOSS PER COMMON SHARE:
Basic and fully diluted	$ (0.38)	$ (0.39)
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE:
Basic and fully diluted	19,827,542	19,827,542

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (7,501,655)	$ (7,716,909)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization	165,351	162,447
Bad Debt Expense (Gain on Reversal of Bed Debt)	34,500	(1,450)
Amortization of Debt Discount	1,408,873	2,335,151
Share-based Compensation	132,680	85,233
Impairment of Long Lived Assets	8,356	7,020
Changes in assets and liabilities:
Accounts Receivable	(124,241)	12,007
Prepaid Expenses and Other Assets	11,174	10,469
Accounts Payable	(2,199)	(49,145)
Deferred Revenue	396,981	428,706
Accrued and Other Expenses	39,230	(17,572)
Net Cash Used in Operating Activities	(5,430,950)	(4,744,043)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to Acquire Property, Plant and Equipment	(27,316)	(17,658)
Net Cash Used in Investing Activities	(27,316)	(17,658)
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash used to pay interest expense	220,177	195,316
Deposit of cash to restricted account	(211,766)	(195,304)
Proceeds from Issuance of Long Term Debt	5,450,000	5,050,000
Repayments of debt borrowings	(32,219)	(28,377)
Net cash provided by financing activities	5,426,192	5,021,635
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(32,074)	259,934
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	580,220	320,286
CASH AND CASH EQUIVALENTS, END OF PERIOD	548,146	580,220
Supplemental disclosures of cash flow information:
Cash paid during the period for: Interest	3,262,119	3,042,537
The Company Recorded Debt Discount Associated with Beneficial Conversion Feature	566,782	6,994
The Company Acquired an Auto Finance Loan to Finance a Purchase of a Company Vehicle	$ 18,365	$ 0

STATEMENTS OF STOCKHOLDERS_ DEF

STATEMENTS OF STOCKHOLDERS’ DEFICIT - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings / Accumulated Deficit	Total
Beginning Balance, shares at Dec. 31, 2014	19,827,542
Beginning Balance, amount at Dec. 31, 2014	$ 19,828	$ 97,453,374	$ (129,204,082)	$ (31,730,880)
Equity-based compensation		85,233		85,233
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt		6,994		6,994
Net loss			(7,716,909)	(7,716,909)
Ending Balance, shares at Dec. 31, 2015	19,827,542
Ending Balance, amount at Dec. 31, 2015	$ 19,828	97,545,601	(136,920,991)	(39,355,562)
Equity-based compensation		132,680		132,680
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt		566,782		566,782
Net loss			(7,501,655)	(7,501,655)
Ending Balance, shares at Dec. 31, 2016	19,827,542
Ending Balance, amount at Dec. 31, 2016	$ 19,828	$ 98,245,063	$ (144,422,646)	$ (46,157,755)

1. SUMMARY OF BUSINESS AND DESC

1. SUMMARY OF BUSINESS AND DESCRIPTION OF GOING CONCERN	12 Months Ended
	Dec. 31, 2016
Summary Of Business And Description Of Going Concern
1. SUMMARY OF BUSINESS AND DESCRIPTION OF GOING CONCERN	Description of Business and Going Concern 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 Company’s 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 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. This subsidiary has not had material activity in 2015 or 2016. The Company’s 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 accompanying 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 years ended December 31, 2016 and 2015, the Company incurred net losses, as well as negative cash flows from operations, and at December 31, 2016 and 2015, had deficiencies in working capital. These factors indicate that the Company may be unable to continue as a going concern. The 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 Company has been funding its operations, in part, from the proceeds of the issuance of notes under a convertible secured subordinated note facility which was established in 2007, as well as, an unsecured convertible subordinated note facility established in 2014. As of December 31, 2016, the Company had $41,555,000 of face value outstanding under these facilities and the Company is entitled to sell to the investors additional notes under these facilities in an amount not exceeding $31,545,000, when requested to by the Company, subject to the terms and conditions specified in these facilities. There can be no assurance that the Company will in fact be able to raise additional capital through these facilities or even from other sources on commercially acceptable terms or at all. In May 2016, Company management negotiated an extension of the Notes under the 2007 and 2014 NPA to mature in November of 2018, and refinanced the Comerica LSA by extending its maturity to June of 2018.

2. SIGNIFICANT ACCOUNTING POLIC

2. SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2016
Accounting Policies [Abstract]
2. SIGNIFICANT ACCOUNTING POLICIES	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions in the Company’s financial statements and notes thereto. Significant estimates and assumptions made by management include the determination of the best estimate of selling price of the deliverables included in multiple-deliverable revenue arrangements, deferral of certain revenues, share-based compensation, allowance for accounts receivable, estimated useful lives of property and equipment, recoverability of capitalized software asset and other long lived assets. Actual results could differ from those estimates. Fair Value of Financial Instruments US GAAP requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Due to the short period of time to maturity, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued liabilities, and notes payable reported in the financial statements approximate the fair value. Cash and Cash Equivalents All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Federal Deposit Insurance Corporation (FDIC) covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. Revenue Recognition The Company derives revenue primarily from subscription services charged to customers accessing the Platform and, to a much lesser degree, professional services provided in connection with subscription services. The Company recognizes revenues when the following criteria have been met: ● persuasive evidence of an arrangement exists; ● delivery has occurred; ● the fees are fixed or determinable; and ● collection is considered reasonably assured. Subscription Revenues Subscription revenues are recognized ratably over the contract term of the arrangement beginning on the date that our service is made available to the customer. Amounts that have been invoiced are recorded in revenue or deferred revenue, depending on whether the revenue recognition criteria have been met. Software Revenue Sale of software takes place when the Company sells perpetual license to the Platform through installation in a private cloud. Revenue recognition begins when all elements of the agreement, besides post-contract customer support, are delivered (including installation). The software revenue is recognized ratably over the period of post-contract customer support in accordance with ASC 985-605. Professional Services Revenues Professional services revenues consist of fees for professional services, which relate to app design and development, training, system implementation and data integration, mobile application marketing services, and mobile strategy implementation consulting. These revenues are recognized as the services are rendered for time and material contracts and when the milestones are achieved and accepted by the customer for fixed-fee contracts. Multiple-Element Arrangements The Company evaluates each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. In order to account for deliverables in a multiple-deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. In determining whether professional service revenues have standalone value, the Company considers availability of professional services from other vendors, the nature of the Company’s professional services, and whether the Company sells professional services to customers without the subscription. When multiple deliverables are included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on their relative selling price. Multiple-deliverable arrangements accounting guidance provides a hierarchy to use when determining the relative selling price for each unit of accounting. Vendor-specific objective evidence (“VSOE”) of selling price, based on the price at which the item is regularly sold by the vendor on a standalone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence (“TPE”) of selling price is used to establish the selling price if it exists. If VSOE of selling price and TPE of selling price are not available, then the best estimate of selling price (“BESP”) is to be used. VSOE and TPE do not currently exist for any of the Company’s deliverables. Accordingly, the Company uses its BESP to determine the relative selling price. The Company determines its BESP for its deliverables based on its overall pricing objectives, taking into consideration market conditions and entity-specific factors. The Company evaluates its BESP by reviewing historical data related to sales of its deliverables. Total consideration under the contract is allocated to each of the separate units of accounting through application of the relative selling price method. Deferred Revenue Deferred revenue consists of billings or payments received prior to the date when revenue is recognized. Cost of Revenues Cost of revenues includes salaries of customer support teams, costs of infrastructure that supports the Platform, expenses for outsourced work to fulfill the contracted work, and amortization charges for the Platform. Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or failure of its customers to make required payments. The need for an allowance for doubtful accounts is evaluated based on specifically identified amounts that management believes to be potentially uncollectible. If actual collections experience changes, revisions to the allowance may be required. Property and Equipment The Company records property and equipment at cost and provides for depreciation and amortization using the straight-line method for financial reporting purposes over the estimated useful lives. The estimated useful lives by asset classification are as follows: Computer hardware and office equipment 5 years Computer software 5 years Furniture and fixtures 5 years Leasehold improvements Shorter of the estimated useful life or the lease term Software Development Costs The Company capitalized certain costs of development and subsequent enhancement of the Platform through the middle of 2013. The Company started capitalizing software development costs when technological feasibility of the Platform or its enhancements had been established. The Company expensed costs associated with preliminary project stage and research activities. The Company’s policy provided for the capitalization of certain payroll, benefits, and other payroll-related costs for employees who were directly associated with development. During 2012, the Platform was substantially completed. During 2013, the Company’s development efforts became more driven by market requirements and rapidly changing customers’ needs. As a result, the Company’s development team adopted the Agile iterative approach to software development. Due to Agile’s short development cycles and focus on rapid production, the Company ceased capitalizing software development costs mid-way through 2013 as the documentation produced under the Agile method did not meet requirements necessary to establish technological feasibility. No development costs were capitalized in 2015 or 2016 and the Company does not expect to capitalize substantial development costs in the future. Intangible Assets Intangible assets consist of the perpetual license for critical Platform software, costs associated with the Company’s patent filings and other acquired intangible assets. The Company also owns several copyrights and trademarks related to products, names, and logos used throughout its non-acquired product lines. Impairment of Long-Lived Assets The Company evaluates the recoverability of its long-lived assets every reporting period or whenever events and circumstances indicate that the value may be impaired. During 2016, the Company recorded a loss on impairment of intangible assets in the amount of $8,356, mostly related to impairment of previously capitalized software, which were replaced with new functionality in our Platform. Advertising Costs Advertising costs consist primarily of industry related tradeshows and marketing campaigns. Advertising costs are expensed as incurred, or the first time the advertising takes place, applied consistently based on the nature of the advertising activity. The amounts related to advertising during 2016 and 2015 were $382,932 and $342,718, respectively. Share-Based Compensation The Company measures share-based compensation cost at the grant date based on the fair value of the award. The Company recognizes compensation cost on a straight-line basis over the requisite service period. The requisite service period is generally three years. The compensation cost is recognized net of estimated forfeiture activity. The fair value of option grants under the Company’s equity compensation plan during the year ended December 31, 2016 was estimated using the following weighted-average assumptions: Dividend yield 0.00 % Expected volatility 58.00 % Risk-free interest rate 1.56 % Expected lives (years) 4.9 Net Loss Per Share Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the periods. Diluted net loss per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Shares of common stock issuable upon conversion of Convertible Subordinated Promissory Notes (the “Notes”) and exercise of share-based awards are excluded from the calculation of the weighted average number, because the effect of the conversion and exercise would be anti-dilutive. Recently Issued Accounting Pronouncements The Company evaluates new significant accounting pronouncements at each reporting period. For the year ended December 31, 2016, the Company did not adopt any new pronouncement that had or is expected to have a material effect on the Company’s presentation of its consolidated financial statements. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-9 Revenue from Contracts with Customers (Topic 606). This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company will adopt the standard early effective for annual reporting period beginning on January 1, 2017 and related interim reporting periods. The new standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We expect that the new standard will simplify our revenue recognition process and may result in acceleration of certain revenue that is currently included in our deferred revenue line item on the balance sheet. We expect to adopt a retrospective approach at the time of adoption, at which time cumulative effect of initially adopting the standard will be recognized in retained earnings as of the date of adoption and additional footnote disclosures will be included in the financial statements. Due to the complexity of certain of our subscription contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms. The FASB's new leases standard ASU 2016-02 Leases (Topic 842) was issued on February 25, 2016. ASU 2016-02 is intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The ASU will require organizations that lease assets, referred to as "Lessees", to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases (i.e. operating and capital) to be recognized on the balance sheet. The FASB lessee accounting model will continue to account for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted for under existing GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases. Public companies will be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption will be permitted for all companies and organizations upon issuance of the standard. For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective application to previously issued annual and interim financial statements for 2018 and 2017. See Notes 5 and 6 for the Company's current lease commitments. The Company is currently in the process of evaluating the impact that this new leasing ASU will have on its financial statements. Fair Value Measurements 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.

3. PROPERTY AND EQUIPMENT AND C

3. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE	12 Months Ended
	Dec. 31, 2016
Property, Plant and Equipment [Abstract]
3. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE	December 31, December 31, 2016 2015 Computer hardware $ 102,203 $ 85,547 Computer software 37,884 37,884 Furniture and fixtures 89,580 78,919 Equipment 25,558 7,193 Leasehold improvements 34,162 34,162 289,386 243,705 Less accumulated depreciation (185,257 ) (144,742 ) Property and equipment, net $ 104,129 $ 98,963 Capitalized software consists of the following: December 31, December 31, 2016 2015 Capitalized software $ 736,678 $ 756,175 Less accumulated amortization (461,845 ) (365,657 ) Capitalized software, net $ 274,833 $ 390,518 During the years ended December 31, 2016 and 2015, the Company recorded depreciation and amortization expense related to its property, equipment and capitalized software of $147,845 and $144,942, respectively. The Company also recorded an impairment charge of $8,356 and $7,020 related to capitalized software during years ended December 31, 2016 and 2015, respectively.

4. INTANGIBLE ASSETS

4. INTANGIBLE ASSETS	12 Months Ended
	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
4. INTANGIBLE ASSETS	The following table summarizes information about the Company’s intangible assets: December 31, 2016 December 31, 2015 Gross Net Gross Net Asset Category Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Acquired license and costs $ 108,534 $ 74,940 $ 33,594 $ 108,534 $ 59,435 $ 49,099 Other 10,000 6,001 3,999 10,000 4,000 6,000 Total $ 118,534 $ 80,941 $ 37,593 $ 118,534 $ 63,435 $ 55,099 During the years ended December 31, 2016 and 2015, the Company recorded amortization expense related to its intangible assets of $17,506 and $17,505, respectively. The following table presents the estimated future amortization expense related to intangible assets held at December 31, 2016: Year ending December 31: 2017 $ 17,505 2018 17,505 2019 2,583 $ 37,593

5. DEBT

5. DEBT	12 Months Ended
	Dec. 31, 2016
Debt Disclosure [Abstract]
5. DEBT	The table below summarizes the Company’s debt at December 31, 2016 and December 31, 2015: Debt Description December 31, December 31, 2016 2015 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2018 3.85 % Capital lease obligations - Noteholder lease 69,717 92,270 August 2019 8.00 % Capital lease obligations - office furniture and other equipment 14,044 22,368 August 2018 9.80 % Capital lease obligations - vehicle 17,023 - July 2021 5.59 % Convertible notes - related parties, net of discount of $1,168,652 and $2,010,743, respectively 39,655,579 33,363,488 November 2018 8.00 % Convertible notes, net of discount of $50,129 680,640 680,640 November 2018 8.00 % Total debt 45,437,003 39,158,766 Less: current portion of long term debt Capital lease obligations 36,950 30,877 Comerica Bank LSA - 5,000,000 Convertible notes - related parties, net of discount of $2,010,743 - 33,363,488 Convertible notes, net of discount of $50,129 - 680,640 Total current portion of long term debt 36,950 39,075,005 Debt - long term $ 45,400,053 $ 83,761 Convertible Notes Overview Since November 14, 2007 and through December 10, 2014, the Company financed its working capital deficiency primarily through the issuance of its notes (the “2007 NPA Notes”) under the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, as amended (as so amended, the “2007 NPA”). On December 11, 2014 the Company entered into an unsecured Convertible Subordinated Note Purchase Agreement, amended (as so amended, the “2014 NPA”) with Union Bancaire Privée, UBP SA ("UBP") and has financed its operations through issuance of notes (the "2014 NPA Notes") through 2014 NPA. During 2016, the Company raised gross proceeds of $5,450,000 from the private placement to UBP under 2014 NPA. On May 17, 2016, the Company and the holders of the majority of the aggregate outstanding principal amount of 2014 NPA Notes and holders of the majority of the aggregate outstanding principal amount of the 2007 NPA Notes agreed to extend to November 14, 2018 the maturity date of the 2014 NPA Notes and the 2007 NPA Notes. Except as so extended, all of the terms relating to the outstanding 2007 Notes and the 2014 Notes continue in full force and effect. The Company is entitled to utilize the amounts available for future borrowing under each of the 2007 Note Purchase Agreement and the 2014 Note Purchase Agreement through November 14, 2018. As a result of modification, any unamortized discount will be amortized into interest expense through the new maturity date of November 14, 2018. The table below summarizes convertible notes issued as of December 31, 2016 by type: Convertible Notes Type: Balance 2007 NPA notes, net of discount $ 29,666,930 2014 NPA notes, net of discount 10,669,289 Total convertible notes $ 40,336,219 Convertible notes issued under 2014 NPA The aggregate principal amount of 2014 NPA Notes that may be issued under the 2014 NPA is $40 million, of which $11,000,000 had been borrowed as of December 31, 2016. The 2014 NPA Notes are convertible into shares of the Company’s common stock, par value $0.001 per share, and are subordinated to the $5 million outstanding under the Company’s Loan and Security Agreement (the “LSA”) with Comerica Bank and to any promissory notes outstanding under the Company’s existing 2007 NPA program. The 2014 NPA Notes have the following terms: ● a maturity date of the earlier of (i) November 14, 2018, (ii) a Change of Control (as defined in the 2014 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the 2014 NPA), other than for a bankruptcy related, such amounts are declared due and payable by at least two-thirds of the aggregate outstanding principal amount of the 2014 NPA Notes; ● an interest rate of 8% per year, with accrued interest payable in cash in quarterly installments commencing on the third month anniversary of the date of issuance of the 2014 NPA ● a conversion price per share that is fixed at $1.43; ● optional conversion upon noteholder request; provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion, the noteholder may only convert that portion of their Notes outstanding for which the Company has a sufficient number of authorized shares of common stock. To the extent multiple noteholders under the 2014 NPA, the 2007 NPA, or both, request conversion of its notes on the same date, any limitations on conversion shall be applied on a pro rata basis. In such case, the noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover conversions of the remaining portion of the notes outstanding as well as the maximum issuances contemplated pursuant to the Company’s 2004 Equity Compensation Plan, within 90 calendar days after the Company’s receipt of such request; and ● may not be prepaid without the consent of holders of at least two-thirds of the aggregate outstanding principal amount of 2014 NPA Notes. Convertible notes issued under 2007 NPA The aggregate principal amount of 2007 NPA Notes that may be issued under the 2014 NPA is $33,300,000, of which $30,755,000 had been borrowed as of December 31, 2016. The 2007 NPA Notes are convertible into shares of the Company’s common stock, par value $0.001 per share, and are subordinated to the $5 million outstanding under the LSA with Comerica Bank. As amended, the 2007 NPA Notes have the following terms: ● a maturity date of the earlier of (i) November 14, 2018, (ii) a Change of Control (as defined in the amended 2007 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the amended 2007 NPA) such amounts are declared due and payable by a 2007 NPA Noteholder or made automatically due and payable in accordance with the terms of the 2007 NPA; ● an interest rate of 8% per year; ● a total borrowing commitment of $33.3 million; ● a conversion price that is fixed at $1.43; and ● optional conversion upon 2007 NPA Noteholder request, provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion, as well as the issuance of the maximum amount of common stock permitted under the Company’s 2004 Equity Compensation Plan, the 2007 NPA Noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover the remaining portion of the Notes outstanding as well as the maximum issuances permitted under the 2004 Equity Compensation Plan. Related Party Convertible Notes under 2007 and 2014 NPAs Grasford, the Company’s largest stockholder, owns $13,826,282 in face value amount of 2007 NPA Notes as of December 31, 2016. Grasford is controlled by Avy Lugassy, one of the Company’s principal shareholders. UBP owns $26,267,180 in combined face value amount of 2007 and 2014 NPA Notes as of December 31, 2016 and is considered a significant beneficial owner. Crystal Management owns $730,769 in face value amount of 2007 NPA Notes as of December 31, 2016. Crystal Management is controlled by Doron Rotler, the second largest shareholder of the Company. Interest expense for 2016 for convertible notes was $4,494,905, including amortization of discount of $1,408,973. Interest expense for 2015 for convertible notes was $5,020,148, including amortization of discount of $2,335,151. Comerica LSA The Company has an outstanding Loan and Security Agreement with Comerica Bank dated June 9, 2014 with original maturity of June 9, 2016. The LSA with Comerica has the following terms: ● a maturity date of June 9, 2018; ● a variable interest rate at prime plus 0.6% payable quarterly; ● secured by substantially all of the assets of the Company, including the Company’s intellectual property; ● secured by an extended irrevocable SBLC issued by UBS AG (Geneva, Switzerland) (“UBS AG”) with an initial term expiring on May 31, 2015, which term is automatically 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 (no such notice has been given and SBLC was extended to expire on May 31, 2017); and ● acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, including but not limited to, failure by the Company to perform its obligations, observe the covenants made by it under the LSA, failure to renew the UBS AG SBLC, and insolvency of the Company. Capital Leases On September 4, 2009, the Company entered into a sale transaction whereby it sold its computer equipment, furniture, fixtures and certain personal property located at its former principal executive offices in Durham, North Carolina (collectively, the “Equipment”) on an “as-is, where-is” basis to the holders of the Company’s Notes, on a ratable basis in proportion to their respective holdings of Notes, for $200,000 (“Purchase Price”). The Purchase Price was paid through a $200,000 reduction, on a ratable basis, in the outstanding aggregate principal amount of the Notes. The Purchase Price represented the fair market value of the Equipment based on an independent appraisal. The payments on the lease are made monthly. The balance of the lease as of December 31, 2016 was $69,717. In September 2013 the Company purchased furniture for its new office by execution of a five-year non-cancellable lease, which is accounted for as a capital lease. The unpaid balance on the lease as of December 31, 2016 is $14,044. In July 2016, the Company acquired a vehicle, that it had been previously leasing since July of 2013. The vehicle is financed through a 5 year auto loan. The payments are made monthly. The unpaid balance on the note payable is $17,023. The table below details future payments under capital leases: Year: 2017 $ 43,477 2018 38,407 2019 23,631 2020 4,219 Thereafter 2,461 112,195 Less amount representing interest (11,411 ) Capital lease obligations $ 100,784

6. COMMITMENTS AND CONTINGENCIE

6. COMMITMENTS AND CONTINGENCIES	12 Months Ended
	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
6. COMMITMENTS AND CONTINGENCIES	Operating Leases On July 29, 2013, the Company signed a 65-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 is being recognized over the entire 65-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 $14,000 per month. The table below summarizes the Company’s future obligations under the new office lease: Year: 2017 167,786 2018 172,418 2019 44,082 Total $ 384,286 Rent expense for the years ended December 31, 2016 and 2015 was $155,603 and $155,116, respectively. 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 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.

7. STOCKHOLDERS EQUITY

7. STOCKHOLDERS EQUITY	12 Months Ended
	Dec. 31, 2016
Equity [Abstract]
7. STOCKHOLDERS EQUITY	Common Stock The Company is authorized to issue 100,000,000 shares of common stock, $0.001 par value per share. As of December 31, 2016, the Company had 19,827,542 shares of common stock outstanding. Holders of the Company’s shares of common stock are entitled to one vote for each share held. Preferred Stock The Board of Directors is authorized, without further stockholder approval, to issue up to 5,000,000 shares of $0.001 par value preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions applicable to such shares, including dividend rights, conversion rights, terms of redemption, and liquidation preferences, and to fix the number of shares constituting any series and the designations of such series. There were no shares of preferred stock outstanding at December 31, 2016 and 2015. Equity Compensation Plans 2004 Equity Compensation Plan The Company adopted its 2004 Equity Compensation Plan (the “2004 Plan”) as of March 31, 2004. The 2004 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, and other direct stock awards to employees (including officers) and directors of the Company as well as to certain consultants and advisors. The total number of shares of common stock reserved for issuance under the 2004 Plan is 5,000,000 shares, subject to adjustment in the event of a stock split, stock dividend, recapitalization, or similar capital change. The Company can’t make any new grants under the plan. 2016 Equity Compensation Plan In May 2016, the Company’s shareholders authorized adoption of the approved MobileSmith Inc. 2016 Equity Compensation Plan for officers, directors, employees and consultants, initially reserving for issuance thereunder 15,000,000 shares of Common Stock. The exercise price for incentive stock options granted under the above plans is required to be no less than the fair market value of the common stock on the date the option is granted, except for options granted to 10% stockholders, which are required to have an exercise price of not less than 110% of the fair market value of the common stock on the date the option is granted. Incentive stock options typically have a maximum term of 10 years, except for option grants to 10% stockholders, which are subject to a maximum term of five years. Non-statutory stock options have a term determined by either the Board of Directors or the Compensation Committee of the Board of Directors. Options granted under the plans are not transferable, except by will and the laws of descent and distribution. A summary of the status of the stock option issuances as of December 31, 2016 and 2015, and changes during the periods ended on these dates is as follows: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Shares Exercise Price Contractual Term Value Outstanding, December 31, 2014 403,661 $ 1.45 Cancelled (42,312 ) 1.53 Issued — — Outstanding, December 31, 2015 361,349 1.44 Cancelled (146,409 ) 1.52 Issued 1,968,860 Outstanding, December 31, 2016 2,184,160 $ 1.48 4.28 $ 31,760 Vested and exercisable, December 31, 2016 335,813 $ 1.41 3.37 $ 31,070 At December 31, 2016, $1,073,959 of unvested expense remains to be recorded related to all options outstanding. Exercise prices for options outstanding as of December 31, 2016 ranged between $.90 and $1.95.

8. INCOME TAXES

8. INCOME TAXES	12 Months Ended
	Dec. 31, 2016
Income Tax Disclosure [Abstract]
8. INCOME TAXES	The Company accounts for income taxes under the asset and liability method in accordance with the requirements of US GAAP. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The balances of deferred tax assets and liabilities are as follows: December 31, December 31, 2016 2015 Net Current Deferred Income Tax Assets Related To: Allowance For Doubtful Accounts $ 73,000 $ 81,000 Depreciation And Amortization 144,000 141,000 Impairment Charges 34,000 30,000 Stock-Based Compensation Expenses 91,000 91,000 Accrued Liabilities 11,000 11,000 Other 3,923 7,000 Net Operating Loss Carryforwards 35,916,000 33,617,000 Total 36,272,923 33,978,000 Less Valuation Allowance (36,272,923 ) (33,978,000 ) Net Current Deferred Income Tax $ — $ — Under US GAAP, a valuation allowance is provided when it is more likely than not that the deferred tax asset will not be realized. Total income tax expense related to continuing operations differs from expected income tax expense (computed by applying the U.S. federal corporate income tax rate of 34% to profit (loss) before taxes) as follows: December 31, December 31, 2016 2015 Tax Benefit Computed At Statutory Rate Of 34% $ (2,550,563 ) $ (2,623,749 ) State Income Tax Benefit, Net Of Federal Effect (341,625 ) (351,428 ) Permanent Differences Stock-Based Compensation 51,153 32,861 Debt Discount Amortization 543,177 900,294 Other 2,935 (4,978 ) Change In Valuation Allowance - Continuing Operations 2,294,923 2,047,000 Totals $ — $ — As of December 31, 2016, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $93 million, which expire between 2018 and 2038. For state tax purposes, the NOL carryforwards expire between 2017 and 2032. In accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a change in equity ownership of greater than 50% of the Company within a three-year period can result in an annual limitation on the Company’s ability to utilize its NOL carryforwards that were created during tax periods prior to the change in ownership. The Company has reviewed its tax positions and has determined that it has no significant uncertain tax positions at December 31, 2016.

9. MAJOR CUSTOMERS AND CONCENTR

9. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK	12 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
9. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK	A customer that individually generates more than 10% of revenue is considered a major customer. For the year ended December 31, 2016, one customer accounted for 15% of the Company’s revenue. Two customers accounted for 75% of net accounts receivable balance as of December 31, 2016. Two vendors accounted for 65% of accounts payable balance as of December 31, 2016. For the year ended December 31, 2015, two customers accounted for 27% of the Company’s revenue. Three customers accounted for 72% of net accounts receivable balance as of December 31, 2015. Four vendors accounted for 93% of accounts payable balance as of December 31, 2015.

10. EMPLOYEE BENEFIT PLAN

10. EMPLOYEE BENEFIT PLAN	12 Months Ended
	Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]
10. EMPLOYEE BENEFIT PLAN	All full-time employees who meet certain age and length of service requirements are eligible to participate in the Company’s 401(k) Plan. The plan provides for contributions by the Company in such amounts as the Board of Directors may annually determine, as well as a 401(k) option under which eligible participants may defer a portion of their salaries. The Company contributed a total of approximately $37,000 and $28,000 to the plan during 2016 and 2015, respectively.

11. SUBSEQUENT EVENTS

11. SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2016
Subsequent Events [Abstract]
11. SUBSEQUENT EVENTS	Subsequent to December 31, 2016, the Company sold one 2014 NPA Note to UBP in the total amount of $1,000,000 on the same terms as the currently outstanding 2014 NPA Notes. The note matures on November 14, 2018.

2. SIGNIFICANT ACCOUNTING POL18

2. SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Use of Estimates	The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions in the Company’s financial statements and notes thereto. Significant estimates and assumptions made by management include the determination of the best estimate of selling price of the deliverables included in multiple-deliverable revenue arrangements, deferral of certain revenues, share-based compensation, allowance for accounts receivable, estimated useful lives of property and equipment, recoverability of capitalized software asset and other long lived assets. Actual results could differ from those estimates.
Fair Value of Financial Instruments	US GAAP requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Due to the short period of time to maturity, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued liabilities, and notes payable reported in the financial statements approximate the fair value.
Cash and Cash Equivalents	All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Federal Deposit Insurance Corporation (FDIC) covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits.
Revenue Recognition	The Company derives revenue primarily from subscription services charged to customers accessing the Platform and, to a much lesser degree, professional services provided in connection with subscription services. The Company recognizes revenues when the following criteria have been met: ● persuasive evidence of an arrangement exists; ● delivery has occurred; ● the fees are fixed or determinable; and ● collection is considered reasonably assured.
Subscription Revenues	Subscription revenues are recognized ratably over the contract term of the arrangement beginning on the date that our service is made available to the customer. Amounts that have been invoiced are recorded in revenue or deferred revenue, depending on whether the revenue recognition criteria have been met.
Software Revenues	Sale of software takes place when the Company sells perpetual license to the Platform through installation in a private cloud. Revenue recognition begins when all elements of the agreement, besides post-contract customer support, are delivered (including installation). The software revenue is recognized ratably over the period of post-contract customer support in accordance with ASC 985-605.
Professional Services Revenues	Professional services revenues consist of fees for professional services, which relate to app design and development, training, system implementation and data integration, mobile application marketing services, and mobile strategy implementation consulting. These revenues are recognized as the services are rendered for time and material contracts and when the milestones are achieved and accepted by the customer for fixed-fee contracts.
Multiple-Element Arrangements	The Company evaluates each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. In order to account for deliverables in a multiple-deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. In determining whether professional service revenues have standalone value, the Company considers availability of professional services from other vendors, the nature of the Company’s professional services, and whether the Company sells professional services to customers without the subscription. When multiple deliverables are included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on their relative selling price. Multiple-deliverable arrangements accounting guidance provides a hierarchy to use when determining the relative selling price for each unit of accounting. Vendor-specific objective evidence (“VSOE”) of selling price, based on the price at which the item is regularly sold by the vendor on a standalone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence (“TPE”) of selling price is used to establish the selling price if it exists. If VSOE of selling price and TPE of selling price are not available, then the best estimate of selling price (“BESP”) is to be used. VSOE and TPE do not currently exist for any of the Company’s deliverables. Accordingly, the Company uses its BESP to determine the relative selling price. The Company determines its BESP for its deliverables based on its overall pricing objectives, taking into consideration market conditions and entity-specific factors. The Company evaluates its BESP by reviewing historical data related to sales of its deliverables. Total consideration under the contract is allocated to each of the separate units of accounting through application of the relative selling price method.
Deferred Revenue	Deferred revenue consists of billings or payments received prior to the date when revenue is recognized.
Cost of Revenues	Cost of revenues includes salaries of customer support teams, costs of infrastructure that supports the Platform, expenses for outsourced work to fulfill the contracted work, and amortization charges for the Platform.
Allowance for Doubtful Accounts	The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or failure of its customers to make required payments. The need for an allowance for doubtful accounts is evaluated based on specifically identified amounts that management believes to be potentially uncollectible. If actual collections experience changes, revisions to the allowance may be required.
Property and Equipment	The Company records property and equipment at cost and provides for depreciation and amortization using the straight-line method for financial reporting purposes over the estimated useful lives. The estimated useful lives by asset classification are as follows: Computer hardware and office equipment 5 years Computer software 5 years Furniture and fixtures 5 years Leasehold improvements Shorter of the estimated useful life or the lease term
Software Development Costs	The Company capitalized certain costs of development and subsequent enhancement of the Platform through the middle of 2013. The Company started capitalizing software development costs when technological feasibility of the Platform or its enhancements had been established. The Company expensed costs associated with preliminary project stage and research activities. The Company’s policy provided for the capitalization of certain payroll, benefits, and other payroll-related costs for employees who were directly associated with development. During 2012, the Platform was substantially completed. During 2013, the Company’s development efforts became more driven by market requirements and rapidly changing customers’ needs. As a result, the Company’s development team adopted the Agile iterative approach to software development. Due to Agile’s short development cycles and focus on rapid production, the Company ceased capitalizing software development costs mid-way through 2013 as the documentation produced under the Agile method did not meet requirements necessary to establish technological feasibility. No development costs were capitalized in 2015 or 2016 and the Company does not expect to capitalize substantial development costs in the future.
Intangible Assets	Intangible assets consist of the perpetual license for critical Platform software, costs associated with the Company’s patent filings and other acquired intangible assets. The Company also owns several copyrights and trademarks related to products, names, and logos used throughout its non-acquired product lines.
Impairment of Long-Lived Assets	The Company evaluates the recoverability of its long-lived assets every reporting period or whenever events and circumstances indicate that the value may be impaired. During 2016, the Company recorded a loss on impairment of intangible assets in the amount of $8,356, mostly related to impairment of previously capitalized software, which were replaced with new functionality in our Platform.
Advertising Costs	Advertising costs consist primarily of industry related tradeshows and marketing campaigns. Advertising costs are expensed as incurred, or the first time the advertising takes place, applied consistently based on the nature of the advertising activity. The amounts related to advertising during 2016 and 2015 were $382,932 and $342,718, respectively.
Share Based Compensation	The Company measures share-based compensation cost at the grant date based on the fair value of the award. The Company recognizes compensation cost on a straight-line basis over the requisite service period. The requisite service period is generally three years. The compensation cost is recognized net of estimated forfeiture activity. The fair value of option grants under the Company’s equity compensation plan during the year ended December 31, 2016 was estimated using the following weighted-average assumptions: Dividend yield 0.00 % Expected volatility 58.00 % Risk-free interest rate 1.56 % Expected lives (years) 4.9
Net Loss Per Share	Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the periods. Diluted net loss per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Shares of common stock issuable upon conversion of Convertible Subordinated Promissory Notes (the “Notes”) and exercise of share-based awards are excluded from the calculation of the weighted average number, because the effect of the conversion and exercise would be anti-dilutive.
Recently Issued Accounting Pronouncements	The Company evaluates new significant accounting pronouncements at each reporting period. For the year ended December 31, 2016, the Company did not adopt any new pronouncement that had or is expected to have a material effect on the Company’s presentation of its consolidated financial statements. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-9 Revenue from Contracts with Customers (Topic 606). This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company will adopt the standard early effective for annual reporting period beginning on January 1, 2017 and related interim reporting periods. The new standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We expect that the new standard will simplify our revenue recognition process and may result in acceleration of certain revenue that is currently included in our deferred revenue line item on the balance sheet. We expect to adopt a retrospective approach at the time of adoption, at which time cumulative effect of initially adopting the standard will be recognized in retained earnings as of the date of adoption and additional footnote disclosures will be included in the financial statements. Due to the complexity of certain of our subscription contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms. The FASB's new leases standard ASU 2016-02 Leases (Topic 842) was issued on February 25, 2016. ASU 2016-02 is intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The ASU will require organizations that lease assets, referred to as "Lessees", to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases (i.e. operating and capital) to be recognized on the balance sheet. The FASB lessee accounting model will continue to account for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted for under existing GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases. Public companies will be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption will be permitted for all companies and organizations upon issuance of the standard. For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective application to previously issued annual and interim financial statements for 2018 and 2017. See Notes 5 and 6 for the Company's current lease commitments. The Company is currently in the process of evaluating the impact that this new leasing ASU will have on its financial statements.
Fair Value Measurements	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.

2. SIGNIFICANT ACCOUNTING POL19

2. SIGNIFICANT ACCOUNTING POLICIES (Tables)	12 Months Ended
	Dec. 31, 2016
Accounting Policies [Abstract]
Schedule of useful life	Computer hardware and office equipment 5 years Computer software 5 years Furniture and fixtures 5 years Leasehold improvements Shorter of the estimated useful life or the lease term
Schedule of fair value assumptions for option grants	Dividend yield 0.00 % Expected volatility 58.00 % Risk-free interest rate 1.56 % Expected lives (years) 4.9

3. PROPERTY AND EQUIPMENT AND20

3. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE (Tables)	12 Months Ended
	Dec. 31, 2016
Property, Plant and Equipment [Abstract]
Property and equipment	December 31, December 31, 2016 2015 Computer hardware $ 102,203 $ 85,547 Computer software 37,884 37,884 Furniture and fixtures 89,580 78,919 Equipment 25,558 7,193 Leasehold improvements 34,162 34,162 289,386 243,705 Less accumulated depreciation (185,257 ) (144,742 ) Property and equipment, net $ 104,129 $ 98,963
Capitalized software	December 31, December 31, 2016 2015 Capitalized software $ 736,678 $ 756,175 Less accumulated amortization (461,845 ) (365,657 ) Capitalized software, net $ 274,833 $ 390,518

4. INTANGIBLE ASSETS (Tables)

4. INTANGIBLE ASSETS (Tables)	12 Months Ended
	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of intangible assets	December 31, 2016 December 31, 2015 Gross Net Gross Net Asset Category Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Acquired license and costs $ 108,534 $ 74,940 $ 33,594 $ 108,534 $ 59,435 $ 49,099 Other 10,000 6,001 3,999 10,000 4,000 6,000 Total $ 118,534 $ 80,941 $ 37,593 $ 118,534 $ 63,435 $ 55,099
Schedule of estimated future amortization expense related to intangible assets	Year ending December 31: 2017 $ 17,505 2018 17,505 2019 2,583 $ 37,593

5. DEBT (Tables)

5. DEBT (Tables)	12 Months Ended
	Dec. 31, 2016
Debt Disclosure [Abstract]
Company's debt	Debt Description December 31, December 31, 2016 2015 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2018 3.85 % Capital lease obligations - Noteholder lease 69,717 92,270 August 2019 8.00 % Capital lease obligations - office furniture and other equipment 14,044 22,368 August 2018 9.80 % Capital lease obligations - vehicle 17,023 - July 2021 5.59 % Convertible notes - related parties, net of discount of $1,168,652 and $2,010,743, respectively 39,655,579 33,363,488 November 2018 8.00 % Convertible notes, net of discount of $50,129 680,640 680,640 November 2018 8.00 % Total debt 45,437,003 39,158,766 Less: current portion of long term debt Capital lease obligations 36,950 30,877 Comerica Bank LSA - 5,000,000 Convertible notes - related parties, net of discount of $2,010,743 - 33,363,488 Convertible notes, net of discount of $50,129 - 680,640 Total current portion of long term debt 36,950 39,075,005 Debt - long term $ 45,400,053 $ 83,761
Summary of convertible notes	Convertible Notes Type: Balance 2007 NPA notes, net of discount $ 29,666,930 2014 NPA notes, net of discount 10,669,289 Total convertible notes $ 40,336,219
Schedule of future payments under capital leases	Year: 2017 $ 43,477 2018 38,407 2019 23,631 2020 4,219 Thereafter 2,461 112,195 Less amount representing interest (11,411 ) Capital lease obligations $ 100,784

6. COMMITMENTS AND CONTINGENC23

6. COMMITMENTS AND CONTINGENCIES (Tables)	12 Months Ended
	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Company's future obligation under the new office and vehicle leases	Year: 2017 167,786 2018 172,418 2019 44,082 Total $ 384,286

7. STOCKHOLDERS EQUITY (Tables)

7. STOCKHOLDERS EQUITY (Tables)	12 Months Ended
	Dec. 31, 2016
Equity [Abstract]
Schedule of Stock Options	Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Shares Exercise Price Contractual Term Value Outstanding, December 31, 2014 403,661 $ 1.45 Cancelled (42,312 ) 1.53 Issued — — Outstanding, December 31, 2015 361,349 1.44 Cancelled (146,409 ) 1.52 Issued 1,968,860 Outstanding, December 31, 2016 2,184,160 $ 1.48 4.28 $ 31,760 Vested and exercisable, December 31, 2016 335,813 $ 1.41 3.37 $ 31,070

8. INCOME TAXES (Tables)

8. INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Schedule of deferred tax assets and liabilities	December 31, December 31, 2016 2015 Net Current Deferred Income Tax Assets Related To: Allowance For Doubtful Accounts $ 73,000 $ 81,000 Depreciation And Amortization 144,000 141,000 Impairment Charges 34,000 30,000 Stock-Based Compensation Expenses 91,000 91,000 Accrued Liabilities 11,000 11,000 Other 3,923 7,000 Net Operating Loss Carryforwards 35,916,000 33,617,000 Total 36,272,923 33,978,000 Less Valuation Allowance (36,272,923 ) (33,978,000 ) Net Current Deferred Income Tax $ — $ —
Schedule of income tax reconciliation	December 31, December 31, 2016 2015 Tax Benefit Computed At Statutory Rate Of 34% $ (2,550,563 ) $ (2,623,749 ) State Income Tax Benefit, Net Of Federal Effect (341,625 ) (351,428 ) Permanent Differences Stock-Based Compensation 51,153 32,861 Debt Discount Amortization 543,177 900,294 Other 2,935 (4,978 ) Change In Valuation Allowance - Continuing Operations 2,294,923 2,047,000 Totals $ — $ —

2. SIGNIFICANT ACCOUNTING POL26

2. SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2016
Computer hardware and office equipment
Life	5 years
Computer software
Life	5 years
Furniture and fixtures
Life	5 years
Leasehold improvements
Life	Shorter of the estimated useful life or the lease term

2. SIGNIFICANT ACCOUNTING POL27

2. SIGNIFICANT ACCOUNTING POLICIES (Details 1)	12 Months Ended
	Dec. 31, 2016
Significant Accounting Policies Details 1
Dividend yield	0.00%
Expected volatility	58.00%
Risk free interest rate	1.56%
Expected lives (years)	4 years 10 months 24 days

2. SIGNIFICANT ACCOUNTING POL28

2. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Significant Accounting Policies Details Narrative
Loss on impairment of intangible assets	$ 8,356
Advertising Costs	$ 382,932	$ 342,718

3. PROPERTY AND EQUIPMENT AND29

3. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Property and equipment, gross	$ 289,386	$ 243,705
Less accumulated depreciation	(185,257)	(144,742)
Property and equipment, net	104,129	98,963
Computer hardware
Property and equipment, gross	102,203	85,547
Computer software
Property and equipment, gross	37,884	37,884
Furniture and fixtures
Property and equipment, gross	89,580	78,919
Equipment
Property and equipment, gross	25,558	7,193
Leasehold improvements
Property and equipment, gross	$ 34,162	$ 34,162

3. PROPERTY AND EQUIPMENT AND30

3. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE (Details 1) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Property And Equipment And Capitalized Software Details 1
Capitalized software	$ 736,678	$ 756,175
Less accumulated amortization	(461,845)	(365,657)
Capitalized software, net	$ 274,833	$ 390,518

3. PROPERTY AND EQUIPMENT AND31

3. PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Depreciation and amortization expense	$ 147,845	$ 144,942
Capitalized software
Impairment	$ 8,356	$ 7,020

4. INTANGIBLE ASSETS (Details)

4. INTANGIBLE ASSETS (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Intangible assets, gross carrying amount	$ 118,534	$ 118,534
Accumulated amortization intangible assets	80,941	63,435
Intangible assets, net carrying amount	37,593	55,099
Acquired license and costs
Intangible assets, gross carrying amount	108,534	108,534
Accumulated amortization intangible assets	74,940	59,435
Intangible assets, net carrying amount	33,594	49,099
Other
Intangible assets, gross carrying amount	10,000	10,000
Accumulated amortization intangible assets	6,001	4,000
Intangible assets, net carrying amount	$ 3,999	$ 6,000

4. INTANGIBLE ASSETS (Details 1

4. INTANGIBLE ASSETS (Details 1) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Year ending December 31:
2,017	$ 17,505
2,018	17,505
2,019	2,583
Total	$ 37,593	$ 55,099

4. INTANGIBLE ASSETS (Details N

4. INTANGIBLE ASSETS (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Intangible Assets Details Narrative
Intangible asset aggregate amortization expense	$ 17,506	$ 17,505

5. DEBT (Details)

5. DEBT (Details) - USD ($)		Dec. 31, 2016	Dec. 31, 2015
Debt Details
Comerica Bank Loan and Security Agreement	[1]	$ 5,000,000	$ 5,000,000
Capital lease obligations - Noteholder lease	[2]	69,717	92,270
Capital lease obligations - office furniture and other equipment	[3]	14,044	22,368
Capital lease obligations - vehicle	[4]	17,023	0
Convertible notes - related parties, net of discount of $1,168,652 and $2,010,743, respectively	[5]	39,655,579	33,363,488
Convertible notes, net of discount of $50,129	[5]	680,640	680,640
Total debt		45,437,003	39,158,766
Less: current portion of long term debt
Capital lease obligations		36,950	30,877
Comerica Bank LSA		0	5,000,000
Convertible notes - related parties, net of discount of $2,010,743		0	33,363,488
Convertible notes, net of discount of $50,129		0	680,640
Total current portion of long term debt		36,950	39,075,005
Debt - long term		$ 45,400,053	$ 83,761
[1]	Maturity: June 2018 Rate: 3.85%
[2]	Maturity: August 2019 Rate: 8.00%
[3]	Maturity: August 2018 Rate: 9.80%
[4]	Maturity: July 2021 Rate: 5.59%
[5]	Maturity: November 2018 Rate: 8.00%

5. DEBT (Details 1)

5. DEBT (Details 1)	Dec. 31, 2016USD ($)
Convertible Notes	$ 40,336,219
2007 NPA
Convertible Notes	29,666,930
2014 NPA
Convertible Notes	$ 10,669,289

5. DEBT (Details 2)

5. DEBT (Details 2)	Dec. 31, 2016USD ($)
Commitments and Contingencies Disclosure [Abstract]
2,017	$ 43,477
2,018	38,407
2,019	23,631
2,020	4,219
Thereafter	2,461
Capital Leases, Future Minimum Payments Due	112,195
Less amount representing interest	(11,411)
Capital lease obligations	$ 100,784

6. COMMITMENTS AND CONTINGENC38

6. COMMITMENTS AND CONTINGENCIES (Details)	Dec. 31, 2016USD ($)
Commitments and Contingencies Disclosure [Abstract]
2,017	$ 167,786
2,018	172,418
2,019	44,082
Total	$ 384,286

6. COMMITMENTS AND CONTINGENC39

6. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Commitments And Contingencies Details Narrative
Rent expense	$ 155,603	$ 155,116

7. STOCKHOLDERS' EQUITY (Detail

7. STOCKHOLDERS' EQUITY (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Stockholders Equity Details
Number of Shares Outstanding, Beginning	361,349	403,661
Number of Shares Cancelled	(146,409)	(42,312)
Number of Shares Issued	1,968,860	0
Number of Shares Outstanding, Ending	2,184,160	361,349
Stock Options Vested and Exercisable Number of Shares	335,813
Weighted Average Exercise Price Outstanding, Beginning	$ 1.44	$ 1.45
Weighted Average Exercise Price Cancelled	1.52	1.53
Weighted Average Exercise Price Issued	0	0
Weighted Average Exercise Price Outstanding, Ending	1.48	$ 1.44
Weighted Average Exercise Price Vested and exercisable, Ending	$ 1.41
Weighted Average Remaining Contractual Life (in years) Outstanding	4 years 3 months 11 days
Weighted Average Remaining Contractual Life (in years) Vested and expected to vest	3 years 4 months 13 days
Aggregate Intrinsic Value Outstanding	$ 31,760
Aggregate Intrinsic Value vested and expected to vest	$ 31,070

8. INCOME TAXES (Details)

8. INCOME TAXES (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Net current deferred income tax assets related to:
Allowance for doubtful accounts	$ 73,000	$ 81,000
Depreciation and amortization	144,000	141,000
Impairment charges	34,000	30,000
Stock-based compensation expenses	91,000	91,000
Accrued liabilities	11,000	11,000
Other	3,923	7,000
Net operating loss carryforwards	35,916,000	33,617,000
Total	36,272,923	33,978,000
Less valuation allowance	(36,272,923)	(33,978,000)
Net current deferred income tax	$ 0	$ 0

8. INCOME TAXES (Details 1)

8. INCOME TAXES (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Tax benefit computed at statutory rate of 34%	$ (2,550,563)	$ (2,623,749)
State income tax benefit, net of federal effect	(341,625)	(351,428)
Permanent differences:
Stock based compensation	51,153	32,861
Debt discount amortization	543,177	900,294
Other	2,935	(4,978)
Change in valuation allowance - continuing operations	2,294,923	2,047,000
Totals	$ 0	$ 0

8. INCOME TAXES (Details Narrat

8. INCOME TAXES (Details Narrative)	12 Months Ended
	Dec. 31, 2016USD ($)
Income Taxes Details Narrative
Federal net operating loss carryforward	$ 93,000,000
Carryforward expiration	Between 2018 and 2038

9. MAJOR CUSTOMERS AND CONCEN44

9. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details Narrative)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
One Customer | Revenue
% Concentration	15.00%
Two Customers | Revenue
% Concentration		27.00%
Two Customers | Accounts Receivable
% Concentration	75.00%
Two Customers | Accounts Payable
% Concentration	65.00%
Three Customers | Accounts Receivable
% Concentration		72.00%
Four Customers | Accounts Payable
% Concentration		93.00%

10. EMPLOYEE BENEFIT PLAN (Deta

10. EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Employee Benefit Plan Details Narrative
Employee benefit plan contibution	$ 37,000	$ 28,000