MobileSmith (MOSTQ) 10-Q 10 Aug 21 2021 Q2 Quarterly report Financial data

Cover

Cover - shares	6 Months Ended
	Jun. 30, 2021	Aug. 09, 2021
Cover [Abstract]
Entity Registrant Name	MOBILESMITH, INC.
Entity Central Index Key	0001113513
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Jun. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Entity Common Stock Shares Outstanding		28,389,493
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity File Number	001-32634
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	95-4439334
Entity Address Address Line 1	5400 Trinity Road
Entity Address Address Line 2	Suite 208
Entity Address City Or Town	Raleigh
Entity Address State Or Province	NC
Entity Address Postal Zip Code	27607
City Area Code	855
Local Phone Number	516-2413

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Current Assets
Cash and Cash Equivalents	$ 831,191	$ 161,744
Restricted Cash and Cash Equivalents	199,737	189,179
Accounts Receivable, Net of Allowance for Doubtful Accounts of $0 and $30,000 respectively	283,633	113,906
Prepaid Expenses and Other Current Assets	74,306	43,286
Total Current Assets	1,388,867	508,115
Operating Lease Right-of-Use Asset	428,142	512,124
Total Assets	1,817,009	1,020,239
Current Liabilities
Accounts Payable	26,092	155,850
Interest Payable	183,921	271,868
Other Liabilities And Accrued Expenses	263,839	237,750
Operating Lease Liability Current	149,525	161,936
Contract With Customer Liability	676,990	649,789
First PPP Loan, Current	0	423,067
Bank Loans	5,000,000	0
Total Current Liabilities	6,300,367	1,900,260
Second PPP Loan	542,000	0
First PPP Loan, Long-Term	0	119,033
Operating Lease Liability	365,115	432,058
Convertible Notes Payable, Net of Discount	0	972,108
Banks Loan	0	5,000,000
Total Liabilities	7,207,482	8,423,459
Stockholders' Deficit
Preferred Stock, $0.001 Par Value, 5,000,000 Shares Authorized, Including 1,750,000 Authorized and Designated for Series A Convertible Preferred Shares: 1,300,687 Issued and Outstanding as of June 30, 2021 and 1,166,297 Issued and Outstanding as of December 31, 2020.	114,072,014	103,649,344
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At June 30, 2021 and December 31, 2020; 28,389,493 Shares Issued and Outstanding at June 30, 2021 and 28,389,493 Shares Issued and Outstanding at December 31, 2020.	28,390	28,390
Additional Paid-in Capital - Common Shares	131,796,969	130,103,361
Accumulated Deficit	(251,287,846)	(241,184,315)
Total Stockholders' Deficit	(5,390,473)	(7,403,220)
Total Liabilities and Stockholders' Deficit	$ 1,817,009	$ 1,020,239

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Allowance for Doubtful Accounts	$ 0	$ 30,000
Stockholders' Deficit
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Authorized	5,000,000	5,000,000
Preferred Stock, Issued	1,300,687	1,166,297
Designated for series A convertible preferred shares	1,750,000	1,750,000
Preferred Stock, Outstanding	1,300,687	1,166,297
Common Stock, Par Value	$ 0.001	$ 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		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
REVENUES:
Subscription and Support	$ 398,358	$ 491,367	$ 816,343	$ 1,010,766
Services and Other	0	116,405	0	221,578
Total Revenue	398,358	607,772	816,343	1,232,344
COST OF REVENUE:
Subscription and Support	199,944	181,221	405,247	346,622
Services and Other	0	0	9,000	93,162
Total Cost of Revenues	199,944	181,221	414,247	439,784
GROSS PROFIT	198,414	426,551	402,096	792,560
OPERATING EXPENSES:
Selling and Marketing	476,147	301,052	1,004,441	668,366
Research and Development	858,571	750,438	1,734,237	1,378,233
General and Administrative	705,489	824,517	1,611,373	1,649,318
Total Operating Expenses	2,040,207	1,876,007	4,350,051	3,695,917
LOSS FROM OPERATIONS	(1,841,793)	(1,449,456)	(3,947,954)	(2,903,357)
OTHER INCOME (EXPENSE):
Other Income	596	5,682	598	11,686
Interest Expense, Net	(48,671)	(1,759,173)	(191,138)	(3,610,276)
Gain on Debt Extinguishment - PPP Loan Forgiveness	0	0	542,100
Loss on Debt Extinguishment	0	(4,864,750)	(6,507,137)	(4,864,750)
Total Other Expense	(48,075)	(6,618,241)	(6,155,577)	(8,463,340)
NET LOSS	(1,889,868)	(8,067,697)	(10,103,531)	(11,366,697)
Plus: Deemed Dividend on Series A Convertible Preferred Stock	(1,000,000)	0	(6,269,401)	0
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (2,889,868)	$ (8,067,697)	$ (16,372,932)	$ (11,366,697)
NET LOSS PER COMMON SHARE:
Basic and Fully Diluted from Continuing Operations	$ (0.10)	$ (0.28)	$ (0.58)	$ (0.40)
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE: Basic And Fully Diluted	28,389,493	28,389,493	28,389,493	28,389,493

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (10,103,531)	$ (11,366,697)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization	0	12,506
Amortization of Debt Discount	78,120	1,585,823
Share Based Compensation	1,693,608	1,502,457
Gain of Debt Extinguishment (PPP Loan Forgiveness)	(542,100)	0
Losses on Debt Extinguishments	6,507,137	4,864,750
Changes in Assets and Liabilities:
Accounts Receivable	(169,727)	(199,097)
Prepaid Expenses and Other Assets	(31,020)	30,254
Accounts Payable	(129,758)	(117,274)
Contract Liability	27,201	(189,752)
Operating Lease Right-of-use Asset	83,982	80,088
Operating Lease Liability	(79,354)	(73,272)
Accrued and Other Expenses	41,747	(1,559,991)
Net Cash Used in Operating Activities	(2,623,695)	(5,430,205)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Issuance of Subordinated Promissory Notes, Related Party	0	1,250,000
Proceeds From Issuance of Convertible Notes Payable, Related Party	0	1,200,000
Proceeds From Issuance of Convertible Notes Payable	0	2,900,000
Repayments of Financing Lease Obligations	0	(6,378)
Proceeds From First PPP Loan	0	542,100
Proceeds From Second PPP Loan	542,000	0
Proceeds From Issuance of Shares of Series A Preferred Stock	2,761,700	0
Net Cash Provided by Financing Activities	3,303,700	5,885,722
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	680,005	455,517
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	350,923	314,967
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	1,030,928	770,484
Composition of Cash, Cash Equivalents and Restricted Cash Balance:
Cash and Cash Equivalents	831,191	582,568
Restricteds Cash	199,737	187,916
Total Cash, Cash Equivalents and Restricted Cash	1,030,928	770,484
Supplemental Disclosures of Cash Flow Information:
Operating Lease Payments	102,863	111,550
Cash Paid During the Period for Interest	97,319	3,825,607
Non-Cash Investing and Financing Activities:
Recorded Debt Discount Associated with Beneficial Conversion Feature	0	8,035,278
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	6,507,137	0
Recorded Beneficial Conversion Feature Associated with Issuance of Series A Preferred	6,269,401	0
Conversion Of Notes Payable Into Common Shares	$ 0	$ 156,980

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) - USD ($)	Total	Convertible Preferred Stock [Member]	Common Stock	Additional Paid-In Capital, Series A Convertible Preferred Stock [Member]	Additional Paid-In Capital, Common Stock [Member]	Retained Earnings (Accumulated Deficit)
Balance, shares at Dec. 31, 2019			28,271,598
Balance, amount at Dec. 31, 2019	$ (51,314,325)	$ 0	$ 28,272	$ 0	$ 118,431,878	$ (169,774,475)
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	65,240		$ 49		65,191
Net Loss	(3,299,000)					(3,299,000)
Balance, shares at Mar. 31, 2020			28,320,549
Balance, amount at Mar. 31, 2020	(51,826,404)	0	$ 28,321	0	121,218,750	(173,073,475)
Balance, shares at Dec. 31, 2019			28,271,598
Balance, amount at Dec. 31, 2019	(51,314,325)	0	$ 28,272	0	118,431,878	(169,774,475)
Net Loss	(11,366,697)
Balance, shares at Jun. 30, 2020			28,389,493
Balance, amount at Jun. 30, 2020	(52,986,307)	0	$ 28,390	0	128,126,475	(181,141,172)
Balance, shares at Mar. 31, 2020			28,320,549
Balance, amount at Mar. 31, 2020	(51,826,404)	0	$ 28,321	0	121,218,750	(173,073,475)
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	91,740		$ 69		91,671
Net Loss	(8,067,697)					(8,067,697)
Balance, shares at Jun. 30, 2020			28,389,493
Balance, amount at Jun. 30, 2020	(52,986,307)	$ 0	$ 28,390	0	128,126,475	(181,141,172)
Balance, shares at Dec. 31, 2020		1,166,297	28,389,493
Balance, amount at Dec. 31, 2020	(7,403,220)	$ 1,166	$ 28,390	103,648,178	130,103,361	(241,184,315)
Equity-Based Compensation	886,935				886,935
Net Loss	(8,213,663)					(8,213,663)
Exchange of Debt for Series A Convertible Preferred Shares on January 28, 2021, shares		70,014
Exchange of Debt for Series A Convertible Preferred Shares on January 28, 2021, amount	7,660,970	$ 70		7,660,900
Issuance of Series A Convertible Preferred for Cash, shares		41,066
Issuance of Series A Convertible Preferred for Cash, amount	1,761,700	$ 41		1,761,659
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares	5,269,401			5,269,401
Deemed Dividend to the Holders of Series A Preferred Shares Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature	(5,269,401)			(5,269,401)
Balance, shares at Mar. 31, 2021		1,277,377	28,389,493
Balance, amount at Mar. 31, 2021	(5,307,278)	$ 1,277	$ 28,390	113,070,737	130,990,296	(249,397,978)
Balance, shares at Dec. 31, 2020		1,166,297	28,389,493
Balance, amount at Dec. 31, 2020	(7,403,220)	$ 1,166	$ 28,390	103,648,178	130,103,361	(241,184,315)
Net Loss	(10,103,531)
Balance, shares at Jun. 30, 2021		1,300,687	28,389,493
Balance, amount at Jun. 30, 2021	(5,390,473)	$ 1,300	$ 28,390	114,070,714	131,796,969	(251,287,846)
Balance, shares at Mar. 31, 2021		1,277,377	28,389,493
Balance, amount at Mar. 31, 2021	(5,307,278)	$ 1,277	$ 28,390	113,070,737	130,990,296	(249,397,978)
Equity-Based Compensation	806,673				806,673
Net Loss	(1,889,868)					(1,889,868)
Issuance of Series A Convertible Preferred for Cash, shares		23,310
Issuance of Series A Convertible Preferred for Cash, amount	1,000,000	$ 23		999,977
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares	1,000,000			1,000,000
Deemed Dividend to the Holders of Series A Preferred Shares Resulting From Amortization of Discount Associated with the Beneficial Conversion Feature	(1,000,000)			(1,000,000)
Balance, shares at Jun. 30, 2021		1,300,687	28,389,493
Balance, amount at Jun. 30, 2021	$ (5,390,473)	$ 1,300	$ 28,390	$ 114,070,714	$ 131,796,969	$ (251,287,846)

DESCRIPTION OF BUSINESS AND BAS

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2021
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Note 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	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 June 30, 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 six months ended June 30, 2021, 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 our non-bank debt, 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.

DEBT

DEBT	6 Months Ended
	Jun. 30, 2021
DEBT
Note 2. DEBT	2. DEBT The table below summarizes the Company's debt outstanding on June 30, 2021 and December 31, 2020: Debt Description June 30, 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 2021 Debt Exchange 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 $6,507,137. Second PPP Loan On February 9 2021, the Company received $542,000 of proceeds from a note payable issued under either the Small Business Administration "the SBA" Paycheck Protection Program ("PPP") under section 7(a)(36) of the Small Business Act or the SBA's Paycheck Protection Program Second Draw Loans under Section 7(a)(37) of the Small Business Act. The note matures in five years and bears interest at 1% per year. Similar to the Company's initial PPP Loan, the second loan contains a loan forgiveness covered period of six months from the date of issuance in which the Company will not be obligated to make any payments of principal or interest. If the Company does not submit a loan forgiveness application within ten months after the end of the loan forgiveness covered period, the Company must begin making principal and interest after that period (the "Loan Forgiveness Application Submission Period"). Interest continues to accrue during the deferment period. If the Company is unable to or does not follow those guidelines for the loan to be forgiven by the SBA, the Company would be required to repay a portion of or the entire balance of the loan proceeds in full. If any portion of the loan is not forgiven, the Company may start making payments on, but not before February of 2022 - the end of the Loan Forgiveness Application Submission Period. Forgiveness of First PPP Loan On February 18, 2021 our first PPP Loan was forgiven by the SBA 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.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2021
COMMITMENTS AND CONTINGENCIES
Note 3. COMMITMENTS AND CONTINGENCIES	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.

STOCKHOLDERS DEFICIT

STOCKHOLDERS DEFICIT	6 Months Ended
	Jun. 30, 2021
STOCKHOLDERS DEFICIT
Note 4. STOCKHOLDERS DEFICIT	4. STOCKHOLDERS DEFICIT Preferred Stock On January 28, 2021 and 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 64,376 shares of Series A Preferred Stock in exchange for $2,761,700 in cash funding. The shares were issued with beneficial conversions feature discount and resulted in a deemed dividend with charge to loss attributable to common shareholders of $2,761,700. Series A Preferred Stock with the following standard terms: ● Each share of Series A Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $42.90 (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”) or in cash, at the option of the Corporation, on the respective Dividend Date; ● 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 six months ended June 30, 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 7.4 $ 17,060,533 Cancelled (902,500 ) 1.57 Issued 1,475,000 3.10 Outstanding, June 30, 2021 $ 11,255,800 2.04 7.9 21,752,184 Vested and exercisable, June 30, 2021 $ 5,195,821 $ 1.85 7.3 $ 11,032,574 Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock on June 30, 2021, and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock on June 30, 2021, as reported on the OTCQB, was $3.50 per share. On June 30, 2021, an amount of $11,495,025 unvested expense related to outstanding stock options has yet to be recorded over a weighted average period of 3.3 years.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	6 Months Ended
	Jun. 30, 2021
FAIR VALUE MEASUREMENTS
Note 5. FAIR VALUE MEASUREMENTS	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 the income approach to arrive at the fair value of the Series A Stock on January 28, 2021 - the date of the exchange. Using this approach the value of Series A Preferred Stock 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 the 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.

DISAGGREGATED PRESENTATION OF R

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION	6 Months Ended
	Jun. 30, 2021
DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION
Note 6. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION	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: 6 Months Ended June 30, 2021 6 Months Ended June 30, 2020 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 342,000 $ 221,640 $ 433,010 $ 435,747 All Other Customers $ 501,543 $ 594,703 $ 615,259 $ 796,597 $ 843,543 $ 816,343 $ 1,048,269 $ 1,232,344 For the six months ended June 30, 2021, three customers accounted for 70% of the accounts receivable balance and no customer accounted for more than 10% of total revenue. For the six months ended June 30, 2020, four customers accounted for 74% of the accounts receivable balance and one customer accounted for 18% of total revenue. Below is a summary of new customer acquisition impact on billings and revenue: 6 Months Ended June 30, 2021 6 Months Ended June 30, 2020 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 843,543 $ 816,343 $ 1,036,182 $ 1,232,344 Customers Acquired During The Period $ - $ - $ 12,087 $ - $ 843,543 $ 816,343 $ 1,048,269 $ 1,232,344

LEASES

LEASES	6 Months Ended
	Jun. 30, 2021
LEASES
Note 7. LEASES	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: Six Months Ended June 30, 2021 Operating lease expense $ 102,863 Remaining Lease Term (Years) 2.7 years Discount Rate 8 % Maturities of operating lease liability as of June 30, 2021 were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2021 (remaining 6 months) $ 95,537 $ 6,843 $ 102,380 2022 191,074 14,096 205,170 2023 191,074 14,519 205,593 2024 63,691 4,840 68,531 Total lease payments $ 541,376 $ 40,298 581,674 Less imputed interest (67,034 ) Total $ 514,640

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2021
SUBSEQUENT EVENTS
Note 8. SUBSEQUENT EVENTS	8. SUBSEQUENT EVENTS Subsequent to June 30, 2021 the Company granted approximately 760,000 of stock options to certain employees. The newly issued stock options replaced stock options previously expired unexercised. The newly issued stock options have an exercise price equal to the fair market price of $1.63 on the date of grant, 10-year term and 5-year vesting.

DEBT (Tables)

DEBT (Tables)	6 Months Ended
	Jun. 30, 2021
DEBT
Summary of Company Debt	Debt Description June 30, 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

STOCKHOLDERS DEFICIT (Tables)

STOCKHOLDERS DEFICIT (Tables)	6 Months Ended
	Jun. 30, 2021
STOCKHOLDERS DEFICIT
Summary 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 7.4 $ 17,060,533 Cancelled (902,500 ) 1.57 Issued 1,475,000 3.10 Outstanding, June 30, 2021 $ 11,255,800 2.04 7.9 21,752,184 Vested and exercisable, June 30, 2021 $ 5,195,821 $ 1.85 7.3 $ 11,032,574

DISAGGREGATED PRESENTATION OF_2

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Tables)	6 Months Ended
	Jun. 30, 2021
DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION
Summary of Disaggregation of revenue	6 Months Ended June 30, 2021 6 Months Ended June 30, 2020 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 342,000 $ 221,640 $ 433,010 $ 435,747 All Other Customers $ 501,543 $ 594,703 $ 615,259 $ 796,597 $ 843,543 $ 816,343 $ 1,048,269 $ 1,232,344 6 Months Ended June 30, 2021 6 Months Ended June 30, 2020 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 843,543 $ 816,343 $ 1,036,182 $ 1,232,344 Customers Acquired During The Period $ - $ - $ 12,087 $ - $ 843,543 $ 816,343 $ 1,048,269 $ 1,232,344

LEASES (Tables)

LEASES (Tables)	6 Months Ended
	Jun. 30, 2021
LEASES
Summary of Operating Lease	The following table summarizes the information about operating lease: Six Months Ended June 30, 2021 Operating lease expense $ 102,863 Remaining Lease Term (Years) 2.7 years Discount Rate 8 %
Summary of Maturity of operating lease liability	Maturities of operating lease liability as of June 30, 2021 were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2021 (remaining 6 months) $ 95,537 $ 6,843 $ 102,380 2022 191,074 14,096 205,170 2023 191,074 14,519 205,593 2024 63,691 4,840 68,531 Total lease payments $ 541,376 $ 40,298 581,674 Less imputed interest (67,034 ) Total $ 514,640

DEBT (Details)

DEBT (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 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
Total debt	$ 5,000,000	$ 5,000,000
Debt description	Comerica Bank Loan and Security Agreement	Comerica Bank Loan and Security Agreement
Maturity Date	June, 2022
Interest rate	3.85%
Debt Instrument 3
Total debt	$ 0	$ 542,100
Debt description	First PPP Loan	First PPP Loan
Maturity Date	April, 2022
Interest rate	1.00%
Debt Instrument 4
Total debt	$ 0	$ 972,108
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
Maturity Date	November, 2022
Interest rate	8.00%
Debt Instrument 2
Total debt	$ 542,000	$ 0
Debt description	Second PPP Loan	Second PPP Loan
Maturity Date	February, 2026
Interest rate	1.00%

DEBT (Details Narrative)

DEBT (Details Narrative) - USD ($)	Feb. 09, 2021	Jun. 09, 2014	Feb. 18, 2021	Jan. 28, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Series A preferred stock , amount				$ 7,660,970	$ 114,072,014		$ 114,072,014		$ 103,649,344
Loss on debt extinguishment					$ 0	$ (4,864,750)	$ (6,507,137)	$ (4,864,750)
Series A preferred stock, shares				64,376	1,300,687		1,300,687		1,166,297
Net unamortized discount							$ 78,120	$ 1,585,823
Comerica Bank [Member]
Outstanding loan		$ 5,000,000
Extended maturity date		Jun. 9, 2022
Interest rate		0.60%
Note Purchase Agreement [Member]
Series A preferred stock, shares				70,014
Convertible notes value				$ 1,075,713
Face value convertible notes				2,900,000
Net unamortized discount				1,849,773
Accrued interest				$ 103,605
Second PPP Loan [Member]
Loss on debt extinguishment			$ 542,100
Interest rate	1.00%
Proceeds from notes payable	$ 542,000

STOCKHOLDERS DEFICIT (Details)

STOCKHOLDERS DEFICIT (Details)	6 Months Ended
	Jun. 30, 2021USD ($)$ / sharesshares
STOCKHOLDERS DEFICIT
Number of shares outstanding, beginning | shares	10,683,300
Number of shares cancelled | shares	(902,500)
Number of shares issued | shares	1,475,000
Number of shares outstanding, ending | shares	11,255,800
Number of shares vested and exercisable | shares	5,195,821
Weighted average exercise price outstanding, beginning | $ / shares	$ 1.85
Weighted average exercise price cancelled | $ / shares	1.57
Weighted average exercise price issued | $ / shares	3.10
Weighted average exercise price outstanding, ending | $ / shares	2.04
Weighted average exercise price vested and exercisable | $ / shares	$ 1.85
Weighted average remaining contractual life (in years) outstanding, beginning	7 years 4 months 24 days
Weighted average remaining contractual life (in years) outstanding, ending	7 years 10 months 24 days
Weighted average remaining contractual life (in years) vested and exercisable	7 years 3 months 18 days
Aggregate intrinsic value outstanding, beginning | $	$ 17,060,533
Aggregate intrinsic value outstanding, ending | $	21,752,184
Aggregate intrinsic value vested and exercisable | $	$ 11,032,574

STOCKHOLDERS DEFICIT (Details N

STOCKHOLDERS DEFICIT (Details Narrative) - USD ($)	1 Months Ended	6 Months Ended
	Jan. 28, 2021	Jun. 30, 2021	Dec. 31, 2020
Unvested expense not yet recorded		$ 11,495,025
Weighted average period of unvested expense not yet recorded		3 years 3 months 18 days
Proceeds from issuance of shares		$ 2,761,700
Loss attributable to common shareholders		$ 2,761,700
Preferred stock shares issued	64,376	1,300,687	1,166,297
Preffered stock par value		$ 0.001	$ 0.001
Preferred Stocks [Member]
Loss attributable to common shareholders	$ 3,507,701
Preferred stock shares issued	70,014
Conversion price	$ 1.43
Series A Preferred Stocks [Member]
Conversion price		1.43
Preffered stock par value		0.001
Preferred Stock Stated Value		$ 42.90
Preferred Stock , description		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;
Closing price per share		$ 3.50

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details Narrative)	1 Months Ended
	Jan. 28, 2021$ / shares
FAIR VALUE MEASUREMENTS (Details Narrative)
Risk free rate and discount rate	1.35%
Market price of common stock	$ 3.10
Volatility	80.00%
Extended term	15 years

DISAGGREGATED PRESENTATION OF_3

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue	$ 398,358	$ 607,772	$ 816,343	$ 1,232,344
Billings	843,543	1,048,269	843,543	1,048,269
New Customer Acquisition [Member]
Revenue			816,343	1,232,344
Billings	843,543	1,048,269	843,543	1,048,269
Top 5 Customers (Measured By Amounts Billed)
Revenue			221,640	435,747
Billings	342,000	433,010	342,000	433,010
All Other Customers
Revenue			594,703	796,597
Billings	501,543	615,259	501,543	615,259
Customers In Existence As Of The Beginning Of The Period (Including Upgrades)
Revenue			816,343	1,232,344
Billings	843,543	1,036,182	843,543	1,036,182
Customers Acquired During The Period
Revenue			0	0
Billings	$ 0	$ 12,087	$ 0	$ 12,087

DISAGGREGATED PRESENTATION OF_4

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details Narrative)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Concentration risk percentage	10.00%
Four Customers [Member] | Account Receivable [Member]
Concentration risk percentage		74.00%
Three Customers [Member] | Account Receivable [Member]
Concentration risk percentage	70.00%
Revenue [Member] | One Customers [Member]
Concentration risk percentage		18.00%

LEASES (Details)

LEASES (Details)	6 Months Ended
	Jun. 30, 2021USD ($)
LEASES
Operating lease expense	$ 102,863
Weighted average Remaining Lease Term (Years)	2 years 8 months 12 days
Weighted average discount rate	8.00%

LEASES (Details 1)

LEASES (Details 1)	Jun. 30, 2021USD ($)
2021 (remaining 6 months)	$ 102,380
2022	205,170
2023	205,593
2024	68,531
Total lease payments	581,674
Less: imputed interest	(67,034)
Total	514,640
Operating Lease Expense
2021 (remaining 6 months)	95,537
2022	191,074
2023	191,074
2024	63,691
Total lease payments	541,376
Vairable Lease Expense
2021 (remaining 6 months)	6,843
2022	14,096
2023	14,519
2024	4,840
Total lease payments	$ 40,298

SUBSEQUENT EVENTS (Details Narr

SUBSEQUENT EVENTS (Details Narrative)	6 Months Ended
	Jun. 30, 2021$ / sharesshares
SUBSEQUENT EVENTS
Option granted | shares	760,000
Fair market price | $ / shares	$ 1.63
Term of option	10 years
Vesting period	5 years