Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 12, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | MobileSmith, Inc. | |
Entity Central Index Key | 0001113513 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | DE | |
Entity File Number | 001-32634 | |
Entity Common Stock, Shares Outstanding | 28,389,493 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and Cash Equivalents | $ 253,452 | $ 71,482 |
Restricted Cash and Cash Equivalents | 187,916 | 243,485 |
Accounts Receivable, Net of Allowance for Doubtful Accounts of $30,000 and $5,250, respectively | 174,228 | 109,187 |
Prepaid Expenses and Other Current Assets | 46,359 | 75,489 |
Total Current Assets | 661,955 | 499,643 |
Property and Equipment, Net | 19,108 | 29,368 |
Capitalized Software, Net | 0 | 5,470 |
Operating Lease Right-of-Use Asset | 553,566 | 674,338 |
Total Assets | 1,234,629 | 1,208,819 |
Current Liabilities | ||
Accounts Payable | 79,535 | 242,249 |
Interest Paybale | 1,026,647 | 1,834,694 |
Other Liabilities and Accrued Expenses | 322,131 | 263,889 |
Operating Lease Liability, Current | 158,740 | 149,525 |
Contract With Customer Liability Current | 832,629 | 1,051,271 |
Bank Loan | 0 | 5,000,000 |
PPP Loan Current | 331,994 | 0 |
Subordinated Promissory Notes, Related Parties | 0 | 3,518,250 |
Convertible Notes Payable, Related Parties, Net of Discount | 0 | 39,230,432 |
Convertible Notes Payable, Net of Discount | 0 | 610,740 |
Total Current Liabilities | 2,751,676 | 51,901,050 |
Operating Lease Liability Noncurrent | 473,761 | 593,994 |
Contrac With Customer Liability Noncurrent | 18,338 | 28,100 |
Bank loan | 5,000,000 | 0 |
PPP loan | 210,106 | 0 |
Subordinated Promissory Notes, Related Parties | 1,065,000 | 0 |
Convertible Notes Payable, Related Parties, Net of Discount | 45,127,680 | 0 |
Convertible Notes Payable, Net of Discount | 1,191,507 | 0 |
Total Liabilities | 55,838,068 | 52,523,144 |
Commitments and Contingencies (Note 3) | ||
Stockholders' Deficit | ||
Preferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, No Shares Issued and Outstanding at September 30, 2020 and December 31, 2019 | 0 | 0 |
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At September 30, 2020 and December 31, 2019; 28,389,493 Shares Issued and Outstanding at September 30, 2020 and 28,271,598 Shares Issued and Outstanding at December 31, 2019 | 28,390 | 28,272 |
Additional Paid-in Capital | 129,114,381 | 118,431,878 |
Accumulated Deficit | (183,746,210) | (169,774,475) |
Total Stockholders' Deficit | (54,603,439) | (51,314,325) |
Total Liabilities and Stockholders' Deficit | $ 1,234,629 | $ 1,208,819 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts | $ 30,000 | $ 5,250 |
Stockholders' Deficit | ||
Preferred Stock, Par Value | $ .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 | $ .001 | $ 0.001 |
Common Stock, Authorized | 100,000,000 | 100,000,000 |
Common Stock, Issued | 28,389,493 | 28,271,598 |
Common Stock, Outstanding | 28,389,493 | 28,271,598 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
REVENUES: | ||||
Total Revenue | $ 511,411 | $ 646,255 | $ 1,743,755 | $ 2,180,298 |
COST OF REVENUES | ||||
Total Cost of Revenue | 199,031 | 274,499 | 638,815 | 809,423 |
GROSS PROFIT | 312,380 | 371,756 | 1,104,940 | 1,370,875 |
OPERATING EXPENSES: | ||||
Sales and Marketing | 249,565 | 257,947 | 917,931 | 1,064,851 |
Research and Development | 719,043 | 747,528 | 2,097,276 | 2,055,797 |
General and Administrative | 835,775 | 927,315 | 2,485,093 | 2,630,953 |
Total Operating Expenses | 1,804,383 | 1,932,790 | 5,500,300 | 5,751,601 |
LOSS FROM OPERATIONS | (1,492,003) | (1,561,034) | (4,395,360) | (4,380,726) |
OTHER INCOME (EXPENSE): | ||||
Other Income | 5,387 | 788 | 17,073 | 1,600 |
Interest Expense, Net | (1,118,422) | (1,294,461) | (4,728,698) | (3,575,051) |
Loss on Debt Extinguishment | 0 | 0 | (4,864,750) | 0 |
Total Other Expense | (1,113,035) | (1,293,673) | (9,576,375) | (3,573,451) |
NET LOSS | $ (2,605,038) | $ (2,854,707) | $ (13,971,735) | $ (7,954,177) |
NET LOSS PER COMMON SHARE: | ||||
Basic and Fully Diluted from Continuing Operations | $ (0.09) | $ (0.10) | $ (0.49) | $ (0.28) |
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE: | ||||
Basic And Fully Diluted | 28,389,493 | 28,271,598 | 28,389,493 | 28,271,598 |
Subscription and Support | ||||
REVENUES: | ||||
Total Revenue | $ 464,809 | $ 528,145 | $ 1,475,575 | $ 1,819,464 |
COST OF REVENUES | ||||
Total Cost of Revenue | 196,031 | 153,733 | 542,653 | 582,862 |
Services and Other | ||||
REVENUES: | ||||
Total Revenue | 46,602 | 118,110 | 268,180 | 360,834 |
COST OF REVENUES | ||||
Total Cost of Revenue | $ 3,000 | $ 120,766 | $ 96,162 | $ 226,561 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (13,971,735) | $ (7,954,177) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||
Depreciation and Amortization | 15,730 | 64,936 |
Bad Debt Expense | 0 | 14,000 |
Amortization of Debt Discount | 2,417,888 | 855,751 |
Amortization of Debt Premium | (775,615) | 0 |
Share Based Compensation | 2,290,363 | 2,533,107 |
Loss on Debt Extinguishment | 4,864,750 | 0 |
Changes in Assets and Liabilities: | ||
Accounts Receivable | (65,041) | (134,658) |
Prepaid Expenses and Other Assets | 29,130 | 44,370 |
Accounts Payable | (162,714) | (3,534) |
Contract Liability | (228,404) | (139,385) |
Operating Lease Right-of-use Asset | 120,772 | 134,326 |
Operating Lease Liability | (111,018) | (102,510) |
Accrued and Other Expenses | (743,427) | (717,978) |
Net Cash Used in Operating Activities | (6,319,321) | (5,405,752) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from Issuance of Subordinated Promissory Notes, Related Party | 1,610,000 | 2,316,250 |
Proceeds from Issuance of Convertible Notes Payable, Related Party | 1,400,000 | 3,160,000 |
Proceeds From Issuance of Convertible Notes Payable | 2,900,000 | 0 |
Proceeds from PPP Loan | 542,100 | 0 |
Repayments of Financing Lease Obligations | (6,378) | (21,634) |
Net Cash Provided by Financing Activities | 6,445,722 | 5,454,616 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 126,401 | 48,864 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 314,967 | 506,901 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 441,368 | 555,765 |
Composition of Cash, Cash Equivalents and Restricted Cash Balance: | ||
Cash and Cash Equivalents | 253,452 | 311,789 |
Restricted Cash | 187,916 | 243,976 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 441,368 | 555,765 |
Supplemental Disclosures of Cash Flow Information: | ||
Operating Lease Payments | 127,601 | 126,057 |
Cash Paid During the Period for Interest | 3,825,607 | 3,375,856 |
Operating Lease Right-Of-Use Asset Obtained In Exchange For Lease Obligations | 0 | 883,634 |
Recorded Debt Discount Associated with Beneficial Conversion Feature | 8,235,278 | 877,413 |
Conversion Of Notes Payable Into Common Shares | $ 156,980 | $ 0 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2018 | 28,271,598 | |||
Beginning Balance, Amount at Dec. 31, 2018 | $ 28,272 | $ 114,082,897 | $ (158,771,112) | $ (44,659,943) |
Equity-Based Compensation | 504,461 | 504,461 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 375,175 | 375,175 | ||
Cumulative Adjustment Related To Adoption Of New Accounting Pronouncement | 2,173 | 2,173 | ||
Net Loss | (2,176,493) | (2,176,493) | ||
Ending Balance, Shares at Mar. 31, 2019 | 28,271,598 | |||
Ending Balance, Amount at Mar. 31, 2019 | $ 28,272 | 114,962,533 | (160,945,432) | (45,954,627) |
Beginning Balance, Shares at Dec. 31, 2018 | 28,271,598 | |||
Beginning Balance, Amount at Dec. 31, 2018 | $ 28,272 | 114,082,897 | (158,771,112) | (44,659,943) |
Net Loss | (7,954,177) | |||
Ending Balance, Shares at Sep. 30, 2019 | 28,271,598 | |||
Ending Balance, Amount at Sep. 30, 2019 | $ 28,272 | 117,493,417 | (166,723,116) | (49,201,427) |
Beginning Balance, Shares at Mar. 31, 2019 | 28,271,598 | |||
Beginning Balance, Amount at Mar. 31, 2019 | $ 28,272 | 114,962,533 | (160,945,432) | (45,954,627) |
Equity-Based Compensation | 1,099,995 | 1,099,995 | ||
Net Loss | (2,922,977) | (2,922,977) | ||
Ending Balance, Shares at Jun. 30, 2019 | 28,271,598 | |||
Ending Balance, Amount at Jun. 30, 2019 | $ 28,272 | 116,062,528 | (163,868,409) | (47,777,609) |
Equity-Based Compensation | 928,651 | 928,651 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 502,238 | 502,238 | ||
Net Loss | (2,854,707) | (2,854,707) | ||
Ending Balance, Shares at Sep. 30, 2019 | 28,271,598 | |||
Ending Balance, Amount at Sep. 30, 2019 | $ 28,272 | 117,493,417 | (166,723,116) | (49,201,427) |
Beginning Balance, Shares at Dec. 31, 2019 | 28,271,598 | |||
Beginning Balance, Amount at Dec. 31, 2019 | $ 28,272 | 118,431,878 | (169,774,475) | (51,314,325) |
Equity-Based Compensation | 721,681 | 721,681 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 2,000,000 | 2,000,000 | ||
Conversion of Notes Payable to Common Stock, Shares | 48,951 | |||
Conversion of Notes Payable to Common Stock, Amount | $ 49 | 65,191 | 65,240 | |
Net Loss | (3,299,000) | (3,299,000) | ||
Ending Balance, Shares at Mar. 31, 2020 | 28,320,549 | |||
Ending Balance, Amount at Mar. 31, 2020 | $ 28,321 | 121,218,750 | (173,073,475) | (51,826,404) |
Beginning Balance, Shares at Dec. 31, 2019 | 28,271,598 | |||
Beginning Balance, Amount at Dec. 31, 2019 | $ 28,272 | 118,431,878 | (169,774,475) | (51,314,325) |
Net Loss | (13,971,735) | |||
Ending Balance, Shares at Sep. 30, 2020 | 28,389,493 | |||
Ending Balance, Amount at Sep. 30, 2020 | $ 28,390 | 129,114,381 | (183,746,210) | (54,603,439) |
Beginning Balance, Shares at Mar. 31, 2020 | 28,320,549 | |||
Beginning Balance, Amount at Mar. 31, 2020 | $ 28,321 | 121,218,750 | (173,073,475) | (51,826,404) |
Equity-Based Compensation | 780,776 | 780,776 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 6,035,278 | 6,035,278 | ||
Conversion of Notes Payable to Common Stock, Shares | 68,944 | |||
Conversion of Notes Payable to Common Stock, Amount | $ 69 | 91,671 | 91,740 | |
Net Loss | (8,067,697) | (8,067,697) | ||
Ending Balance, Shares at Jun. 30, 2020 | 28,389,493 | |||
Ending Balance, Amount at Jun. 30, 2020 | $ 28,390 | 128,126,475 | (181,141,172) | (52,986,307) |
Equity-Based Compensation | 787,906 | 787,906 | ||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 200,000 | 200,000 | ||
Net Loss | (2,605,038) | (2,605,038) | ||
Ending Balance, Shares at Sep. 30, 2020 | 28,389,493 | |||
Ending Balance, Amount at Sep. 30, 2020 | $ 28,390 | $ 129,114,381 | $ (183,746,210) | $ (54,603,439) |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [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 its highest rate of success with clients within the Healthcare industry and concentrated its development and selling and marketing efforts in that industry. During 2018 we further refined our Healthcare offering and redefined our product - a suite of e-health mobile solutions, that consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019, we consolidated our current solutions under a single initial offering branded Peri™. Peri™ is a cloud-based surgical and clinical procedure application architected to accomplish the following: - Run on a platform integrated with future MobileSmith applications; - Incorporate MobileSmith developed and/or licensed healthcare service applications; - Securely link those services to Electronic Medical Records ("EMR") platforms; and - Produce a mobile app based set of pre and postoperative instructions (which we refer to as Clinical Pathways), that establish a direct two-way clinical procedure management process between a patient and a healthcare provider thereby improving patient engagement during the process which both benefits the patient by improving patient experience and benefits the provider by improving clinical outcome measured in procedure cancellations and post procedure readmissions. During second quarter of 2020 and in a response to the COVID-19 pandemic, we rapidly designed and brought to market a suite of special applications. These applications include the following: - COVID response mobile applications used by hospital staff and hospital target communities for coordination and rapid distribution of information; and - COVIDClear mobile applications are self-attestation and symptom reporting mobile tools that are used by employers to facilitate return of their workforce back to work. The Company prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its financial position, results of operations, cash flows, and stockholders’ deficit as of September 30, 2020. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These condensed financial statements and accompanying notes should be read in conjunction with the audited annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 on file with the SEC (the “Annual Report”). Except as otherwise noted, there have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report. The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the nine months ended September 30, 2020 and 2019, the Company incurred net losses as well as negative cash flows from operations and has negative working capital of $2,089,721 as of September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations and positive cash flows. Since November 2007, the Company has been funding its operations, in part, from the proceeds from the issuance of notes under a convertible secured subordinated note purchase agreement facility which was established in 2007 (the "2007 NPA"), and an unsecured convertible subordinated note purchase agreement facility established in 2014 (the "2014 NPA"), and subordinated promissory notes to related parties. As of September 30, 2020, the Company had notes with $49,274,660 of combined face value outstanding principal which were issued under the 2007 NPA and 2014 NPA (collectively, the "Notes"). The Company is entitled to request additional notes in an amount not exceeding $9,481,750, subject to the terms and conditions specified in these facilities. The Notes under the 2007 NPA and 2014 NPA and subordinated promissory notes to related parties mature in November of 2022. Additionally, the Company has a Loan and Security Agreement with Comerica Bank ( the "Comerica LSA") which matures in June of 2022. 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 accepted terms, if at all. Additionally, the disruption to capital markets caused by the pandemic may adversely affect the Company’s ability to obtain funding to continue operations in the future. As such, there is substantial doubt about the Company's ability 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 31,2019. |
2. DEBT
2. DEBT | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
2. DEBT | The table below summarizes the Company's debt outstanding at September 30, 2020 and December 31, 2019: Debt Description September 30, December 31, 2020 2019 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2022 4.08% PPP Loan 542,100 - April 2022 1.00% Convertible notes - related parties, net of discounts and premiums of $759,801 and $1,193,801, respectively 45,127,680 39,230,432 November 2022 8.00% Convertible notes, net of discount of $2,195,673 and $45,029, respectively 1,191,507 610,740 November 2022 8.00% Subordinated Promissory Note, Related Party 1,065,000 3,518,250 November 2022 8.00% Total debt 52,926,287 48,359,422 Less: current portion of long term debt 331,994 - Debt - long term $ 52,594,293 $ 48,359,422 Convertible Notes On April 30, 2020, the Company and the holders of the majority of the aggregate outstanding principal amount of the Notes issued under the 2014 NPA (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 the maturity dates of the 2014 NPA Notes and the 2007 NPA Notes to November 14, 2022. In addition, the 2014 NPA was amended to allow the Company to issue 2014 NPA Notes as consideration of cancellation of other indebtedness. Except as for above mentioned modifications, all of the terms relating to the outstanding 2007 NPA 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, 2022. As a result of the extension of the Maturity Date, any unamortized discount will be amortized into interest expense through the new maturity date of November 14, 2022. On May 6, 2020, the Company and related party holders of $4,063,250 in subordinated promissory notes exchanged those notes for the 2014 NPA Notes issued under 2014 NPA (the "Debt Exchange Transaction"). Avy Lugassy, one of Company's principal shareholders is a beneficial owner of the entities holding newly issued 2014 NPA Notes. The newly issued 2014 NPA Notes mature on November 14, 2022 and have the terms identical to other 2014 NPA Notes. The Debt Exchange Transaction was accounted for as debt extinguishment and the newly issued 2014 NPA Notes were recorded at fair value in accordance with ASC 470 "Debt". The total fair value of the 2014 NPA Notes issued as a result of the Debt Exchange Transaction was determined to be $8,928,000. The debt exchange transaction resulted in loss recorded on the statement of operations of $4,864,750 and a premium on the newly issued convertible debt of $4,864,750. The embedded beneficial conversion feature present in the newly issued debt in the amount of $4,043,250 resulted in a debt discount and a charge to paid-in capital. Amortization of debt discount and debt premium will be recorded in interest expense through maturity date of the notes. Convertible Notes issued in exchange for cash consideration: During the nine months ended September 30, 2020, the Company issued through a private placement $4,300,000 in principal amount of additional unsecured The table below summarizes our convertible notes issued as of September 30, 2020 by type: Convertible Notes Type: Balance Balance 2007 NPA notes, net of discount $ 20,261,974 $ 20,405,588 2014 NPA notes, net of discounts and premiums 26,057,213 19,435,584 Total convertible notes, net of discount $ 46,319,187 $ 39,841,172 Subordinated Promissory Notes, Related Party During the nine months ended September 30, 2020, the Company issued several additional subordinated promissory notes to a related party totaling $1,610,000 in principal. These notes have an interest rate of 8% payable twice a year. On May 6, 2020 $4,063,250 of subordinated promissory notes to related party were exchanged for 2014 NPA Notes as detailed above. As of September 30, 2020 remaining balance of these notes was $1,065,000. Comerica LSA The Company has an outstanding Loan and Security Agreement with Comerica Bank dated June 9, 2014 (the "LSA") in the amount of $5,000,000, with an extended maturity date of June 9, 2020. On June 9, 2020 the Company and Comerica Bank entered into Third Amendment to the LSA, which extended the maturity of the LSA to June 9, 2022. The LSA is secured by an extended irrevocable letter of credit issued by UBS Paycheck Protection Program Loan On April 29, 2020 the Company borrowed $542,100 through issuance of a promissory note in accordance with the Paycheck Protection Program ("PPP") established by Section 1102 of the CARES Act and implemented and administered by the Small Business Administration (the "PPP loan"). The PPP loan matures on April 29, 2022. The PPP loan carries interest at 1% per year and is payable in 18 monthly installments of $30,513. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. Pursuant to the PPP rules, all or portion of this loan may be forgiven. The actual amount of the loan forgiveness will depend, in part, on the total amount of payroll costs, certain allowed rent and utility costs. Not more than 25% of the loan forgiveness amount may be attributable to non-payroll costs. The Company used the proceeds from the PPP loan for qualifying expenses and will apply for forgiveness of the PPP loan in accordance with the terms of the CARES Act. However, the Company cannot completely assure at this time that such forgiveness of the PPP loan will occur. The first monthly installment of the PPP loan is due on November 29, 2020. However, due to extension of the original CARES Act timeline and due to difficulties of SBA processing foregiveness applications, the monthly installment timeline is likely to be pushed back. |
3. COMMITMENTS AND CONTINGENCIE
3. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
3. COMMITMENTS AND CONTINGENCIES | 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 | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
4. EQUITY AND EQUITY BASED COMPENSATION | The following is a summary of the stock option activity for the nine months ended September 30, 2020: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2019 12,345,796 $ 1.73 8.3 $ 13,823,410 Cancelled (2,770,065 ) 1.76 Issued 840,000 2.73 Outstanding, September 30, 2020 10,415,731 1.80 6.7 $ 7,268,822 Vested and exercisable, September 30, 2020 4,838,681 $ 1.72 6.0 $ 3,783,524 Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock at September 30, 2020 and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock at September 30, 2020, as reported on the OTCQB Venture Marketplace, was $2.50 per share. At September 30, 2020, an amount of $8,970,854 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 | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
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: 9 Months Ended September 30, 2020 9 Months Ended September 30, 2019 Billings GAAP Revenue Billings GAAP Revenue Top 5 customers (measured by amounts billed) $ 527,160 $ 611,026 $ 1,002,040 $ 596,210 All other Customers 993,869 1,132,729 1,045,873 1,584,088 $ 1,521,029 $ 1,743,755 $ 2,047,913 $ 2,180,298 For the nine months ended September 30, 2020, one customer accounted for 16% of total revenue and two customers accounted for 67% of accounts receivable balance. For the nine months ended September 30, 2019, one customer accounted for 17% of total revenue and one customer accounted for 89% of accounts receivable balance. New customer acquisition impact on billings and revenue: 9 Months Ended September 30, 2020 9 Months Ended September 30, 2019 Billings GAAP Revenue Billings GAAP Revenue Customers in existence as of the beginning of the period (including upgrades) $ 1,387,693 $ 1,711,012 $ 1,476,663 $ 2,175,245 Customers acquired during the period 133,336 32,743 571,250 5,053 $ 1,521,029 $ 1,743,755 $ 2,047,913 $ 2,180,298 |
6. LEASES
6. LEASES | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
6. LEASES | Leases (Topic 842) Disclosures We are a lessee for a non-cancellable operating lease for our corporate office in Raleigh, North Carolina. We are also a lessee for a non-cancellable finance lease for a corporate vehicle and office furniture. Financing leases are not significant in terms of both balances and period expenses. The operating lease for the corporate office expires on April 30, 2024. The following table summarizes the information about our operating lease: Nine Months Ended September 30, 2020 Operating lease expense $ 153,271 Weighted Average Remaining Lease Term (Years) Weighted Average Discount Rate 8 % Maturities of operating lease liability as of September 30, 2020, were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2020 (remaining 3 months) 47,590 3,310 50,900 2021 189,994 13,609 203,603 2022 189,615 13,988 203,603 2023 189,225 14,378 203,603 2024 63,074 4,793 67,867 Total lease payments $ 679,498 $ 50,078 729,576 Less imputed interest (97,075 ) Total $ 632,501 |
7. SUBSEQUENT EVENTS
7. SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
7. SUBSEQUENT EVENTS | Subsequent to September 30, 2020, the Company borrowed $300,000 through issuance of a subordinated promissory notes to a related party. The note carries an interest rate of 8% per year and matures on November 14, 2022. |
1. DESCRIPTION OF BUSINESS AN_2
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | MobileSmith, Inc. (referred to herein as the “Company,” “us,” “we,” or “our”) was incorporated as Smart Online, Inc. in the State of Delaware in 1993. The Company changed its name to MobileSmith, Inc. effective July 1, 2013. The same year the Company focused exclusively on development of do-it-yourself customer facing platform that enabled organizations to rapidly create, deploy, and manage custom, native smartphone and tablet apps deliverable across iOS and Android mobile platforms without writing a single line of code. During 2017, the Company concluded that it had its highest rate of success with clients within the Healthcare industry and concentrated its development and selling and marketing efforts in that industry. During 2018 we further refined our Healthcare offering and redefined our product - a suite of e-health mobile solutions, that consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019, we consolidated our current solutions under a single initial offering branded Peri™. Peri™ is a cloud-based surgical and clinical procedure application architected to accomplish the following: - Run on a platform integrated with future MobileSmith applications; - Incorporate MobileSmith developed and/or licensed healthcare service applications; - Securely link those services to Electronic Medical Records ("EMR") platforms; and - Produce a mobile app based set of pre and postoperative instructions (which we refer to as Clinical Pathways), that establish a direct two-way clinical procedure management process between a patient and a healthcare provider thereby improving patient engagement during the process which both benefits the patient by improving patient experience and benefits the provider by improving clinical outcome measured in procedure cancellations and post procedure readmissions. During second quarter of 2020 and in a response to the COVID-19 pandemic, we rapidly designed and brought to market a suite of special applications. These applications include the following: - COVID response mobile applications used by hospital staff and hospital target communities for coordination and rapid distribution of information; and - COVIDClear mobile applications are self-attestation and symptom reporting mobile tools that are used by employers to facilitate return of their workforce back to work. The Company prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its financial position, results of operations, cash flows, and stockholders’ deficit as of September 30, 2020. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These condensed financial statements and accompanying notes should be read in conjunction with the audited annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 on file with the SEC (the “Annual Report”). Except as otherwise noted, there have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report. The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the nine months ended September 30, 2020 and 2019, the Company incurred net losses as well as negative cash flows from operations and has negative working capital of $2,089,721 as of September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations and positive cash flows. Since November 2007, the Company has been funding its operations, in part, from the proceeds from the issuance of notes under a convertible secured subordinated note purchase agreement facility which was established in 2007 (the "2007 NPA"), and an unsecured convertible subordinated note purchase agreement facility established in 2014 (the "2014 NPA"), and subordinated promissory notes to related parties. As of September 30, 2020, the Company had notes with $49,274,660 of combined face value outstanding principal which were issued under the 2007 NPA and 2014 NPA (collectively, the "Notes"). The Company is entitled to request additional notes in an amount not exceeding $9,481,750, subject to the terms and conditions specified in these facilities. The Notes under the 2007 NPA and 2014 NPA and subordinated promissory notes to related parties mature in November of 2022. Additionally, the Company has a Loan and Security Agreement with Comerica Bank ( the "Comerica LSA") which matures in June of 2022. 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 accepted terms, if at all. Additionally, the disruption to capital markets caused by the pandemic may adversely affect the Company’s ability to obtain funding to continue operations in the future. As such, there is substantial doubt about the Company's ability 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 31,2019. |
2. DEBT (Tables)
2. DEBT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Company Debt | Debt Description September 30, December 31, 2020 2019 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2022 4.08% PPP Loan 542,100 - April 2022 1.00% Convertible notes - related parties, net of discounts and premiums of $759,801 and $1,193,801, respectively 45,127,680 39,230,432 November 2022 8.00% Convertible notes, net of discount of $2,195,673 and $45,029, respectively 1,191,507 610,740 November 2022 8.00% Subordinated Promissory Note, Related Party 1,065,000 3,518,250 November 2022 8.00% Total debt 52,926,287 48,359,422 Less: current portion of long term debt 331,994 - Debt - long term $ 52,594,293 $ 48,359,422 |
Summary of Convertible Notes | Convertible Notes Type: Balance Balance 2007 NPA notes, net of discount $ 20,261,974 $ 20,405,588 2014 NPA notes, net of discounts and premiums 26,057,213 19,435,584 Total convertible notes, net of discount $ 46,319,187 $ 39,841,172 |
4. EQUITY AND EQUITY BASED CO_2
4. EQUITY AND EQUITY BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Schedule of stock options outstanding | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2019 12,345,796 $ 1.73 8.3 $ 13,823,410 Cancelled (2,770,065 ) 1.76 Issued 840,000 2.73 Outstanding, September 30, 2020 10,415,731 1.80 6.7 $ 7,268,822 Vested and exercisable, September 30, 2020 4,838,681 $ 1.72 6.0 $ 3,783,524 |
5. DISAGGREGATED PRESENTATION_2
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of revenue | Customer size impact on billings and revenue: 9 Months Ended September 30, 2020 9 Months Ended September 30, 2019 Billings GAAP Revenue Billings GAAP Revenue Top 5 customers (measured by amounts billed) $ 527,160 $ 611,026 $ 1,002,040 $ 596,210 All other Customers 993,869 1,132,729 1,045,873 1,584,088 $ 1,521,029 $ 1,743,755 $ 2,047,913 $ 2,180,298 For the nine months ended September 30, 2020, one customer accounted for 16% of total revenue and two customers accounted for 67% of accounts receivable balance. For the nine months ended September 30, 2019, one customer accounted for 17% of total revenue and one customer accounted for 89% of accounts receivable balance. New customer acquisition impact on billings and revenue: 9 Months Ended September 30, 2020 9 Months Ended September 30, 2019 Billings GAAP Revenue Billings GAAP Revenue Customers in existence as of the beginning of the period (including upgrades) $ 1,387,693 $ 1,711,012 $ 1,476,663 $ 2,175,245 Customers acquired during the period 133,336 32,743 571,250 5,053 $ 1,521,029 $ 1,743,755 $ 2,047,913 $ 2,180,298 |
6. LEASES (Tables)
6. LEASES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Summary of Operating Lease | Nine Months Ended September 30, 2020 Operating lease expense $ 153,271 Weighted Average Remaining Lease Term (Years) Weighted Average Discount Rate 8 % |
Maturity of operating lease liability | Operating Lease Expense Variable Lease Expense Total Lease Expense 2020 (remaining 3 months) 47,590 3,310 50,900 2021 189,994 13,609 203,603 2022 189,615 13,988 203,603 2023 189,225 14,378 203,603 2024 63,074 4,793 67,867 Total lease payments $ 679,498 $ 50,078 729,576 Less imputed interest (97,075 ) Total $ 632,501 |
2. DEBT (Details)
2. DEBT (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Total Debt | $ 52,926,287 | $ 48,359,422 |
Less: current portion of long term debt | 331,994 | 0 |
Debt - long term | $ 52,594,293 | $ 48,359,422 |
Debt Instrument 1 | ||
Debt Description | Comerica Bank Loan and Security Agreement | Comerica Bank Loan and Security Agreement |
Total Debt | $ 5,000,000 | $ 5,000,000 |
Maturity | June 2020 | |
Interest Rate | 4.08% | 4.08% |
Debt Instrument 2 | ||
Debt Description | PPP Loan | PPP Loan |
Total Debt | $ 542,100 | $ 0 |
Maturity | April 2022 | |
Interest Rate | 1.00% | 0.00% |
Debt Instrument 3 | ||
Debt Description | Convertible notes - related parties, net of discounts and premiums of $759,801 and $1,193,801, respectively | Convertible notes - related parties, net of discounts and premiums of $359,570 and $1,193,801, respectively |
Total Debt | $ 45,127,680 | $ 39,230,432 |
Maturity | November 2022 | |
Interest Rate | 8.00% | 8.00% |
Debt Instrument 4 | ||
Debt Description | Convertible notes, net of discount of $2,195,673 and $45,029, respectively | Convertible notes, net of discount of $2,452,353 and $45,029, respectively |
Total Debt | $ 1,191,507 | $ 610,740 |
Maturity | November 2022 | |
Interest Rate | 8.00% | 8.00% |
Debt Instrument 5 | ||
Debt Description | Subordinated Promissory Note, Related Party | Subordinated Promissory Note, Related Party |
Total Debt | $ 1,065,000 | $ 3,518,250 |
Maturity | November 2022 | |
Interest Rate | 8.00% | 8.00% |
2. DEBT (Details 1)
2. DEBT (Details 1) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Convertible Notes, Net of Discount | $ 46,319,187 | $ 39,841,172 |
2007 NPA notes | ||
Convertible Notes, Net of Discount | 20,261,974 | 20,405,588 |
2014 NPA notes | ||
Convertible Notes, Net of Discount | $ 26,057,213 | $ 19,435,584 |
4. EQUITY AND EQUITY BASED CO_3
4. EQUITY AND EQUITY BASED COMPENSATION (Details) | 9 Months Ended |
Sep. 30, 2020USD ($)$ / sharesshares | |
Equity [Abstract] | |
Number of Shares Outstanding, Beginning | shares | 12,345,796 |
Number of Shares Cancelled | shares | (2,770,065) |
Number of Shares Issued | shares | 840,000 |
Number of Shares Outstanding, Ending | shares | 10,415,731 |
Number of Shares Vested and Exercisable | shares | 4,838,681 |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 1.73 |
Weighted Average Exercise Price Cancelled | $ / shares | 1.76 |
Weighted Average Exercise Price Issued | $ / shares | 2.73 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | 1.80 |
Weighted Average Exercise Price Vested and Exercisable | $ / shares | $ 1.72 |
Weighted Average Remaining Contractual Life (in years) Outstanding, beginning | 8 years 3 months 18 days |
Weighted Average Remaining Contractual Life (in years) Outstanding, ending | 6 years 8 months 12 days |
Weighted Average Remaining Contractual Life (in years) Vested and Exercisable | 6 years |
Aggregate Intrinsic Value Outstanding, beginning | $ | $ 13,823,410 |
Aggregate Intrinsic Value Outstanding, ending | $ | 7,268,822 |
Aggregate Intrinsic Value Vested and Exercisable | $ | $ 3,783,524 |
4. EQUITY AND EQUITY BASED CO_4
4. EQUITY AND EQUITY BASED COMPENSATION (Details Narrative) | Sep. 30, 2020USD ($)$ / shares |
Equity [Abstract] | |
Closing Price of the Common Stock | $ / shares | $ 2.50 |
Unvested Expense Not Yet Recorded | $ | $ 8,970,854 |
5. DISAGGREGATED PRESENTATION_3
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Billings | $ 1,521,029 | $ 2,047,913 | $ 1,521,029 | $ 2,047,913 |
Revenue | 511,411 | 646,255 | 1,743,755 | 2,180,298 |
Top 5 Customers (Measured By Amounts Billed) | ||||
Billings | 527,160 | 1,002,040 | 527,160 | 1,002,040 |
Revenue | 611,026 | 596,210 | ||
All Other Customers | ||||
Billings | 993,869 | 1,045,873 | 993,869 | 1,045,873 |
Revenue | 1,132,729 | 1,584,088 | ||
Customers In Existence As Of The Beginning Of The Period (Including Upgrades) | ||||
Billings | 1,387,693 | 1,476,663 | 1,387,693 | 1,476,663 |
Revenue | 1,711,012 | 2,175,245 | ||
Customers Acquired During The Period | ||||
Billings | $ 133,336 | $ 571,250 | 133,336 | 571,250 |
Revenue | $ 32,743 | $ 5,053 |
5. DISAGGREGATED PRESENTATION_4
5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details Narrative) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
One Customer | Revenue | ||
Concentration Risk Percentage | 16.00% | 17.00% |
One Customer | Accounts Receivable | ||
Concentration Risk Percentage | 89.00% | |
Two Customers | Accounts Receivable | ||
Concentration Risk Percentage | 67.00% |
6. LEASES (Details)
6. LEASES (Details) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Leases [Abstract] | |
Operating lease expense | $ 153,271 |
Weighted Average Remaining Lease Term (Years) | 0 years |
Weighted Average Discount Rate | 8.00% |
6. LEASES (Details 1)
6. LEASES (Details 1) | Sep. 30, 2020USD ($) |
2020 | $ 50,900 |
2021 | 203,603 |
2022 | 203,603 |
2023 | 203,603 |
2024 | 67,867 |
Total lease payments | 729,576 |
Less: imputed interest | (97,075) |
Total | 632,501 |
Operating Lease Expense | |
2020 | 47,590 |
2021 | 189,994 |
2022 | 189,615 |
2023 | 189,225 |
2024 | 63,074 |
Total lease payments | 679,498 |
Vairable Lease Expense | |
2020 | 3,310 |
2021 | 13,609 |
2022 | 13,988 |
2023 | 14,378 |
2024 | 4,793 |
Total lease payments | $ 50,078 |