MobileSmith (MOSTQ) 10-Q 11 May 22 2022 Q1 Quarterly report Financial data

Cover

Cover - shares	3 Months Ended
	Mar. 31, 2022	May 11, 2022
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	Mar. 31, 2022
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Entity Common Stock Shares Outstanding		28,389,493
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-32634
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	95-4439334
Entity Interactive Data Current	Yes
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 BALANCE SHEETS

CONDENSED BALANCE SHEETS - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Current Assets
Cash And Cash Equivalents	$ 741,497	$ 372,581
Restricted Cash And Cash Equivalents	208,575	202,761
Accounts Receivable, Net Of Allowance For Doubtful Accounts Of $15,000 And $0, Respectively	89,594	80,875
Prepaid Expenses And Other Current Assets	49,846	50,304
Total Current Assets	1,089,512	706,521
Operating Lease Right-of-use Asset	298,149	342,383
Total Assets	1,387,661	1,048,904
Current Liabilities
Accounts Payable	115,153	83,942
Interest Payable	17,097	17,646
Other Liabilities And Accrued Expenses	158,359	156,986
Operating Lease Liability Current	149,525	149,525
Contract With Customer Liability	414,157	464,162
Bank Loan	5,000,000	5,000,000
Total Current Liabilities	5,854,291	5,872,261
Operating Lease Liability	239,992	282,534
Total Liabilities	6,094,283	6,154,795
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: 1,497,869 Issued And Outstanding As Of March 31, 2022 And 1,403,276 Issued And Outstanding As Of December 31, 2021.	131,459,976	127,162,277
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At March 31, 2022 And December 31, 2021; 28,389,493 Shares Issued And Outstanding At March 31, 2022 And 28,389,493 Shares Issued And Outstanding At December 31, 2021.	28,390	28,390
Additional Paid-in Capital - Common Shares	121,235,642	123,015,819
Accumulated Deficit	(257,430,630)	(255,312,377)
Total Stockholders' Deficit	(4,706,622)	(5,105,891)
Total Liabilities And Stockholders' Deficit	$ 1,387,661	$ 1,048,904

CONDENSED BALANCE SHEETS (Paren

CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
CONDENSED BALANCE SHEETS
Preferred Stock, Par Value	$ 0.001	$ 0.001
Allowance For Doubtful Accounts	$ 15,000	$ 0
Preferred Stock, Authorized	5,000,000	5,000,000
Preferred Stock, Issued	1,497,869	1,403,276
Designated For Series A Convertible Preferred Shares	1,750,000	1,750,000
Preferred Stock, Outstanding	1,497,869	1,403,276
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
	Mar. 31, 2022	Mar. 31, 2021
Revenues:
Subscription And Support	$ 329,902	$ 417,985
Total Revenue	329,902	417,985
Cost Of Revenue:
Subscription And Support	123,571	205,303
Services And Other	0	9,000
Total Cost Of Revenues	123,571	214,303
Gross Profit	206,331	203,682
Operating Expenses:
Selling And Marketing	377,883	528,294
Research And Development	1,067,196	875,666
General And Administrative	831,934	905,884
Total Operating Expenses	2,277,013	2,309,844
Loss From Operations	(2,070,682)	(2,106,162)
Other Income (expense):
Interest Expense, Net	(47,571)	(142,464)
Gain On Debt Extinguishment - Ppp Loan Forgiveness	0	542,100
Losses On Debt Extinguishments	0	(6,507,137)
Total Other Expense	(47,571)	(6,107,501)
Net Loss	(2,118,253)	(8,213,663)
Plus: Dividend On Series A Convertible Preferred Stock	(2,597,699)	0
Plus: Deemed Dividend On Series A Convertible Preferred Stock	(3,464,405)	(5,269,401)
Net Loss Attributable To Common Shareholders	$ (8,180,357)	$ (13,483,064)
Net Loss Per Common Share:
Basic And Fully Diluted From Continuing Operations	$ (0.29)	$ (0.47)
Weighted-average Number Of Shares Used In Computing Net Loss Per Common Share:
Basic And Fully Diluted	28,389,493	28,389,493

CONDENSED STATEMENTS OF CASH FL

CONDENSED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash Flows From Operating Activities:
Net Loss	$ (2,118,253)	$ (8,213,663)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Bad Debt Expense	15,000	2,746
Amortization Of Debt Discount	0	78,120
Share Based Compensation	817,522	886,935
Gain Of Debt Extinguishment (ppp Loan Forgiveness)	0	(542,100)
Losses On Debt Extinguishments	0	6,507,137
Changes In Assets And Liabilities:
Accounts Receivable	(23,719)	(32,260)
Prepaid Expenses And Other Assets	458	11,366
Accounts Payable	31,211	(12,006)
Contract Liability	(50,005)	11,227
Operating Lease Right-of-use Asset	44,234	42,320
Operating Lease Liability	(42,542)	(39,281)
Accrued And Other Expenses	824	2,200
Net Cash Used In Operating Activities	(1,325,270)	(1,297,259)
Cash Flows From Financing Activities:
Proceeds From Second Ppp Loan	0	542,000
Proceeds From Issuance Of Shares Of Series A Preferred Stock	1,700,000	1,761,700
Net Cash Provided By Financing Activities	1,700,000	2,303,700
Net Increase (decrease) In Cash And Cash Equivalents	374,730	1,006,441
Cash, Cash Equivalents And Restricted Cash, Beginning Of Period	575,342	350,923
Cash, Cash Equivalents And Restricted Cash, End Of Period	950,072	1,357,364
Composition Of Cash, Cash Equivalents And Restricted Cash Balance:
Cash And Cash Equivalents	741,497	1,161,371
Restricted Cash	208,575	195,993
Total Cash, Cash Equivalents And Restricted Cash	950,072	1,357,364
Supplemental Disclosures Of Cash Flow Information:
Operating Lease Payments	51,788	48,150
Cash Paid During The Period For Interest	48,125	48,125
Non-cash Investing And Financing Activities:
Recorded Discount Associated With Beneficial Conversion Feature On Issuance Of Series A Convertible Preferred Shares	3,464,405	1,761,700
Issued Series A Preferred Shares Fair Valued At $7,660,970 In Exchange For Carrying Value Of Debt (including Accrued Interest, Premiums And Discounts) Of $1,153,833	0	6,507,137
Issued 54,966 Shares Of Series A Preferred Shares Fair Valued At $2,597,699 As Dividend Paid In Kind	$ 2,597,699	$ 0

CONDENSED STATEMENTS OF STOCKHO

CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIT (Unaudited) - USD ($)	Total	Common Stock	SeriesAConvertible Preferred Stock Shares [Member]	Additional Paid-In Capital, Common Stock [Member]	Accumulated Deficit	Additional Paid-In Capital, Series A Convertible Preferred Stock [Member]
Balance, Shares at Dec. 31, 2020		28,389,493	1,166,297
Balance, Amount at Dec. 31, 2020	$ (7,403,220)	$ 28,390	$ 1,166	$ 130,103,361	$ (241,184,315)	$ 103,648,178
Equity-based Compensation	886,935	0	$ 0	886,935	0	0
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	0	$ 70	0	0	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	0	$ 41	0	0	1,761,659
Beneficial Conversion Feature Recorded As A Result Of Issuance Of Series A Convertible Preferred Shares	5,269,401	0	0	0	0	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)	0	0	0	0	(5,269,401)
Net Loss	(8,213,663)	$ 0	$ 0	0	(8,213,663)
Balance, Shares at Mar. 31, 2021		28,389,493	1,277,377
Balance, Amount at Mar. 31, 2021	(5,307,278)	$ 28,390	$ 1,277	130,990,296	(249,397,978)	113,070,737
Balance, Shares at Dec. 31, 2021		28,389,493	1,403,276
Balance, Amount at Dec. 31, 2021	(5,105,891)	$ 28,390	$ 1,402	123,015,819	(255,312,377)	127,160,875
Equity-based Compensation	817,522	0		817,522	0	0
Beneficial Conversion Feature Recorded As A Result Of Issuance Of Series A Convertible Preferred Shares	3,464,405	0	0	0	0	3,464,405
Deemed Dividend To The Holders Of Series A Preferred Shares Resulting From Amortization Of Discount Associated With The Beneficial Conversion Feature	(3,464,405)	0	0	0	0	(3,464,405)
Net Loss	(2,118,253)	0	$ 0	0	(2,118,253)	0
Issuance Of Series A Convertible Preferred Shares For Cash, Shares			39,627
Issuance Of Series A Convertible Preferred Shares For Cash, Amount	1,700,000	0	$ 40	0	0	1,699,960
Issuance Of Dividend On Series A Convertible Preferred Shares, Shares			54,966
Issuance Of Dividend On Series A Convertible Preferred Shares, Amount	0	$ 0	$ 55	(2,597,699)	0	2,597,644
Balance, Shares at Mar. 31, 2022		28,389,493	1,497,869
Balance, Amount at Mar. 31, 2022	$ (4,706,622)	$ 28,390	$ 1,497	$ 121,235,642	$ (257,430,630)	$ 131,458,479

DESCRIPTION OF BUSINESS AND BAS

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2022
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
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 on our architected healthcare technology ecosystem. The architecture is designed to: · improve experience of healthcare patients and consumers, who are often at the same time members of various medical insurance networks · increase adoption, utilization and intelligence of EMRs (electronic medical records), extend EMR’s usability to patients and consumers of healthcare. During 2021 we advanced our flagship PeriOp offering to be market ready. PeriOp 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. PeriOp digitizes and streamlines for both patients and providers “the last mile of healthcare delivery” between scheduled procedure and day of surgery with an emphasis on patient’s readiness. PeriOp digitizes and streamlines “the first mile” of post-surgery recovery journey with a focus on maintaining positive surgical outcomes and avoidance of readmissions. PeriOp has not yet generated significant revenue. Most of our revenue is generated from App Blueprint solutions and related supporting services, where applicable. 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, 2022. 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, 2021 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, 2022, 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. The Company has been funding its operations, in part, from the proceeds from the issuance of its Series A Preferred Stock (with the terms set forth in Note 4 below) to related parties. The Comerica LSA matures in June of 2022 as further defined and described in Note 2 below. The Company’s management is actively negotiating with Comerica to extend the maturity date of the LSA. However, there can be no assurance that the Company will in fact be able to raise additional capital through t its Series A Preferred Stock or even from other sources on commercially accepted terms, if at all, or to be able to negotiate an extension of the Comerica LSA on terms acceptable to the Company, if at all. 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.

DEBT

DEBT	3 Months Ended
	Mar. 31, 2022
DEBT
Note 2. Debt	2. DEBT The table below summarizes the Company’s debt outstanding on March 31, 2022 and December 31, 2021: Debt Description March 31, December 31, 2022 2021 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 5,000,000 June 2022 3.85 % 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; and · acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, including but not limited to, failure by the Company to perform its obligations, observe the covenants made by it under the LSA, failure to renew the UBS AG SBLC, and insolvency of the Company. The Company is in compliance with its LSA covenants as of March 31, 2022.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2022
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	3 Months Ended
	Mar. 31, 2022
STOCKHOLDERS DEFICIT
Note 4. Stockholders Deficit	4. STOCKHOLDERS DEFICIT Preferred Stock On February 24, 2022 the Company issued a total of 54,966 shares of Series A Preferred Stock as payment in kind for dividends declared by the board of directors, with respect to the then outstanding Series A Preferred Stock.. The issuance of the Series A Preferred Stock was recorded at fair value on February 24, 2022 as determined below: · The value of the 54,966 shares of Series A Preferred Stock dividend was recorded at $2,597,699. In absence of retained earnings, the dividend resulted in a charge to additional paid in capital for Common Stock. In addition, on February 24, 2022 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. The resulting beneficial conversion feature was recorded as a discount and amortized in its entirety as a deemed dividend and charged to loss attributable to common shareholders on the Company’s Statement of Operations in the amount of $1,764,405. In addition, during the three month period ended March 31, 2022 the Company issued 39,627 shares of Series A Preferred Stock in exchange for $1,700,000 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 stock shareholders of $1,700,000. Our Series A Preferred Stock has 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 the Stated Value; · Each dividend shall be paid either in shares of Series A Preferred Stock or in cash, at the option of the Company, 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 Company; · 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 the Stated Value of Series A Preferred Stock into one share of common stock; · The shares are subject to automatic conversion immediately prior to the occurrence of a Fundamental Transaction, as defined in the Series A Preferred Stock 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, 2022: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2021 10,883,300 $ 2.06 7.6 $ 9,553,832 Cancelled (1,382,806 ) 1.93 Issued 500,000 2.55 Outstanding, March 31, 2022 10,000,494 2.11 7.6 8,946,350 Vested and exercisable, March 31, 2022 5,415,575 $ 1.94 7.0 $ 5,718,211 Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock on March 31, 2022, and the exercise price of outstanding, in-the-money stock options. The closing price of the common stock on March 31, 2022, as reported on the OTCQB, was $3.00 per share. On March 31, 2022, an amount of $7,664,728 unvested expense related to outstanding stock options has yet to be recorded over a weighted average period of 3.1 years.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	3 Months Ended
	Mar. 31, 2022
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 February 24, 2002 issuance of Series A Preferred Stock as payment in kind for dividends resulted in transaction which required the Company to record newly issued Series A Preferred Stock 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. The Company used a valuation method that takes into consideration both the Level 1 input of observable market value of MobileSmith common stock on the date of the transaction, as quoted on the OTCQB, that, although being thinly traded, could not be ignored and Level 3 inputs resulting from a Fundamental Analysis to arrive at Company Enterprise Value. The single most significant factor included in the valuation is the weighting between values resulting from Level 1 and Level 3 input models. The fair value of Series A Preferred Shares was determined to be $2,597,699. The fair value calculated by three valuation methods and by weighting the results of each method calculation to arrive at the final fair value. Method 1. Monte Carlo simulation based on the OTCQB quoted value of Common Stock The Company used the income (discounted cash flow) approach to arrive at the fair value of the Series A Preferred Stock on February 24, 2022. 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 Company in the future. The Company used the Geometric Browinian Motion/Monte Carlo model to simulate future movement of equity securities and discounted the results back to the February 24, 2022 transaction date. The model used the following notable inputs: · the market price of the Company common stock on February 24, 2022 of $2.50 as a starting point of simulation · the risk free rate and discount rate of 2.16%; · volatility of 65.0%; · term of simulation is 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. Method 2. Monte Carlo simulation based on the value of Common Stock determined using Fundamental analysis The Company used the income (discounted cash flow) approach to arrive at the fair value of the Series A Preferred Stock on February 24, 2022. 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 Company in the future. The Company used the Geometric Browinian Motion/Monte Carlo model to simulate future movement of equity securities and discounted the results back to the February 24, 2022 transaction date. The model used the following notable inputs: · the price of the Company common stock on February 24, 2022 of $0.54 as a starting point of simulation (as derived from total equity value from Fundamental Analysis) · the risk free rate and discount rate of 2.16%; · volatility of 65.0%; · term of simulation is 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. Method 3. Monte Carlo simulation of total equity value based on the Fundamental Analysis The Company used the income (discounted cash flow) approach to arrive at the fair value of the Series A Preferred Stock on February 24, 2022. Using this approach, the total equity value payouts were simulated, allocated to Series A Preferred Stock and discounted back to the date of the transaction. The Company used the Geometric Browinian Motion/Monte Carlo model to simulate future movement of total equity. The model used the following notable inputs: · total equity value of $39,158,000 as of the date of transaction, as derived from Fundamental Analysis · the risk free rate and discount rate of 1.96%; · volatility of 60.0%; · term of simulation is 10 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. Fundamental Analysis. The Company performed Fundamental Analysis to arrive at Business Enterprise Value ("BEV") as of February 24, 2022 of approximately $39,000,000. The key assumptions used in arriving at the BEV are as follows: · Multiple applied to the revenue to determine terminal value is 12x. · Discount rate applied to the cash flows and terminal value is 50% as customary for a first stage/early development company · fully diluted number of shares to calculate adjusted equity value is 72,836,053 shares of common stock allocated as follows: 28,389,493 shares to common stock and 44,446,560 to shares of common stock issuable upon conversion of 1,481,552 shares of Series A Preferred Stock · number of annual periods considered for discounted cash flows is three years.

DISAGGREGATED PRESENTATION OF R

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION	3 Months Ended
	Mar. 31, 2022
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: 3 Months Ended March 31, 2022 3 Months Ended March 31, 2021 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 249,000 $ 78,353 $ 304,900 $ 76,171 All Other Customers 30,898 251,549 124,311 341,814 $ 279,898 $ 329,902 $ 429,211 $ 417,985 For the three months ended March 31, 2022, two customers accounted for 76% of the accounts receivable balance and one customer accounted for more than 10% of total revenue. For the three months ended March 31, 2021, four customers accounted for 97% of the accounts receivable balance and one customer accounted for 38% of total revenue . Below is a summary of new customer acquisition impact on billings and revenue: 3 Months Ended March 31, 2022 3 Months Ended March 31, 2021 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 279,898 $ 329,902 $ 429,211 $ 417,985 Customers Acquired During The Period - - - - $ 279,898 $ 329,902 $ 429,211 $ 417,985

LEASES

LEASES	3 Months Ended
	Mar. 31, 2022
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. The operating lease for the corporate office expires on April 30, 2024. The following table summarizes the information about operating lease: Three Months Ended March 31, 2022 Operating lease expense $ 51,788 Remaining Lease Term (Years) 2.08 Discount Rate 8 % Maturities of operating lease liability as of March 31, 2022 were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2022 143,306 10,572 153,878 2023 191,074 14,519 205,593 2024 63,691 4,840 68,531 Total lease payments $ 398,071 $ 29,931 428,002 Less imputed interest (38,485 ) Total $ 389,517

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2022
SUBSEQUENT EVENTS
Note 8. Subsequent Events	8. SUBSEQUENT EVENTS Subsequent to March 31, 2022, the Company issued 11,655 shares of Series A Preferred Stock in exchange for $500,000 of cash investment.

DEBT (Tables)

DEBT (Tables)	3 Months Ended
	Mar. 31, 2022
DEBT
Summary Of Company Debt	Debt Description March 31, December 31, 2022 2021 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 5,000,000 June 2022 3.85 %

STOCKHOLDERS DEFICIT (Tables)

STOCKHOLDERS DEFICIT (Tables)	3 Months Ended
	Mar. 31, 2022
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, 2021 10,883,300 $ 2.06 7.6 $ 9,553,832 Cancelled (1,382,806 ) 1.93 Issued 500,000 2.55 Outstanding, March 31, 2022 10,000,494 2.11 7.6 8,946,350 Vested and exercisable, March 31, 2022 5,415,575 $ 1.94 7.0 $ 5,718,211

DISAGGREGATED PRESENTATION OF_2

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2022
DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION
Summary Of Disaggregation Of Revenue	3 Months Ended March 31, 2022 3 Months Ended March 31, 2021 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 249,000 $ 78,353 $ 304,900 $ 76,171 All Other Customers 30,898 251,549 124,311 341,814 $ 279,898 $ 329,902 $ 429,211 $ 417,985
Summary Of Disaggregation Of Revenue New Customer	3 Months Ended March 31, 2022 3 Months Ended March 31, 2021 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 279,898 $ 329,902 $ 429,211 $ 417,985 Customers Acquired During The Period - - - - $ 279,898 $ 329,902 $ 429,211 $ 417,985

LEASES (Tables)

LEASES (Tables)	3 Months Ended
	Mar. 31, 2022
LEASES
Summary Of Operating Lease	The following table summarizes the information about operating lease: Three Months Ended March 31, 2022 Operating lease expense $ 51,788 Remaining Lease Term (Years) 2.08 Discount Rate 8 %
Summary Of Maturity Of Operating Lease Liability	Maturities of operating lease liability as of March 31, 2022 were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2022 143,306 10,572 153,878 2023 191,074 14,519 205,593 2024 63,691 4,840 68,531 Total lease payments $ 398,071 $ 29,931 428,002 Less imputed interest (38,485 ) Total $ 389,517

DEBT (Details)

DEBT (Details) - Debt Instrument 1 - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
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 (Details Narrative)

DEBT (Details Narrative) - Comerica Bank [Member]	Jun. 09, 2014USD ($)
Outstanding Loan	$ 5,000,000
Extended Maturity Date	Jun. 9, 2022
Interest Rate	0.60%

STOCKHOLDERS DEFICIT (Details)

STOCKHOLDERS DEFICIT (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
STOCKHOLDERS DEFICIT
Number Of Shares Outstanding, Beginning	10,883,300
Number Of Shares Cancelled	(1,382,806)
Number Of Shares Issued	500,000
Number Of Shares Vested And Exercisable	5,415,575
Number Of Shares Outstanding, Ending	10,000,494	10,883,300
Weighted Average Exercise Price Outstanding, Beginning	$ 2.06
Weighted Average Exercise Price Cancelled	1.93
Weighted Average Exercise Price Issued	2.55
Weighted Average Exercise Price Vested And Exercisable	1.94
Weighted Average Exercise Price Outstanding, Ending	$ 2.11	$ 2.06
Weighted Average Remaining Contractual Life (in Years) Outstanding	7 years 7 months 6 days	7 years 7 months 6 days
Weighted Average Remaining Contractual Life (in Years) Vested And Expected To Vest	7 years
Aggregate Intrinsic Value Outstanding Beginning	$ 9,553,832
Aggregate Intrinsic Value Outstanding Ending	8,946,350
Aggregate Intrinsic Value Vested And Expected To Vest	$ 5,718,211

STOCKHOLDERS DEFICIT (Details N

STOCKHOLDERS DEFICIT (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2022	Feb. 24, 2022	Dec. 31, 2021	Sep. 30, 2021
Weighted Average Period Of Unvested Expense Not Yet Recorded	3 years 1 month 6 days
Unvested Expense Not Yet Recorded	$ 7,664,728
Closing Price Of The Common Stock	$ 3
Preffered Stock Par Value	$ 0.001		$ 0.001
Preferred Stock Shares Issued	1,497,869		1,403,276
Series A Preferred Stocks [Member]
Preffered Stock Par Value	$ 0.001			$ 0.001
Loss Attributable To Common Shareholders	$ 1,700,000
Debt Instrument Covenant 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 the Stated Value
Preferred Stock Stated Value	$ 42.90			42.90
Preferred Stock Shares Issued	39,627
Proceeds From Issuance Of Shares	$ 1,700,000
Conversion Price	$ 1.43			$ 1.43
Preferred Stocks [Member]
Loss Attributable To Common Shareholders	$ 1,764,405
Preferred Stock Shares Issued		54,966
Conversion Price	$ 1.43
Preferred Stock Dividend	$ 2,597,699

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details)	Mar. 31, 2022USD ($)$ / shares
FAIR VALUE MEASUREMENTS (Details)
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock | $ / shares	$ 2.50
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock, Equity	$ 0
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock, Value Of Preferred Share	$ 9,100,576
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock, Weighting	10.00%
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock, Weighted Value	$ 910,058
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Value Of Common Stock | $ / shares	$ 0.54
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Equity	$ 0
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Value Of Preferred Share	$ 2,020,886
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Weighting	45.00%
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Weighted Value	$ 909,399
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Value Of Common Stock | $ / shares	$ 0
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Equity	$ 39,157,900
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Value Of Preferred Share	$ 1,729,464
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Weighting	45.00%
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Weighted Value	$ 778,258
Fair Value Of Series A Preferred Shares, Weighted Value	$ 2,597,715

FAIR VALUE MEASUREMENTS (Deta_2

FAIR VALUE MEASUREMENTS (Details Narrative) - USD ($)	1 Months Ended
	Feb. 24, 2022	Mar. 31, 2022	Dec. 31, 2021
Conversion Of Stock, Share Converted	1,481,552
Fundamental Business Enterprise Value	$ 39,000,000
Discount Rate On Trminal Value	50.00%
Number Of Shares Diluted	72,836,053
Annual Periods For Discounted Cash Flows	3 years
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock		$ 2.50
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Value Of Common Stock		$ 0.54
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Equity		$ 39,157,900
Preferred Stock Value		$ 131,459,976	$ 127,162,277
Series A Preferred Stock [Member]
Number Of Shares Diluted	44,446,560
Preferred Stock Value	$ 2,597,699
Common Stock [Member]
Number Of Shares Diluted	28,389,493
Method 1 [Member]
Monte Carlo Simulation Based On The Otcqb Quoted Value Of Common Stock	$ 2.50
Risk Free Rate And Discount Rate	2.16%
Volatility	65.00%
Extended Term	15 years
Method 2 [Member]
Risk Free Rate And Discount Rate	2.16%
Volatility	65.00%
Extended Term	15 years
Monte Carlo Simulation Based On The Value Of Common Stock Determined Using Fundamental Analysis, Value Of Common Stock	$ 0.54
Method 3 [Member]
Risk Free Rate And Discount Rate	1.96%
Volatility	60.00%
Extended Term	10 years
Monte Carlo Simulation Of Total Equity Value Based On The Fundamental Analysis, Equity	$ 39,158,000

DISAGGREGATED PRESENTATION OF_3

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Billings	$ 279,898	$ 429,211
Revenue	329,902	417,985
All Other Customers
Billings	30,898	124,311
Revenue	251,549	341,814
Convertible Preferred Stock [Member]
Billings	249,000	304,900
Revenue	$ 78,353	$ 76,171

DISAGGREGATED PRESENTATION OF_4

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Billings	$ 279,898	$ 429,211
Revenue	329,902	417,985
Customers in Existence as of the Beginning of the Period
Billings	279,898	429,211
Revenue	329,902	417,985
Customers Acquired During the Period
Billings	0	0
Revenue	$ 0	$ 0

DISAGGREGATED PRESENTATION OF_5

DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details Narrative)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Two Customers [Member] | Account Receivable [Member]
Concentration Risk Percentage	76.00%
One Customers [Member] | Revenue [Member]
Concentration Risk Percentage		38.00%
Four Customers [Member] | Revenue [Member]
Concentration Risk Percentage	97.00%
Four Customers [Member] | Account Receivable [Member]
Concentration Risk Percentage		10.00%

LEASES (Details)

LEASES (Details)	3 Months Ended
	Mar. 31, 2022USD ($)
LEASES
Operating Lease Expense	$ 51,788
Weighted Average Remaining Lease Term (years)	2 years 29 days
Weighted Average Discount Rate	8.00%

LEASES (Details 1)

LEASES (Details 1)	Mar. 31, 2022USD ($)
2022	$ 153,878
2023	205,593
2024	68,531
Total Lease Payments	428,002
Less: Imputed Interest	(38,485)
Total	389,517
Operating Lease Expense
2022	143,306
2023	191,074
2024	63,691
Total Lease Payments	398,071
Vairable Lease Expense
2022	10,572
2023	14,519
2024	4,840
Total Lease Payments	$ 29,931

SUBSEQUENT EVENTS (Details Narr

SUBSEQUENT EVENTS (Details Narrative)	3 Months Ended
	Mar. 31, 2022USD ($)shares
SUBSEQUENT EVENTS
Cash Proceeds From Issuance Of Series A Preferred Stock | $	$ 500,000
Series A Preferred Stock, Issued | shares	11,655