Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 14, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | MobileSmith, Inc. | |
Entity Central Index Key | 1,113,513 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
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 | 28,236,633 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and Cash Equivalents | $ 1,129,126 | $ 58,484 |
Restricted cash | 60,144 | 120,372 |
Accounts Receivable | 332,708 | 260,403 |
Prepaid Expenses and Other Current Assets | 103,321 | 71,992 |
Total Current Assets | 1,625,299 | 511,251 |
Property and Equipment, Net | 60,581 | 71,603 |
Capitalized Software, Net | 116,973 | 169,593 |
Intangible Assets, Net | 11,341 | 20,093 |
Other Assets | 48,940 | 0 |
Total Other Assets | 237,835 | 261,289 |
Total Assets | 1,863,134 | 772,540 |
Current Liabilities | ||
Trade Accounts Payable | 206,375 | 125,982 |
Accrued Expenses | 253,914 | 201,528 |
Accrued Interest | 761,221 | 865,822 |
Capital Lease Obligations | 31,172 | 34,927 |
Contract Liability, Current | 648,821 | 860,927 |
Bank Loan | 0 | 5,000,000 |
Convertible Notes Payable, Related Parties, Net of Discount | 0 | 37,101,243 |
Convertible Notes Payable, Net of Discount | 0 | 680,640 |
Total Current Liabilities | 1,901,503 | 44,871,069 |
Long-Term Liabilities | ||
Capital Lease Obligations | 13,083 | 28,907 |
Deferred Rent | 16,409 | 26,286 |
Contract Liability | 1,040,681 | 527,576 |
Bank Loan | 5,000,000 | 0 |
Subordinated Promissory Note, Related Party | 525,000 | 0 |
Convertible Notes Payable, Related Parties, Net of Discount | 34,516,300 | 0 |
Convertible Notes Payable, Net of Discount | 655,640 | 0 |
Total Long-Term Liabilities | 41,767,133 | 582,769 |
Total Liabilities | 43,668,616 | 45,453,838 |
Commitments and Contingencies (Note 3) | ||
Stockholders' Deficit | ||
Preferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, No Shares Issued and Outstanding at June 30, 2018 and December 31, 2017 | 0 | 0 |
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At June 30, 2018 and December 31, 2017; 28,236,633 and 24,722,647 Shares Issued and Outstanding at June 30, 2018 and December 31, 2017, respectively | 28,237 | 24,723 |
Additional Paid-in Capital | 112,682,775 | 105,795,621 |
Accumulated Deficit | (154,516,494) | (150,501,642) |
Total Stockholders' Deficit | (41,805,482) | (44,681,298) |
Total Liabilities and Stockholders' Deficit | $ 1,863,134 | $ 772,540 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Stockholders' Deficit | ||
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 | 100,000,000 |
Common stock, issued | 28,236,633 | 24,722,647 |
Common stock, outstanding | 28,236,633 | 24,722,647 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
REVENUES: | ||||
Subscription and Support | $ 520,918 | $ 638,941 | $ 1,017,741 | $ 1,046,343 |
Total Revenue | 520,918 | 638,941 | 1,017,741 | 1,046,343 |
COST OF REVENUES | ||||
Subscription and Support | 183,885 | 140,315 | 345,420 | 283,922 |
Professional Services and Other | 0 | 15,748 | 0 | 29,304 |
Total Cost of Revenue | 183,885 | 156,063 | 345,420 | 313,226 |
GROSS PROFIT | 337,033 | 482,878 | 672,321 | 733,117 |
OPERATING EXPENSES: | ||||
Sales and Marketing | 386,492 | 285,860 | 683,730 | 565,622 |
Research and Development | 426,090 | 440,425 | 767,491 | 889,534 |
General and Administrative | 674,361 | 321,300 | 1,197,405 | 798,366 |
Total Operating Expenses | 1,486,943 | 1,047,585 | 2,648,626 | 2,253,522 |
LOSS FROM OPERATIONS | (1,149,910) | (564,707) | (1,976,305) | (1,520,405) |
OTHER INCOME (EXPENSE): | ||||
Other Income | 2 | 594 | 1,599 | 1,184 |
Interest Expense, Net | (1,110,525) | (1,085,616) | (2,105,423) | (2,122,614) |
Total Other Expense | (1,110,523) | (1,085,022) | (2,103,824) | (2,121,430) |
NET LOSS | $ (2,260,433) | $ (1,649,729) | $ (4,080,129) | $ (3,641,835) |
NET LOSS PER COMMON SHARE: | ||||
Basic and Fully Diluted | $ (0.08) | $ (0.08) | $ (0.14) | $ (0.18) |
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE: | ||||
Basic And Fully Diluted | 28,236,633 | 19,827,542 | 28,236,633 | 19,827,542 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (4,080,129) | $ (3,641,835) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||
Depreciation and Amortization | 80,691 | 82,049 |
Bad Debt Expense | 0 | 12,500 |
Amortization of Debt Discount | 409,183 | 322,056 |
Share Based Compensation | 506,542 | 213,196 |
Changes in Assets and Liabilities: | ||
Accounts Receivable | (72,305) | (270,489) |
Prepaid Expenses and Other Assets | (14,992) | 2,617 |
Accounts Payable | 86,708 | 6,535 |
Contract Liability | 300,999 | 1,100,827 |
Accrued and Other Expenses | (68,407) | 16,260 |
Net Cash Used in Operating Activities | (2,851,710) | (2,156,284) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Payments to Acquire Property, Plant and Equipment | (8,297) | (8,339) |
Net Cash Used in Investing Activities | (8,297) | (8,339) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds From Issuance of Short Term Loan from Related Party | 525,000 | 0 |
Proceeds from Issuance of Long Term Debt | 3,365,000 | 2,225,000 |
Repayments of Debt Borrowings | (19,579) | (18,097) |
Net Cash Provided by Financing Activities | 3,870,421 | 2,206,903 |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 1,010,414 | 42,280 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 178,856 | 664,723 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 1,189,270 | 707,003 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash Paid During the Period for Interest | 1,791,718 | 1,771,509 |
The Company Recorded Debt Discount Associated with Beneficial Conversion Feature | 1,359,126 | 5,070 |
The Company Converted $5,025,000 of its Convertible Notes into Common Shares | $ 5,025,000 | $ 0 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, shares at Dec. 31, 2017 | 24,722,647 | |||
Beginning Balance, amount at Dec. 31, 2017 | $ 24,723 | $ 105,795,621 | $ (150,501,642) | $ (44,681,298) |
Equity-Based Compensation | 506,542 | 506,542 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 1,359,126 | 1,359,126 | ||
Conversion of Notes Payable to Common Stock, shares | 3,513,986 | |||
Conversion of Notes Payable to Common Stock, amount | $ 3,514 | 5,021,486 | 5,025,000 | |
Cumulative adjustment related to adoption of Topic 606 Revenue with Customers (See Note 1) | 65,277 | 65,277 | ||
Net Loss | (4,080,129) | (4,080,129) | ||
Ending Balance, shares at Jun. 30, 2018 | 28,236,633 | |||
Ending Balance, amount at Jun. 30, 2018 | $ 28,237 | $ 112,682,775 | $ (154,516,494) | $ (41,805,482) |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2018 | |
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 same year the Company focused exclusively on development of do-it-yourself customer facing platform that enabled organizations to rapidly create, deploy, and manage custom, native smartphone and tablet apps deliverable across iOS and Android mobile platforms without writing a single line of code. During 2017 the Company concluded that it had highest rate of success with clients within Healthcare industry and concentrated its development and sales and marketing efforts in that industry. During 2018 we further refined our Healthcare offering and redefined our product - a suite of e-health mobile solutions, that consists of: ● access to a catalog of ready to deploy mobile app solutions (app Blueprint catalog) ● related deployment, support and integration services (app build and managed services and custom development, where applicable); ● hosting of the deployed mobile apps. Our flagship MobileSmith® Platform has transformed from a do-it-yourself customer facing platform into an internally used engine that supports the deployment of mobile apps created from Blueprints, integration of various third-party code and services into the mobile apps produced from Blueprints, hosting of deployed apps and design of new Blueprints. 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 management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its financial position, results of operations, cash flows, and stockholders’ deficit as of June 30, 2018. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 on file with the SEC (the “Annual Report”). Except as otherwise noted, there have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report. The accompanying condensed 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 six months ended June 30, 2018 and 2017, the Company incurred net losses as well as negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed 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 and Their Impact on Significant Accounting Policies The Company's significant accounting policies are detailed in "Note 2: Significant Accounting Policies" of the Company's Annual Report on Form 10-K for the year ended December 31, 2017. Adoption of Financial Accounting Standards Board, Accounting Standards Codification, Topic 606, Revenue Recognition ("Topic 606") did not have material impact on the Company's condensed consolidated financial statements. The adoption of Topic 606 did result in changes to the Company's accounting policies and introduced new definitions and disclosure requirements that are discussed below and throughout these condensed consolidated financial statements. Revenue Recognition: General Overview and Performance Obligations to Customers The Company derives revenue primarily from contracts for subscription to the suite of e-health mobile solutions and, to a much lesser degree, ancillary services provided in connection with subscription services. The Company’s contracts include the following performance obligations: ● Access to the content available on the App Blueprint Catalog, including hosting of the deployed apps; ● App Build and Managed Services; ● Custom development work. The majority of the Company’s contracts are for subscription to a catalog of mobile app Blueprints, hosting of the deployed apps and related services. Custom work for specific deliverables is documented in the statements of work. Customers may enter into subscription and various statements of work concurrently or consecutively. Most of the Company’s performance obligations are not considered to be distinct from the subscription to Blueprints, hosting of deployed apps and related services and are combined into a single performance obligation. New statements of work and modifications of contracts are reviewed each reporting period and significant judgment is applied as to nature and characteristics of the new or modified performance obligations on a contract by contract basis. Revenue Recognition: Transaction Price of the Contract and Satisfaction of Performance Obligations The transaction price of the contract is an aggregate amount of consideration payable by customer for delivery of contracted services. Transaction price is impacted by the terms of a contracted agreement with the customer. Such terms range from one to three years. Transaction price excludes any future renewal periods or any marketing or sales discounts. Transaction price may include a significant financing component in instances where Company offers discounts for accelerated payments on the long-term contracts. Significant financing component is recorded in other assets and is amortized as interest expense in the Company’s income statement over the term of the contract. The transaction price is predominantly allocated to the single performance obligation of access to the Blueprints, hosting and related services and to a lesser degree allocated between the access and other distinct performance obligations based on the stand-alone selling price. The subscription revenue is then recognized over time over the term of the contract, using the output method of time elapsed. Other performance obligations are usually recognized at a point in time upon delivery of a specific documented output. Management believes that such chosen methods faithfully depict satisfaction of Company performance obligations and transfer of benefit to the customers. The full transaction price of the contract may be billed in its entirety or in agreed upon installments. Billed transaction price in excess of revenue recognized results in the recording of a contract liability. Unbilled portion of transaction price represents contracted consideration receivable by the Company, that was not yet billed. Incremental Costs of Obtaining a Contract The Company’s incremental costs of obtaining a contract include sales commissions and are recognized as other assets on the balance sheet for the contracts with a term exceeding 12 months. These costs are amortized through the term of the contract and are recorded as sales and marketing expense. As of June 30, 2018 the Company’s other assets include approximately $59,000 of such costs. Contract Liabilities A new contract liability is created every time the Company records receivables due from its customers. Contract liability represents Company’s obligation to transfer services for which the Company has already invoiced. Most of the contract liabilities will be recognized in revenue over a period of 12 to 36 months. Customer Credit Risk Most of Company's receivables (billings) are collected within 30-45 day period. The majority of Company's customers are healthcare organizations, which historically have had low credit risk. Use of practical expedients in application of the Topic 606 The newly adopted recognition standard prescribes the application of accounting standards to individual contracts with customers, but allows for the application of the guidance to a portfolio of contracts (or performance obligations) with similar characteristics if the effect of such application is immaterial. The Company applies practical expedients in following instances: ● The Company does not adjust promised amount of consideration for the effects of a significant financing component if, at contract inception, the period between when the Company transfers its services to a customer and when the customer pays services will be one year or less. ● The Company recognizes incremental costs of obtaining a contract as expenses when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. Transition Disclosures in the Period of Adoption of Topic 606 The Company applied the transition guidance in Topic 606 to the contracts that were not substantially completed as of January 1, 2018. The Company selected a modified retrospective approach at the time of adoption, at which time cumulative effect of initially adopting the standard is to be recognized in retained earnings as of the date of adoption and additional footnote disclosures will be included in the financial statements. The impact of adoption on the selected accounts is as follows: The cumulative effects of the changes made to the Company's Condensed Consolidated Balance Sheet at January 1, 2018 due to the adoption of Topic 606 were as follows: Balance at Balance at December 31, 2017 Adjustments January 1, 2018 Assets: Prepaid Expenses and Other Current Assets $ 71,992 $ 65,277 $ 137,269 Equity: Accumulated Deficit $ (150,501,642 ) $ 65,277 $ (150,436,365 ) The following tables summarize the current period impacts of adopting Topic 606 on our Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheet: As Reported as of 06/30/2018 Balances without Adoption of Topic 606 Effect of Adoption Assets: Prepaid Expenses and Other Current Assets $ 103,321 $ 49,055 * Other Assets 48,940 - 48,940 * Liabilities: Contract Liability 1,689,502 1,645,812 43,690 ** Equity: Accumulated Deficit $ (154,516,494 ) $ (154,581,771 ) $ 65,277 *Total impact on the Company's assets was $97,995, of which $59,391 resulted from capitalization of sales commissions and $38,604 was related to capitalization of interest expense for significant financing component. The combined impact is presented on a classified basis to reflect the current and non-current nature of the balances. **Represents the combined impact of adjustments to capitalized sales commissions and interest expense for significant financing component on the contract liability. Condensed Consolidated Statements of Operations: As Reported for the Period Ended 06/30/2018 Balances without Adoption of Topic 606 Effect of Adoption REVENUES: Subscription and Support $ 1,017,741 $ 1,011,393 $ 6,348 OPERATING EXPENSES: Sales and Marketing $ 683,730 $ 675,532 $ 8,198 OTHER INCOME (EXPENSE): Interest Expense, Net $ (2,105,423 ) $ (2,096,301 ) $ (9,122 ) |
2. DEBT
2. DEBT | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
2. DEBT | The table below summarizes the Company's debt outstanding at June 30, 2018 and December 31, 2017: Debt Description June 30, December 31, 2018 2017 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2020 5.60 % Capital lease obligations - Noteholder lease 32,332 45,294 August 2019 8.00 % Capital lease obligations - office furniture and other equipment - 4,870 August 2018 9.80 % Capital lease obligations - vehicle 11,923 13,670 July 2021 5.59 % Convertible notes - related parties, net of discount of $1,397,930 and $447,988, respectively 34,516,300 37,101,243 November 2020 8.00 % Convertible notes, net of discount of $50,129 655,640 680,640 November 2020 8.00 % Subordinated Promissory Note, Related Party 525,000 - November 2020 8.00 % Total debt 40,741,195 42,845,717 Less: current portion of long term debt Capital lease obligations 31,172 34,927 Convertible notes - related parties, net of discount of $447,988 - 37,101,243 Convertible notes, net of discount of $50,129 - 680,640 Comerica Bank Loan and Security Agreement - 5,000,000 Subordinated Promissory Note, Related Party - - Total current portion of long term debt 31,172 42,816,810 Debt - long term $ 40,710,023 $ 28,907 Convertible Notes During the six months ended June 30, 2018, the Company privately placed $3,365,000 in principal amount of additional unsecured Convertible Subordinated Notes unsecured Convertible Subordinated Note Purchase Agreement dated December 10, 2014 On May 25, 2018, the Company and the holders of the majority of the aggregate outstanding principal amount of the 2014 NPA Notes and holders of the majority of the aggregate outstanding principal amount of the Secured Promissory Notes (the “2007 NPA Notes”) issued under the Convertible Secured Subordinated Note Purchase Agreement dated November 14, 2007 (the "2007 NPA”) agreed to extend to November 14, 2020, 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, 2020. As a result of modification, any unamortized discount will be amortized into interest expense through the new maturity date of November 14, 2020. The market value of the Company’s common stock on the date of each issuance of the 2014 NPA Notes to UBP was higher than the conversion price, which resulted in a beneficial conversion feature totaling $1,359,126 and corresponding debt discount, which is being amortized into interest expense through the maturity of the Notes. During the three months period ended June 30, 2018 three noteholders converted a total of $5,025,000 of Notes into 3,513,986 shares of Company's common stock at the stated conversion price of $1.43 per share. The table below summarizes convertible notes issued and outstanding as of June 30, 2018 by type: Convertible Notes Type: Balance 2007 NPA notes, net of discount $ 18,407,559 2014 NPA notes, net of discount 16,764,381 Total convertible notes, net of discount $ 35,171,940 Comerica LSA The Company has an outstanding Loan and Security Agreement with Comerica Bank dated June 9, 2014 in the amount of $5,000,000, with original maturity of June 9, 2016. |
3. COMMITMENTS AND CONTINGENCIE
3. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
3. COMMITMENTS AND CONTINGENCIES | Aggregate future lease commitments The Company leases computers, office equipment, office furniture and company vehicle under capital lease agreements that expire through July 2021. Total amount financed under these capital leases at June 30, 2018 was $44,255. This obligation is included within the Company’s total debt. The table below summarizes Company’s future obligations under its capital leases: Year: 2018 $ 16,669 2019 23,631 2020 4,219 Thereafter 2,461 46,980 Less amount representing interest (2,725 ) Capital lease obligations $ 44,255 The Company leases its office space in Raleigh, North Carolina pursuant to an operating lease with an initial term that expires in March 2019. The Company expects to extend the lease through April of 2024. Year: 2018 $ 86,600 2019 44,082 Total $ 130,682 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. |
4. EQUITY AND EQUITY BASED COMP
4. EQUITY AND EQUITY BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
4. EQUITY AND EQUITY BASED COMPENSATION | As of June 30, 2018, options to purchase 7,488,744 shares of Common Stock were granted under 2016 Equity Compensation Plan, in addition to 102,250 options granted under previous plans. Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2017 2,658,247 $ 1.54 Cancelled (125,011 ) 1.25 Issued 1.95 Outstanding, June 30, 2018 7,590,994 1.81 7.76 $ 5,200,768 Vested and exercisable, June 30, 2018 1,401,939 $ 1.53 4.05 $ 1,315,298 Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock at June 30, 2018 and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock at June 30, 2018, as reported on the OTCQB Venture Marketplace, was $2.50 per share. At June 30, 2018, $7,969,536 unvested expense has yet to be recorded related to outstanding stock options. |
5. DISAGGREGATED PRESENTATION O
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION | 6 Months Ended |
Jun. 30, 2018 | |
Disaggregated Presentation Of Revenue And Other Relevant Information | |
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION | The tables below depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors, such as type of customer and type of contract. Customer size impact on billings and revenue: 6 months Ended June 30, 2018 6 months Ended June 30, 2017 Billings GAAP Revenue Billings GAAP Revenue Top 5 customers (measured by amounts billed) $ 476,969 $ 128,453 $ 1,243,912 $ 408,871 All other customers 810,235 889,288 909,142 637,473 $ 1,287,204 $ 1,017,741 $ 2,153,013 $ 1,046,343 For the six months ended June 30, 2018, four customers accounted for 71% of the accounts receivable balance. For the six months ended June 30, 2017, two major customers accounted for 31% of total revenues and one customer accounted for 52% of the accounts receivable balance. New customer acquisition impact on billings and revenue: 6 Months Ended June 30, 2018 6 Months Ended June 30, 2017 Billings GAAP Revenue Billings GAAP Revenue Customers in existence as of the beginning of the period (including upgrades) $ 901,898 $ 963,936 $ 1,300,960 $ 870,629 Customers acquired during the period 385,306 53,805 852,054 175,714 $ 1,287,204 $ 1,017,741 $ 2,153,013 $ 1,046,343 As of June 30, 2018 the aggregate amount of the transaction price allocated to unsatisfied (or partially satisfied) performance obligations was $2,948,453, of which $1,689,502 had been billed to the customers and recorded as contract liability and $1,273,047 remained unbilled as of June 30, 2018. The following table describes the timing of when the Company expects to recognize the revenue from the unsatisfied performance obligations. Billed (Contract Liability as of June 30, 2018) Unbilled Total 2018 $ 648,821 $ 221,106 $ 869,927 2019 836,049 575,329 1,411,378 2020 204,632 462,516 667,148 2021 - 14,096 14,096 $ 1,689,502 $ 1,273,047 $ 2,962,549 At January 1, 2018 total contract liability balance was $1,338,465 (net of the Topic 606 adoption adjustment), of which $532,833 was recognized in revenue during the six months ended June 30, 2018. |
6. SUBSEQUENT EVENTS
6. SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
6. SUBSEQUENT EVENTS | On July 31, 2018, the Company issued one 2014 NPA Note to UBP in the principal amount of $250,000 on the same terms as the currently outstanding 2014 NPA Notes. The note matures on November 14, 2020. |
1. DESCRIPTION OF BUSINESS AN13
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Description Of Business And Basis Of Presentation | |
Effects of new accounting pinciple | The cumulative effects of the changes made to the Company's Condensed Consolidated Balance Sheet at January 1, 2018 due to the adoption of Topic 606 were as follows: Balance at Balance at December 31, 2017 Adjustments January 1, 2018 Assets: Prepaid Expenses and Other Current Assets $ 71,992 $ 65,277 $ 137,269 Equity: Accumulated Deficit $ (150,501,642 ) $ 65,277 $ (150,436,365 ) The following tables summarize the current period impacts of adopting Topic 606 on our Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheet: As Reported as of 06/30/2018 Balances without Adoption of Topic 606 Effect of Adoption Assets: Prepaid Expenses and Other Current Assets $ 103,321 $ 49,055 * Other Assets 48,940 - 48,940 * Liabilities: Contract Liability 1,689,502 1,645,812 43,690 ** Equity: Accumulated Deficit $ (154,516,494 ) $ (154,581,771 ) $ 65,277 *Total impact on the Company's assets was $97,995, of which $59,391 resulted from capitalization of sales commissions and $38,604 was related to capitalization of interest expense for significant financing component. The combined impact is presented on a classified basis to reflect the current and non-current nature of the balances. **Represents the combined impact of adjustments to capitalized sales commissions and interest expense for significant financing component on the contract liability. Condensed Consolidated Statements of Operations: As Reported for the Period Ended 06/30/2018 Balances without Adoption of Topic 606 Effect of Adoption REVENUES: Subscription and Support $ 1,017,741 $ 1,011,393 $ 6,348 OPERATING EXPENSES: Sales and Marketing $ 683,730 $ 675,532 $ 8,198 OTHER INCOME (EXPENSE): Interest Expense, Net $ (2,105,423 ) $ (2,096,301 ) $ (9,122 ) |
2. DEBT (Tables)
2. DEBT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Company's debt | Debt Description June 30, December 31, 2018 2017 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2020 5.60 % Capital lease obligations - Noteholder lease 32,332 45,294 August 2019 8.00 % Capital lease obligations - office furniture and other equipment - 4,870 August 2018 9.80 % Capital lease obligations - vehicle 11,923 13,670 July 2021 5.59 % Convertible notes - related parties, net of discount of $1,397,930 and $447,988, respectively 34,516,300 37,101,243 November 2020 8.00 % Convertible notes, net of discount of $50,129 655,640 680,640 November 2020 8.00 % Subordinated Promissory Note, Related Party 525,000 - November 2020 8.00 % Total debt 40,741,195 42,845,717 Less: current portion of long term debt Capital lease obligations 31,172 34,927 Convertible notes - related parties, net of discount of $447,988 - 37,101,243 Convertible notes, net of discount of $50,129 - 680,640 Comerica Bank Loan and Security Agreement - 5,000,000 Subordinated Promissory Note, Related Party - - Total current portion of long term debt 31,172 42,816,810 Debt - long term $ 40,710,023 $ 28,907 |
Summary of convertible notes | Convertible Notes Type: Balance 2007 NPA notes, net of discount $ 18,407,559 2014 NPA notes, net of discount 16,764,381 Total convertible notes, net of discount $ 35,171,940 |
3. COMMITMENTS AND CONTINGENC15
3. COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Company's future obligations under its capital leases | Year: 2018 $ 16,669 2019 23,631 2020 4,219 Thereafter 2,461 46,980 Less amount representing interest (2,725 ) Capital lease obligations $ 44,255 |
Company's future obligation under the office lease | Year: 2018 $ 86,600 2019 44,082 Total $ 130,682 |
4. EQUITY AND EQUITY BASED CO16
4. EQUITY AND EQUITY BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity And Equity Based Compensation | |
Schedule of stock options outstanding | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2017 2,658,247 $ 1.54 Cancelled (125,011 ) 1.25 Issued 1.95 Outstanding, June 30, 2018 7,590,994 1.81 7.76 $ 5,200,768 Vested and exercisable, June 30, 2018 1,401,939 $ 1.53 4.05 $ 1,315,298 |
5. DISAGGREGATED PRESENTATION17
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disaggregated Presentation Of Revenue And Other Relevant Information Tables Abstract | |
Disaggregation of revenue | Customer size impact on billings and revenue: 6 months Ended June 30, 2018 6 months Ended June 30, 2017 Billings GAAP Revenue Billings GAAP Revenue Top 5 customers (measured by amounts billed) $ 476,969 $ 128,453 $ 1,243,912 $ 408,871 All other customers 810,235 889,288 909,142 637,473 $ 1,287,204 $ 1,017,741 $ 2,153,013 $ 1,046,343 New customer acquisition impact on billings and revenue: 6 Months Ended June 30, 2018 6 Months Ended June 30, 2017 Billings GAAP Revenue Billings GAAP Revenue Customers in existence as of the beginning of the period (including upgrades) $ 901,898 $ 963,936 $ 1,300,960 $ 870,629 Customers acquired during the period 385,306 53,805 852,054 175,714 $ 1,287,204 $ 1,017,741 $ 2,153,013 $ 1,046,343 |
Summary of contract liability | Billed (Contract Liability as of June 30, 2018) Unbilled Total 2018 $ 648,821 $ 221,106 $ 869,927 2019 836,049 575,329 1,411,378 2020 204,632 462,516 667,148 2021 - 14,096 14,096 $ 1,689,502 $ 1,273,047 $ 2,962,549 |
1. DESCRIPTION OF BUSINESS AN18
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 | |
Assets | |||
Prepaid Expenses and Other Current Assets | $ 103,321 | $ 71,992 | |
Other Assets | 48,940 | 0 | |
Liabilities | |||
Contract Liability | 1,689,502 | ||
Equity | |||
Accumulated Deficit | (154,516,494) | (150,501,642) | |
Adjustments | |||
Assets | |||
Prepaid Expenses and Other Current Assets | 65,277 | ||
Equity | |||
Accumulated Deficit | 65,277 | ||
Balances with Adoption of Topic 606 | |||
Assets | |||
Prepaid Expenses and Other Current Assets | 137,269 | ||
Equity | |||
Accumulated Deficit | $ (150,436,365) | ||
Balances without Adoption of Topic 606 | |||
Assets | |||
Prepaid Expenses and Other Current Assets | [1] | 49,055 | |
Other Assets | 0 | ||
Liabilities | |||
Contract Liability | 1,645,812 | ||
Equity | |||
Accumulated Deficit | (154,581,771) | ||
Effect of Adoption | |||
Assets | |||
Other Assets | [1] | 48,940 | |
Liabilities | |||
Contract Liability | [2] | 43,690 | |
Equity | |||
Accumulated Deficit | $ 65,277 | ||
[1] | Total impact on the Company's assets was $97,995, of which $59,391 resulted from capitalization of sales commissions and $38,604 was related to capitalization of interest expense for significant financing component. The combined impact is presented on a classified basis to reflect the current and non-current nature of the balances. | ||
[2] | Represents the combined impact of adjustments to capitalized sales commissions and interest expense for significant financing component on the contract liability. |
1. DESCRIPTION OF BUSINESS AN19
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
REVENUES: | ||||
Subscription and Support | $ 520,918 | $ 638,941 | $ 1,017,741 | $ 1,046,343 |
OPERATING EXPENSES: | ||||
Sales and Marketing | 386,492 | 285,860 | 683,730 | 565,622 |
OTHER INCOME (EXPENSE) | ||||
Interest Expense, Net | $ (1,110,525) | $ (1,085,616) | (2,105,423) | $ (2,122,614) |
Balances without Adoption of Topic 606 | ||||
REVENUES: | ||||
Subscription and Support | 1,011,393 | |||
OPERATING EXPENSES: | ||||
Sales and Marketing | 675,532 | |||
OTHER INCOME (EXPENSE) | ||||
Interest Expense, Net | (2,096,301) | |||
Effect of Adoption | ||||
REVENUES: | ||||
Subscription and Support | 6,348 | |||
OPERATING EXPENSES: | ||||
Sales and Marketing | 8,198 | |||
OTHER INCOME (EXPENSE) | ||||
Interest Expense, Net | $ (9,122) |
2. DEBT (Details)
2. DEBT (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Debt | ||
Comerica Bank Loan and Security Agreement | $ 5,000,000 | $ 5,000,000 |
Capital leases obligations - Noteholder lease | 32,332 | 45,294 |
Capital lease obligations - office furniture and other equipment | 0 | 4,870 |
Capital lease obligations - vehicle | 11,923 | 13,670 |
Convertible notes - related parties, net of discount of $1,397,930 and $447,988, respectively | 34,516,300 | 37,101,243 |
Convertible notes, net of discount of $50,129 | 655,640 | 680,640 |
Subordinated Promissory Note, Related Party | 525,000 | 0 |
Total debt | 40,741,195 | 42,845,717 |
Less: current portion of long term debt | ||
Capital lease obligations | 31,172 | 34,927 |
Convertible notes - related parties, net of discount of $447,988 | 0 | 37,101,243 |
Convertible notes, net of discount of $50,129 | 0 | 680,640 |
Comerica Bank Loan and Security Agreement | 0 | 5,000,000 |
Subordinated Promissory Note, Related Party | 0 | 0 |
Total current portion of long term debt | 31,172 | 42,816,810 |
Debt - long term | $ 40,710,023 | $ 28,907 |
2. DEBT (Details 1)
2. DEBT (Details 1) | Jun. 30, 2018USD ($) |
Convertible notes, net of discount | $ 35,171,940 |
2007 NPA notes | |
Convertible notes, net of discount | 18,407,559 |
2014 NPA notes | |
Convertible notes, net of discount | $ 16,764,381 |
3. COMMITMENTS AND CONTINGENC22
3. COMMITMENTS AND CONTINGENCIES (Details) | Jun. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 16,669 |
2,019 | 23,631 |
2,020 | 4,219 |
Thereafter | 2,461 |
Total | 46,980 |
Less amount representing interest | (2,725) |
Capital lease obligations | $ 44,255 |
3. COMMITMENTS AND CONTINGENC23
3. COMMITMENTS AND CONTINGENCIES (Details 1) | Jun. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 86,600 |
2,019 | 44,082 |
Total | $ 130,682 |
4. EQUITY AND EQUITY BASED CO24
4. EQUITY AND EQUITY BASED COMPENSATION (Details) | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Equity Compensation Details Abstract | |
Number of Shares Outstanding, Beginning | shares | 2,658,247 |
Number of Shares Cancelled | shares | (125,011) |
Number of Shares Issued | shares | 0 |
Number of Shares Outstanding, Ending | shares | 7,590,994 |
Stock Options Vested and Exercisable Number of Shares | shares | 1,401,939 |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 1.54 |
Weighted Average Exercise Price Cancelled | $ / shares | 1.25 |
Weighted Average Exercise Price Issued | $ / shares | 1.95 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | 1.81 |
Weighted Average Exercise Price Vested and exercisable, Ending | $ / shares | $ 1.53 |
Weighted Average Remaining Contractual Life (in years) Outstanding | 7 years 9 months 4 days |
Weighted Average Remaining Contractual Life (in years) Vested and Exercisable | 4 years 18 days |
Aggregate Intrinsic Value Outstanding | $ | $ 5,200,768 |
Aggregate Intrinsic Value Vested and Exercisable | $ | $ 1,315,298 |
5. DISAGGREGATED PRESENTATION25
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Billings | $ 1,287,204 | $ 2,153,013 | $ 1,287,204 | $ 2,153,013 |
Revenue | 520,918 | 638,941 | 1,017,741 | 1,046,343 |
Top 5 customers | ||||
Billings | 476,969 | 1,243,912 | 476,969 | 1,243,912 |
Revenue | 128,453 | 408,871 | ||
All other customers | ||||
Billings | 810,235 | 909,142 | 810,235 | 909,142 |
Revenue | 889,288 | 637,473 | ||
Customers in existence as of the beginning of the period (including upgrades) | ||||
Billings | 901,898 | 1,300,960 | 901,898 | 1,300,960 |
Revenue | 963,936 | 870,629 | ||
Customers acquired during the period | ||||
Billings | $ 385,306 | $ 852,054 | 385,306 | 852,054 |
Revenue | $ 53,805 | $ 175,714 |
5. DISAGGREGATED PRESENTATION26
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details 1) | Jun. 30, 2018USD ($) |
Total | $ 1,689,502 |
Billed | |
2,018 | 648,821 |
2,019 | 836,049 |
2,020 | 204,632 |
2,021 | 0 |
Total | 1,689,502 |
Unbilled | |
2,018 | 221,106 |
2,019 | 575,329 |
2,020 | 462,516 |
2,021 | 14,096 |
Total | 1,273,047 |
Total | |
2,018 | 869,927 |
2,019 | 1,411,378 |
2,020 | 667,148 |
2,021 | 14,096 |
Total | $ 2,962,549 |