MobileSmith (MOSTQ) 10-Q 11 May 21 2021 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	May 11, 2021
Document And Entity Information
Entity Registrant Name	MobileSmith, Inc.
Entity Central Index Key	0001113513
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
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	Q1
Document Fiscal Year Focus	2021

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Current Assets
Cash and Cash Equivalents	$ 1,161,371	$ 161,744
Restricted Cash and Cash Equivalents	195,993	189,179
Accounts Receivable, Net of Allowance for Doubtful Accounts of $2,746 and $30,000, Respectively	143,420	113,906
Prepaid Expenses and Other Current Assets	31,920	43,286
Total Current Assets	1,532,704	508,115
Operating Lease Right-of-Use Asset	469,804	512,124
Total Assets	2,002,508	1,020,239
Current Liabilities
Accounts Payable	143,844	155,850
Interest Paybale	184,456	271,868
Other Liabilities and Accrued Expenses	223,757	237,750
Operating Lease Liability Current	165,196	161,936
First PPP Loan, Current	0	423,067
Total Current Liabilities	717,253	1,250,471
Second PPP Loan	542,000	0
First PPP Loan, Long-Term	0	119,033
Operating Lease Liability	389,517	432,058
Contrac With Customer Liability	661,016	649,789
Convertible Notes Payable, Net of Discount		972,108
Bank Loan	5,000,000	5,000,000
Total Liabilities	7,309,786	8,423,459
Commitments and Contingencies (Note 3)
Stockholders' Deficit
Peferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, Including 1,750,000 Authorized and Designated for Series A Convertible Preferred Stock: 1,277,377 Issued and Outstanding as of March 31, 2021 and 1,166,297 Issued and Outstanding as of December 31, 2020.	113,072,014	103,649,344
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At March 31, 2021 and December 31, 2020; 28,389,493 Shares Issued and Outstanding at March 31, 2021 and 28,389,493 Shares Issued and Outstanding at December 31, 2020.	28,390	28,390
Additional Paid-in Capital - Common Shares	130,990,296	130,103,361
Accumulated Deficit	(249,397,978)	(241,184,315)
Total Stockholders' Deficit	(5,307,278)	(7,403,220)
Total Liabilities and Stockholders' Deficit	$ 2,002,508	$ 1,020,239

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Allowance for Doubtful Accounts	$ 2,746	$ 30,000
Stockholders' Deficit
Preferred Stock, Par Value	$ .001	$ 0.001
Preferred Stock, Authorized	5,000,000	5,000,000
Preferred Stock, Issued	1,277,377	1,166,297
Preferred Stock, Outstanding	1,277,377	1,166,297
Common Stock, Par Value	$ .001	$ 0.001
Common Stock, Authorized	100,000,000	100,000,000
Common Stock, Issued	28,389,493	28,389,493
Common Stock, Outstanding	28,389,493	28,389,493

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
REVENUES:
Total Revenue	$ 417,985	$ 624,572
COST OF REVENUES
Total Cost of Revenue	214,303	258,563
GROSS PROFIT	203,682	366,009
OPERATING EXPENSES:
Sales and Marketing	528,294	367,314
Research and Development	875,666	627,795
General and Administrative	905,884	824,801
Total Operating Expenses	2,309,844	1,819,910
LOSS FROM OPERATIONS	(2,106,162)	(1,453,901)
OTHER INCOME (EXPENSE):
Other Income	4	6,004
Interest Expense, Net	(142,467)	(1,851,103)
Gain on Debt Extinguishment - PPP Loan Forgiveness	542,100	0
Loss on Debt Extinguishment	(6,507,137)	0
Total Other Expense	(6,107,501)	(1,845,099)
NET LOSS	(8,213,663)	(3,299,000)
Plus: Deemed Dividend on Series A Convertible Preferred Stock	(5,269,401)	0
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (13,483,064)	$ (3,299,000)
NET LOSS PER COMMON SHARE:
Basic and Fully Diluted from Continuing Operations	$ (0.47)	$ (0.12)
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE:
Basic And Fully Diluted	28,389,493	28,320,549
Subscription and Support
REVENUES:
Total Revenue	$ 417,985	$ 519,399
COST OF REVENUES
Total Cost of Revenue	205,303	165,401
Services and Other
REVENUES:
Total Revenue	0	105,173
COST OF REVENUES
Total Cost of Revenue	$ 9,000	$ 93,162

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (8,213,663)	$ (3,299,000)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization	0	9,127
Bad Debt Expense	2,746	0
Amortization of Debt Discount	78,120	851,408
Share Based Compensation	886,935	721,681
Gain on Debt Extinguishment (PPP Loan Forgiveness)	(542,100)	0
Loss on Debt Extinguishment	6,507,137	0
Changes in Assets and Liabilities:
Accounts Receivable	(32,260)	(142,313)
Prepaid Expenses and Other Assets	11,366	20,417
Accounts Payable	(12,006)	43,543
Contract Liability	11,227	(91,189)
Operating Lease Right-of-use Asset	42,320	40,149
Operating Lease Liability	(39,281)	(36,270)
Accrued and Other Expenses	2,200	(910,964)
Net Cash Used in Operating Activities	(1,297,259)	(2,793,411)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Issuance of Subordinated Promissory Notes, Related Party	0	1,045,000
Proceeds From Issuance of Convertible Notes Payable, Related Party	0	1,000,000
Proceeds From Issuance of Convertible Notes Payable	0	1,000,000
Repayments of Financing Lease Obligations	0	(970)
Proceeds From Second PPP Loan	542,000	0
Proceeds From Issuance of Shares of Series A Preferred Stock	1,761,700	0
Net Cash Provided by Financing Activities	2,303,700	3,044,030
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,006,441	250,619
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	350,923	314,967
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	1,357,364	565,586
Composition of Cash, Cash Equivalents and Restricted Cash Balance:
Cash and Cash Equivalents	1,161,371	327,324
Restricted Cash	195,993	238,262
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	1,357,364	565,586
Supplemental Disclosures of Cash Flow Information:
Operating Lease Payments	48,150	46,741
Cash Paid During the Period for Interest	48,125	1,834,694
Recorded Debt Discount Associated with Beneficial Conversion Feature	0	2,000,000
Issued Series A Preferred Shares Valued at $7,760,970 in Exchange for Carrying Value of Debt (Including Accrued Interest, Premiums and Discounts) of $1,153,832	6,507,138	0
Recorded Beneficial Conversion Feature Associated with Issuance of Series A Preferred	1,761,700	0
Conversion Of Notes Payable Into Common Shares	$ 0	$ 65,240

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) - USD ($)	Series A Convertible Preferred Stock	Additional Paid-In Capital Series A Convertible Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance, Shares at Dec. 31, 2019	0		28,271,598
Beginning Balance, Amount at Dec. 31, 2019	$ 0	$ 0	$ 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
Deemed Dividend to the Holders of Series A Preferred Stock Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature						0
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	0		28,320,549
Ending Balance, Amount at Mar. 31, 2020	$ 0	0	$ 28,321	121,218,750	(173,073,475)	(51,826,404)
Beginning Balance, Shares at Dec. 31, 2020	1,166,297		28,389,493
Beginning Balance, Amount at Dec. 31, 2020	$ 1,166	103,648,178	$ 28,390	130,103,361	(241,184,315)	(7,403,220)
Equity-Based Compensation				886,935		886,935
Exchange of Debt for Series A Convertible Preferred Stock, shares	70,014
Exchange of Debt for Series A Convertible Preferred Stock, amount	$ 70	7,660,900				7,660,970
Issuance of Series A Convertible Preferred Stock for Cash, shares	41,066
Issuance of Series A Convertible Preferred Stock for Cash, amount	$ 41	1,761,659				1,761,700
Beneficial Conversion Feature Recorded as a Result Of Issuance of Series A Convertible Preferred Stock		5,269,401				5,269,401
Deemed Dividend to the Holders of Series A Preferred Stock Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature		(5,269,401)				(5,269,401)
Net Loss					(8,213,663)	(8,213,663)
Ending Balance, Shares at Mar. 31, 2021	1,277,377		28,389,493
Ending Balance, Amount at Mar. 31, 2021	$ 1,277	$ 113,070,737	$ 28,390	$ 130,990,296	$ (249,397,978)	$ (5,307,278)

1. DESCRIPTION OF BUSINESS AND

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2021
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 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 consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019 and 2020 we consolidated our current solutions under a single offering branded Peri™. Peri™ is a cloud-based collection of applications that run of our architected healthcare technology ecosystem. The architecture is designed to do the following: ● improve experience of healthcare patients and consumers, who are often at the same time members of various medical insurance networks ● optimize delivery of healthcare and relationship between members and insurance networks ● increase adoption, utilization and intelligence of EMRs (electronic medical records), extend EMR's usability to patients and consumers of healthcare Peri™ is designed to bridge the gap between healthcare industry system tools and healthcare consumer's mobile device. Our flagship PeriOp offering is an EMR integrated mobile app based set of pre- and postoperative instructions (which we refer to as Clinical Pathways), that establishes a direct two-way clinical procedure management process between a patient and a healthcare provider and by doing so improves patient engagement and procedural adherence. 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 March 31, 2021. 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, 2020 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 three months ended March 31, 2021 and 2020, 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 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. In December of 2020 and January of 2021 we exchanged all non-bank, including the debt issued under the 2007 NPA and the 2014 NPA, into Series A Convertible Preferred Stock (the "Series A Preferred Stock") with the same investors. We expect to finance our operations through the issuance of Series A Preferred Stock going forward. If financing through issuance of Series A Preferred Stock becomes unavailable, we will need to seek other sources of funding. 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 August 5, 2020, the FASB issued ASU 2020-06 "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is not expected to have a material impact on the financial statements of the Company. For the Company the ASU is not effective until fiscal year 2024, but early adoption is permitted as early as current fiscal year ending December 31, 2021.

2. DEBT

2. DEBT	3 Months Ended
	Mar. 31, 2021
Debt Disclosure [Abstract]
2. DEBT	The table below summarizes the Company's debt outstanding at March 31, 2021 and December 31, 2020: Debt Description March 31, December 31, 2021 2020 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 5,000,000 June 2022 3.85 % Second PPP Loan 542,000 — February 2026 1.00 % First PPP Loan — 542,100 April 2022 1.00 % Convertible notes, net of discount of $1,927,892 as of December 31, 2020 — 972,108 November 2022 8.00 % Total debt 5,542,000 6,514,208 Less: current portion of long term debt — 423,067 Debt - long term $ 5,542,000 6,091,141 Bank Loan The Company has an outstanding Loan and Security Agreement with Comerica Bank ("Comerica") dated June 9, 2014 (the "LSA") in the amount of $5,000,000, with an extended maturity of June 9, 2022. The LSA is secured by an extended irrevocable letter of credit issued by UBS AG (Geneva, Switzerland) ("UBS AG") with a renewed term expiring on May 31, 2022, which term is 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. The LSA with Comerica has the following additional terms: ● 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; ● 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. Convertible Notes and January 2021 Debt Exchange On January 28, 2021 the Company exchanged its remaining unsecured Convertible Subordinated Notes (the “2014 NPA Notes”) under its existing unsecured Convertible Subordinated Note Purchase Agreement dated December 10, 2014 (the “2014 NPA”) for Series A Preferred Stock. The carrying value of 2014 NPA Notes of $1,075,713 consisting of face value of $2,900,000 net of unamortized discount of $1,849,773 plus accrued interest of $103,605 was exchanged for 70,014 shares of Series A Preferred Stock ("the January 2021 Debt Exchange"). The January Debt Exchange transaction was accounted for as debt extinguishment and the newly issued shares of Series A Preferred Stock were recorded at fair value in accordance with ASC 470 "Debt". The issued shares were fair valued at $7,660,970. The difference between the carrying amount of extinguished debt and fair value of the Series A Preferred Stock issued resulted in loss recorded on the statement of operations of $6,507,138. Second PPP Loan Forgiveness of First PPP Loan On February 18, 2021 our First PPP Loan was forgiven in its entirety. The forgiveness was accounted for as debt extinguishment which resulted in a gain of $542,100 recorded in our statement of operations.

3. COMMITMENTS AND CONTINGENCIE

3. COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2021
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. STOCKHOLDERS DEFICIT

4. STOCKHOLDERS DEFICIT	3 Months Ended
	Mar. 31, 2021
Equity [Abstract]
4. STOCKHOLDERS DEFICIT	Preferred Stock On January 28, 2021 as a result of the January 2021 Debt Exchange transaction the Company issued 70,014 shares of Series A Preferred Stock. On the date of the January 2021 Debt Exchange the market value of the common stock was above the Series A Preferred Stock conversion price of $1.43, which resulted in the conversion feature that was beneficial to the holder on the date of the exchange. The resulting beneficial conversion feature was recorded as a discount and amortized in its entirety as a deemed dividend on the date of the January 2021 Debt Exchange and charged to loss attributable to common shareholders on the Company's Statement of Operations in the amount of $3,507,701. In addition, the Company issued 41,066 shares of Series A Preferred Stock in exchange for $1,761,700 in cash funding. The shares were issued with a beneficial conversions feature discount and resulted in a deemed dividend with charge to loss attributable to common shareholders of $1,761,700. Series A Preferred Stock with the following standard terms: ● Each share of the Series A Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $42,290 (the “Stated Value”); ● Each share of the Series A Preferred Stock then outstanding shall be entitled to receive an annual dividend equal to $3.43, subject to proration related to the timing of issuance. Such dividend is designed to have an effective yield of 8% on invested stated value; ● Each dividend shall be paid either in shares of Series A Preferred Stock (“ Payment-in-Kind ● The Holders of Series A Preferred Stock shall have no voting rights with respect to any matters to be voted on by the stockholders of the Corporation; ● The Holders of Series A Preferred Stock shall have certain Board observation and inspection rights administered through a designated Agent; ● Each share of Series A Preferred Stock shall be convertible, at any time and from time to time, at the option of the Holder into 30 shares of Common Stock, which results in conversion ratio of $1.43 of stated value of Series A Preferred Stock into one share of common stock (the "Series A Preferred Conversion Price"); ● The shares are subject to automatic conversion immediately prior to the occurrence of a Fundamental Transaction, as defined in a Certificate of Designation. A Fundamental Transaction includes, but is not limited to, a sale, merger or similar change in ownership. Equity Compensation Plan The following is a summary of the stock option activity for the three months ended March 31, 2021: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2020 $ 10,683,300 $ 1.85 7.58 $ 17,060,533 Cancelled (13,500 ) 1.60 Issued 1,175,000 2.88 Outstanding, March 31, 2021 $ 11,844,800 1.96 7.6 15,928,838 Vested and exercisable, March 31, 2021 $ 5,525,091 $ 1.78 6.4 $ 8,394,846 Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock at March 31, 2021 and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock at March 31, 2021, as reported on the OTCQB, was $3.30 per share. At March 31, 2021, an amount of $11,396,816 unvested expense related to outstanding stock options has yet to be recorded over a weighted average period of 3.5 years .

5. FAIR VALUE MEASUREMENTS

5. FAIR VALUE MEASUREMENTS	3 Months Ended
	Mar. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]
5. FAIR VALUE MEASUREMENTS	We are required to provide financial statement users with information about assets and liabilities measured at fair value in the balance sheet or disclosed in the notes to the financial statements regarding (1) the valuation techniques and inputs used to develop fair value measurements, including the related judgments and assumptions made, (2) the uncertainty in the fair value measurements as of the reporting date, and (3) how changes in the measurements impact the performance and cash flows of the entity. 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. The January 2021 Debt Exchange resulted in transaction which required the Company to recognize debt extinguishment and to record newly issued financing instrument at fair value at the date of the transaction on a non-recurring basis. Fair value measurement was categorized as Level 3 fair value measurement due to use of various unobservable inputs to the pricing model. A single most significant factor included in pricing models was the Level 1 input of observable market value of MobileSmith common stock on the date of the transaction, as quoted on the OTCQB. Despite the thinly traded nature of the Company stock, the quoted market value could not be ignored in determination of fair value in the transaction. The Company used income approach to arrive at the fair value of the Series A Convertible Stock on January 28, 2021 - the date of the exchange. Using this approach the value of Series A Preferred Stock holding is equal to the present value of the cash flow streams that can be expected to be generated by the holder in a combination of dividends and conversion of preferred shares into common and subsequent sale of the common shares. The Company used Monte Carlo model to simulate future movement of our common stock and discounted the results back to January 28, 2021 transaction date. The model used the following notable inputs: ● the market price of the Company common stock on January 28, 2021 of $3.10 as a starting point of simulation ● the risk free rate and discount rate of 1.35%; ● volatility of 80%; ● term of simulation extended to 15 years; ● the model also considered the probability of a Fundamental Transaction (as defined in Series A Preferred Stock certificate of designation) and probabilities of payment of dividend in cash or in additional preferred shares.

6. DISAGGREGATED PRESENTATION O

6. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION	3 Months Ended
	Mar. 31, 2021
Revenue from Contract with Customer [Abstract]
6. 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: 3 Months Ended March 31, 2021 3 Months Ended March 31, 2020 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 304,900 $ 76,171 $ 338,173 $ 171,535 All Other Customers $ 124,311 $ 341,814 $ 195,211 $ 453,037 $ 429,211 $ 417,985 $ 533,384 $ 624,572 For the three months ended March 31, 2021, four customers accounted for 97% of the accounts receivable balance and no customer accounted for 38% of total revenue. For the three months ended March 31, 2020, two customers accounted for 46% of the accounts receivable balance and one customer accounted for 17% of total revenue. Below is a summary of new customer acquisition impact on billings and revenue: 3 Months Ended March 31, 2021 3 Months Ended March 31, 2020 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 429,211 $ 417,985 $ 533,384 $ 624,572 Customers Acquired During The Period $ — $ — — — $ 429,211 $ 417,985 $ 533,384 $ 624,572

7. LEASES

7. LEASES	3 Months Ended
	Mar. 31, 2021
Leases [Abstract]
7. 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: The following table summarizes the information about operating lease: Nine Months Ended March 31, 2021 Operating lease expense $51,672 Remaining Lease Term (Years) 3 years Discount Rate 8% Maturities of operating lease liability as of March 31, 2021 were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2021 (remaining 9 months) 142,496 10,206 152,702 2022 189,615 13,988 203,603 2023 189,225 14,378 203,603 2024 63,074 4,793 67,867 Total lease payments $ 584,410 $ 43,365 627,775 Less imputed interest (73,062 ) Total $ 554,713

1. DESCRIPTION OF BUSINESS AN_2

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2021
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 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 consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019 and 2020 we consolidated our current solutions under a single offering branded Peri™. Peri™ is a cloud-based collection of applications that run of our architected healthcare technology ecosystem. The architecture is designed to do the following: ● improve experience of healthcare patients and consumers, who are often at the same time members of various medical insurance networks ● optimize delivery of healthcare and relationship between members and insurance networks ● increase adoption, utilization and intelligence of EMRs (electronic medical records), extend EMR's usability to patients and consumers of healthcare Peri™ is designed to bridge the gap between healthcare industry system tools and healthcare consumer's mobile device. Our flagship PeriOp offering is an EMR integrated mobile app based set of pre- and postoperative instructions (which we refer to as Clinical Pathways), that establishes a direct two-way clinical procedure management process between a patient and a healthcare provider and by doing so improves patient engagement and procedural adherence. 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 March 31, 2021. 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, 2020 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 three months ended March 31, 2021 and 2020, 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 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. In December of 2020 and January of 2021 we exchanged all non-bank, including the debt issued under the 2007 NPA and the 2014 NPA, into Series A Convertible Preferred Stock (the "Series A Preferred Stock") with the same investors. We expect to finance our operations through the issuance of Series A Preferred Stock going forward. If financing through issuance of Series A Preferred Stock becomes unavailable, we will need to seek other sources of funding. 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 August 5, 2020, the FASB issued ASU 2020-06 "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is not expected to have a material impact on the financial statements of the Company. For the Company the ASU is not effective until fiscal year 2024, but early adoption is permitted as early as current fiscal year ending December 31, 2021.

2. DEBT (Tables)

2. DEBT (Tables)	3 Months Ended
	Mar. 31, 2021
Debt Disclosure [Abstract]
Company Debt	Debt Description March 31, December 31, 2021 2020 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 5,000,000 June 2022 3.85 % Second PPP Loan 542,000 — February 2026 1.00 % First PPP Loan — 542,100 April 2022 1.00 % Convertible notes, net of discount of $1,927,892 as of December 31, 2020 — 972,108 November 2022 8.00 % Total debt 5,542,000 6,514,208 Less: current portion of long term debt — 423,067 Debt - long term $ 5,542,000 6,091,141

4. STOCKHOLDERS DEFICIT (Tables

4. STOCKHOLDERS DEFICIT (Tables)	3 Months Ended
	Mar. 31, 2021
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, 2020 $ 10,683,300 $ 1.85 7.58 $ 17,060,533 Cancelled (13,500 ) 1.60 Issued 1,175,000 2.88 Outstanding, March 31, 2021 $ 11,844,800 1.96 7.6 15,928,838 Vested and exercisable, March 31, 2021 $ 5,525,091 $ 1.78 6.4 $ 8,394,846

6. DISAGGREGATED PRESENTATION_2

6. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2021
Revenue from Contract with Customer [Abstract]
Disaggregation of revenue	Customer size impact on billings and revenue: 3 Months Ended March 31, 2021 3 Months Ended March 31, 2020 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 304,900 $ 76,171 $ 338,173 $ 171,535 All Other Customers $ 124,311 $ 341,814 $ 195,211 $ 453,037 $ 429,211 $ 417,985 $ 533,384 $ 624,572 Below is a summary of new customer acquisition impact on billings and revenue: 3 Months Ended March 31, 2021 3 Months Ended March 31, 2020 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 429,211 $ 417,985 $ 533,384 $ 624,572 Customers Acquired During The Period $ — $ — — — $ 429,211 $ 417,985 $ 533,384 $ 624,572

7. LEASES (Tables)

7. LEASES (Tables)	3 Months Ended
	Mar. 31, 2021
Leases [Abstract]
Summary of Operating Lease	The following table summarizes the information about operating lease: Nine Months Ended March 31, 2021 Operating lease expense $51,672 Remaining Lease Term (Years) 3 years Discount Rate 8%
Maturity of operating lease liability	Maturities of operating lease liability as of March 31, 2021 were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2021 (remaining 9 months) 142,496 10,206 152,702 2022 189,615 13,988 203,603 2023 189,225 14,378 203,603 2024 63,074 4,793 67,867 Total lease payments $ 584,410 $ 43,365 627,775 Less imputed interest (73,062 ) Total $ 554,713

2. DEBT (Details)

2. DEBT (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Total debt	$ 5,542,000	$ 6,514,208
Less: current portion of long term debt	0	423,067
Debt - long term	$ 5,542,000	$ 6,091,141
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	Jun-22
Interest rate	3.85%
Debt Instrument 2
Debt description	Second PPP Loan	Second PPP Loan
Total debt	$ 542,000	$ 0
Maturity	February 2026
Interest rate	1.00%
Debt Instrument 3
Debt description	First PPP Loan	First PPP Loan
Total debt	$ 0	$ 542,100
Maturity	Apr-22
Interest rate	1.00%
Debt Instrument 4
Debt description	Convertible notes, net of discount of $1,927,892 as of December 31, 2020	Convertible notes, net of discount of $1,927,892 as of December 31, 2020
Total debt	$ 0	$ 972,108
Maturity	Nov-22
Interest rate	8.00%

4. STOCKHOLDERS DEFICIT (Detail

4. STOCKHOLDERS DEFICIT (Details)	3 Months Ended
	Mar. 31, 2021USD ($)$ / sharesshares
Equity [Abstract]
Number of shares outstanding, beginning | shares	10,683,300
Number of shares cancelled | shares	(13,500)
Number of shares issued | shares	1,175,000
Number of shares outstanding, ending | shares	11,844,800
Number of shares vested and exercisable | shares	5,525,091
Weighted average exercise price outstanding, beginning | $ / shares	$ 1.85
Weighted average exercise price cancelled | $ / shares	1.60
Weighted average exercise price issued | $ / shares	2.88
Weighted average exercise price outstanding, ending | $ / shares	1.96
Weighted average exercise price vested and exercisable | $ / shares	$ 1.78
Weighted average remaining contractual life (in years) outstanding, beginning	7 years 6 months 29 days
Weighted average remaining contractual life (in years) outstanding, ending	7 years 7 months 6 days
Weighted average remaining contractual life (in years) vested and exercisable	6 years 4 months 24 days
Aggregate intrinsic value outstanding, beginning | $	$ 17,060,533
Aggregate intrinsic value outstanding, ending | $	15,928,838
Aggregate intrinsic value vested and exercisable | $	$ 8,394,846

4. STOCKHOLDERS DEFICIT (Deta_2

4. STOCKHOLDERS DEFICIT (Details Narrative)	3 Months Ended
	Mar. 31, 2021USD ($)
Equity [Abstract]
Unvested expense not yet recorded	$ 11,396,816
Weighted average period of unvested expense not yet recorded	3 years 6 months

5. DISAGGREGATED PRESENTATION O

5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Billings	$ 429,211	$ 533,384
Revenue	417,985	624,572
Top 5 Customers (Measured By Amounts Billed)
Billings	304,900	338,173
Revenue	76,171	171,535
All Other Customers
Billings	124,311	195,211
Revenue	341,814	453,037
Customers In Existence As Of The Beginning Of The Period (Including Upgrades)
Billings	429,211	533,384
Revenue	417,985	624,572
Customers Acquired During The Period
Billings	0	0
Revenue	$ 0	$ 0

5. DISAGGREGATED PRESENTATION_2

5. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details Narrative)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Four Customers | Accounts Receivable
Concentration risk percentage	97.00%
One Customer | Revenue
Concentration risk percentage	38.00%	17.00%
Two Customers | Accounts Receivable
Concentration risk percentage		46.00%

6. LEASES (Details)

6. LEASES (Details)	3 Months Ended
	Mar. 31, 2021USD ($)
Leases [Abstract]
Operating lease expense	$ 51,672
Weighted average remaining lease term (years)	3 years
Weighted average discount rate	8.00%

6. LEASES (Details 1)

6. LEASES (Details 1)	Mar. 31, 2021USD ($)
2021 (remaining 9 months)	$ 152,702
2022	203,603
2023	203,603
2024	67,867
Total lease payments	627,775
Less: imputed interest	(73,062)
Total	554,713
Operating Lease Expense
2021 (remaining 9 months)	142,496
2022	189,615
2023	189,225
2024	63,074
Total lease payments	584,410
Vairable Lease Expense
2021 (remaining 9 months)	10,206
2022	13,988
2023	14,378
2024	4,793
Total lease payments	$ 43,365