Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 23, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | MobileSmith, Inc. | ||
Entity Central Index Key | 0001113513 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | DE | ||
Entity File Number | 001-32634 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
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 Public Float | $ 19,400,000 | ||
Entity Common Stock, Shares Outstanding | 28,389,493 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and Cash Equivalents | $ 161,744 | $ 71,482 |
Restricted Cash And Cash Equivalents | 189,179 | 243,485 |
Accounts Receivable, Net of Allowance for Doubtful Accounts of $30,000 and $5,250, Respectively | 113,906 | 109,187 |
Prepaid Expenses and Other Current Assets | 43,286 | 75,489 |
Total Current Assets | 508,115 | 499,643 |
Property and Equipment, Net | 0 | 29,368 |
Capitalized Software, Net | 0 | 5,470 |
Operating Lease Right-of-Use Asset | 512,124 | 674,338 |
Total Assets | 1,020,239 | 1,208,819 |
Current Liabilities | ||
Accounts Payable | 155,850 | 242,249 |
Interest Payable | 271,868 | 1,834,694 |
Other Liabilities and Accrued Expenses | 237,750 | 263,889 |
Operating Lease Liability, Current | 161,936 | 149,525 |
Contract With Customer Liability Current | 649,789 | 1,051,271 |
Bank Loan | 0 | 5,000,000 |
PPP Loan Current | 423,067 | 0 |
Subordinated Promissory Notes, Related Parties | 0 | 3,518,250 |
Convertible Notes Payable, Related Parties, Net of Discount | 0 | 39,230,432 |
Convertible Notes Payable, Net of Discount | 0 | 610,740 |
Total Current Liabilities | 1,900,260 | 51,901,050 |
Long-term Liabilities | ||
Operating Lease Liability | 432,058 | 593,994 |
Contract with Customer Liability | 0 | 28,100 |
Bank Loan | 5,000,000 | 0 |
PPP Loan | 119,033 | 0 |
Convertible Notes Payable, Net of Discount | 972,108 | 0 |
Total Liabilities | 8,423,459 | 52,523,144 |
Commitments and Contingencies (Note 3) | ||
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: 1,166,297 Issued and Outstanding as of December 31, 2020 and zero as of December 31, 2019 | 103,649,344 | 0 |
Common Stock, $0.001 Par Value, 100,000,000 Shares Authorized At December 31, 2020 and December 31, 2019; 28,389,493 Shares Issued and Outstanding at December 31, 2020 and 28,271,598 Shares Issued and Outstanding at December 31, 2019 | 28,390 | 28,272 |
Additional Paid-in Capital | 130,103,361 | 118,431,878 |
Accumulated Deficit | (241,184,315) | (169,774,475) |
Total Stockholders' Deficit | (7,403,220) | (51,314,325) |
Total Liabilities and Stockholders' Deficit | $ 1,020,239 | $ 1,208,819 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Allowance for Doubtful Accounts | $ 30,000 | $ 5,250 |
Stockholders' Deficit | ||
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Issued | 1,166,297 | 0 |
Preferred Stock, Outstanding | 1,166,297 | 0 |
Common Stock, Par Value | $ 0.001 | $ 0.001 |
Common Stock, Authorized | 100,000,000 | 100,000,000 |
Common Stock, Issued | 28,389,493 | 28,271,598 |
Common Stock, Outstanding | 28,389,493 | 28,271,598 |
Series A Convertible Preferred Stock | ||
Stockholders' Deficit | ||
Preferred Stock, Authorized | 1,750,000 | 1,750,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenue | $ 2,197,079 | $ 2,801,708 |
Cost of Revenue | 833,945 | 1,068,983 |
GROSS PROFIT | 1,363,134 | 1,732,725 |
OPERATING EXPENSES | ||
Sales and Marketing | 1,328,246 | 1,445,246 |
Research and Development | 2,820,222 | 2,771,003 |
General and Administrative | 3,325,366 | 3,629,622 |
Total Operating Expenses | 7,473,834 | 7,845,871 |
LOSS FROM OPERATIONS | (6,110,700) | (6,113,146) |
OTHER INCOME (EXPENSE) | ||
Other Income | 95,074 | 1,843 |
Interest Expense, Net | (6,040,630) | (4,894,233) |
Loss on Debt Extinguishment | (59,353,584) | 0 |
Total Other Expense | (65,299,140) | (4,892,390) |
NET LOSS | (71,409,840) | (11,005,536) |
Plus: Deemed Dividend on Series A Convertible Preferred Stock | (37,438,180) | 0 |
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ (108,848,020) | $ (11,005,536) |
NET LOSS PER COMMON SHARE | ||
Basic and Fully Diluted from Continuing Operations | $ (3.83) | $ (0.39) |
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE | ||
Basic And Fully Diluted | 28,389,493 | 28,271,598 |
Subscription and Support | ||
Revenue | $ 1,928,899 | $ 2,319,514 |
Cost of Revenue | 737,783 | 754,743 |
Services and Other | ||
Revenue | 268,180 | 482,194 |
Cost of Revenue | $ 96,162 | $ 314,240 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (71,409,840) | $ (11,005,536) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities | ||
Depreciation and Amortization | 34,838 | 74,526 |
Bad Debt Expense | 30,000 | 4,750 |
Amortization of Debt Discount | 3,184,641 | 1,207,760 |
Amortization of Debt Premium | (1,218,824) | 0 |
Share Based Compensation | 3,109,763 | 3,471,568 |
Losses on Debt Extinguishments | 59,353,584 | 0 |
Changes in Assets and Liabilities | ||
Accounts Receivable | (34,719) | 157,450 |
Prepaid Expenses and Other Assets | 32,203 | 50,309 |
Accounts Payable | (86,399) | 75,568 |
Contract Liability | (429,582) | (623,624) |
Operating Lease Right-of-use Asset | 162,214 | 174,133 |
Operating Lease Liability | (149,525) | (138,066) |
Accrued and Other Expenses | 111,880 | 228,569 |
Net Cash Used in Operating Activities | (7,309,766) | (6,322,593) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from Issuance of Subordinated Promissory Notes, Related Party | 1,910,000 | 2,993,250 |
Proceeds from Issuance of Convertible Notes Payable, Related Party | 1,650,000 | 3,160,000 |
Proceeds From Issuance of Convertible Notes Payable | 2,900,000 | 0 |
Proceeds from PPP Loan | 542,100 | 0 |
Proceeds From Issuance of Shares of Series A Preferred Stock | 350,000 | 0 |
Repayments of Financing Lease Obligations | (6,378) | (22,591) |
Net Cash Provided by Financing Activities | 7,345,722 | 6,130,659 |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 35,956 | (191,934) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 314,967 | 506,901 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 350,923 | 314,967 |
Composition of Cash, Cash Equivalents and Restricted Cash Balance: | ||
Cash and Cash Equivalents | 161,744 | 71,482 |
Restricted Cash | 189,179 | 243,485 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 350,923 | 314,967 |
Supplemental Disclosures of Cash Flow Information | ||
Operating Lease Payments | 191,805 | 172,809 |
Cash Paid During the Period for Interest | 3,919,183 | 3,451,266 |
Adoption of ASC 842 - Operating Lease Right-Of-Use Asset and Lease Obligations | 0 | 883,634 |
Recorded Debt Discount Associated with Beneficial Conversion Feature | $ 8,404,858 | $ 877,413 |
Issued Series A Preferred Shares Valued at $103,299,334 in Exchange for Carrying Value of Debt (Including Accrued Interest, Premiums and Discounts) of $48,810,510 | 103,299,344 | 0 |
Recorded Beneficial Conversion Feature Associated with Issuance of Series A Preferred | $ 37,438,180 | $ 0 |
The Company Converted $156,980 of its Convertible Notes into Common Shares | $ 156,980 | $ 0 |
STATEMENTS OF STOCKHOLDERS' DEF
STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Series A Convertible Preferred Stock | Additional Paid-In Capital, Series A Convertible Preferred Stock | Common Stock | Additional Paid-In Capital, Common Stock | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2018 | 0 | 28,271,598 | ||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 0 | $ 0 | $ 28,272 | $ 114,082,897 | $ (158,771,112) | $ (44,659,943) |
Equity-Based Compensation | 3,471,568 | 3,471,568 | ||||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 877,413 | 877,413 | ||||
Cumulative Adjustment Related To Adoption Of ASC842 Guidance On Accounting For Leases | 2,173 | 2,173 | ||||
Net Loss | (11,005,536) | (11,005,536) | ||||
Ending Balance, Shares at Dec. 31, 2019 | 0 | 28,271,598 | ||||
Ending Balance, Amount at Dec. 31, 2019 | $ 0 | 0 | $ 28,272 | 118,431,878 | (169,774,475) | (51,314,325) |
Equity-Based Compensation | 3,109,763 | 3,109,763 | ||||
Conversion of Notes Payable to Common Stock, Shares | 117,895 | |||||
Conversion of Notes Payable to Common Stock, Amount | $ 118 | 156,862 | 156,980 | |||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt | 8,404,858 | 8,404,858 | ||||
Exchange of Debt for Series A Convertible Preferred Shares on December 23, 2020, Shares | 1,158,141 | |||||
Exchange of Debt for Series A Convertible Preferred Shares on December 23, 2020, Amount | $ 1,158 | 103,298,186 | 103,299,344 | |||
Issuance of Series A Convertible Preferred for Cash, Shares | 8,156 | |||||
Issuance of Series A Convertible Preferred for Cash, Amount | $ 8 | 349,992 | 350,000 | |||
Beneficial Conversion Feature Recorded as a Result Of Issuance Of Series A Convertible Preferred Shares of $37,438,180 | 37,438,180 | 37,438,180 | ||||
Deemed Dividend to the Holders of Series A Preferred Shares Resuling From Amortization of Discount Associated with the Beneficial Conversion Feature | (37,438,180) | (37,438,180) | ||||
Net Loss | (71,409,840) | (71,409,840) | ||||
Ending Balance, Shares at Dec. 31, 2020 | 1,166,297 | 28,389,493 | ||||
Ending Balance, Amount at Dec. 31, 2020 | $ 1,166 | $ 103,648,178 | $ 28,390 | $ 130,103,361 | $ (241,184,315) | $ (7,403,220) |
1. SUMMARY OF BUSINESS AND DESC
1. SUMMARY OF BUSINESS AND DESCRIPTION OF GOING CONCERN | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
SUMMARY OF BUSINESS AND DESCRIPTION OF GOING CONCERN | Description of Business and Going Concern 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: ● 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 accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the years ended December 31, 2020 and 2019, the Company incurred net losses, as well as negative cash flows from operations, and at December 31, 2020 and 2019, had deficiencies in working capital. The 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 of the issuance of notes under a convertible secured subordinated note purchase agreement facility which was established in 2007 (the "2007 NPA"), an unsecured convertible subordinated note purchase agreement facility established in 2014 (the "2014 NPA") and subordinated promissory notes to related parties. In December 2020 and January 2021 the Company exchanged all of its non-bank debt for Series A Convertible Preferred stock and terminated both 2007 and 2014 NPAs. The Company is authorized to issue up to 1,750,000 in Series A Convertible Preferred stock at a price of $42.9 per share. The Company management expects that Series A Convertible Preferred stock will remain it main source of funding in foreseeable future. Based on the above, there is substantial doubt about the Company's ability to continue as a going concern. |
2. SIGNIFICANT ACCOUNTING POLIC
2. SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions in the Company’s financial statements and notes thereto. Significant estimates and assumptions made by management include the determination of performance obligations and the allocation of consideration among performance obligations, and the determination of when the Company has met the requirements to recognize revenue related to the performance obligations, share-based compensation and allowance for accounts receivable. Actual results could differ from those estimates. Cash and Cash Equivalents All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Federal Deposit Insurance Corporation ("FDIC") covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. Revenue Recognition: General Overview and Performance Obligations to Customers The Company derives revenue primarily from contracts for subscription to the suite of e-health mobile solutions and, to a much lesser degree, ancillary services provided in connection with subscription services. The Company’s contracts include the following performance obligations: ● Access to the content available on the App Blueprint Catalog, including hosting of the deployed apps; ● App Build and Managed Services; and ● Custom development work. The majority of the Company’s contracts are for a subscription to a catalog of mobile App Blueprints, and hosting of the deployed apps and related services. Custom work for specific deliverables is documented in statements of work or separate contracts. Customers may enter into subscription and various statements of work concurrently or consecutively. Most of the Company’s performance obligations are not considered to be distinct from the subscription to Blueprints, hosting of deployed apps and related services and are combined into a single performance obligation except for certain custom development work which is capable of being distinct. New statements of work and modifications of contracts are reviewed each reporting period and significant judgment is applied as to nature and characteristics of the new or modified performance obligations on a contract by contract basis. Revenue Recognition: Transaction Price of the Contract and Satisfaction of Performance Obligations The transaction price of the contract is an aggregate amount of consideration payable by customer for delivery of contracted services. The transaction price is impacted by the terms of a contracted agreement with the customer. Such terms range from one to three years. The transaction price excludes any marketing or sales discounts or any future renewal periods, unless the renewal periods represent a material right given to customer to extend the agreement. The transaction price may include a significant financing component in instances where the Company offers discounts for accelerated payments on the long-term contracts. Significant financing components are recorded in other assets and amortized as interest expense in the Company’s Statement of Operations over the term of the contract. The transaction price is predominantly allocated to a single performance obligation of access to the Blueprints, hosting and related services and, to a lesser degree, allocated between the access and other distinct performance obligations based on the stand-alone selling price. The subscription revenue is then recognized over time over the term of the contract, using the output method of time elapsed. Other performance obligations identified are evaluated based on the specific terms of the agreement are usually recognized at a point in time upon delivery of a specific documented output. Management believes that such chosen methods faithfully depict satisfaction of the Company performance obligations and transfer of benefit to the customers. The full transaction price of the contract may be billed in its entirety or in agreed upon installments. Billed transaction price in excess of revenue recognized results in the recording of a contract liability. The unbilled portion of transaction price related to revenue earned represents contracted consideration receivable by the Company that was not yet billed. Incremental Costs of Obtaining a Contract The Company’s incremental costs of obtaining a contract include sales commissions. Sales commissions are recognized as other assets on the balance sheet for the contracts with a term exceeding 12 months. These costs are amortized through the term of the contract and are recorded as sales and marketing expense. Contract Liabilities A new contract liability is created every time the Company records receivables due from its customers. The contract liability represents the Company’s obligation to transfer services for which the Company has already invoiced. Most of the contract liabilities will be recognized in revenue over a period of 12 to 36 months. Customer Credit Risk Most of the Company's receivables (billings) are collected within 30-45 days. The majority of the Company's customers are healthcare organizations, which historically have had low credit risk. Cost of Revenues Cost of revenues includes salaries of customer support teams, costs of infrastructure, expenses for outsourced work to fulfill the contracted work, and amortization charges for capitalized software. Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or failure of its customers to make required payments. The need for an allowance for doubtful accounts is evaluated based on specifically identified amounts that management believes to be potentially uncollectible. If actual collections experience changes, revisions to the allowance may be required. Impairment of Long-Lived Assets The Company evaluates the recoverability of its long-lived assets every reporting period or whenever events and circumstances indicate that the value may be impaired. Advertising Costs Advertising costs consist primarily of industry related tradeshows and marketing campaigns. Advertising costs are expensed as incurred, or the first time the advertising takes place, applied consistently based on the nature of the advertising activity. The amounts related to advertising during the years ended December 31, 2020 and 2019 were $248,261 and $234,203, respectively. Net Loss Per Share Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the periods. Diluted net loss per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Shares of common stock issuable upon conversion of Convertible Subordinated Promissory Notes (the “Notes”), conversion of Series A Convertible Preferred Stock and exercise of share-based awards are excluded from the calculation of the weighted average number, because the effect of the conversion and exercise would be anti-dilutive. Recently Issued Accounting Pronouncements The Company evaluates new significant accounting pronouncements at each reporting period. For the year ended December 31, 2020, the Company did not identify any new pronouncement that had or is expected to have a material effect on Company’s presentation of its financial statements. |
3. DEBT
3. DEBT | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | The Company's debt had been significantly impacted by the following transactions that took place in 2020: ● April 30, 2020 extension of maturity of non-bank debt through November 14, 2022 (the "April 2020 Debt Modification") ● May 6, 2020 exchange of $4,063,250 in related party subordinated promissory notes for the notes issued under the December 11, 2014 unsecured Convertible Subordinated Note Purchase Agreement, as amended (the “2014 NPA”) (the "May 2020 Note Exchange") ● Debt exchange of all non-bank debt for equity that was completed on two different dates: most of the debt was exchanged on December 23, 2020 (the "December 2020 Debt Exchange") and remaining debt was exchanged subsequent to the year end on January 28, 2021 (the "January 2021 Exchange") The table below summarizes the Company’s debt at December 31, 2020 and December 31, 2019: Debt Description December 31, December 31, 2020 2019 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2022 3.85 % PPP Loan 542,100 April 2022 1.00 % Convertible notes - related parties, net of discounts of $0 and $1,193,801, respectively 39,230,432 November 2022 8.00 % Convertible notes, net of discount of $1,927,892 and $45,029, respectively 972,108 610,740 November 2022 8.00 % Subordinated Promissory Note, Related Party 3,518,250 November 2022 8.00 % Total debt 6,514,208 48,359,422 Less: current portion of long term debt 423,067 Debt - long term $ 6,091,141 $ 48,359,422 Bank Loan The Company has an outstanding Loan and Security Agreement with Comerica Bank dated June 9, 2014 (the "LSA") in the amount of $5,000,000, with an extended maturity date of June 9, 2022. The LSA is secured by an extended irrevocable letter of credit issued by UBS The LSA with Comerica has the following additional terms: ● a variable interest rate at prime plus 0.6% payable monthly; ● 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. Paycheck Protection Program Loan On April 29, 2020 the Company borrowed $542,100 through issuance of a promissory note in accordance with the Paycheck Protection Program ("PPP") established by Section 1102 of the CARES Act and implemented and administered by the Small Business Administration (the "PPP loan"). The PPP loan matures on April 29, 2022. The PPP loan carries interest at 1% per year and is payable in 18 monthly installments of $30,513. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. Pursuant to the PPP rules, all or portion of this loan may be forgiven. The actual amount of the loan forgiveness will depend, in part, on the total amount of payroll costs, certain allowed rent and utility costs. Not more than 25% of the loan forgiveness amount may be attributable to non-payroll costs. The Company used the proceeds from the PPP loan for qualifying expenses, applied for forgiveness of the PPP loan in accordance with the terms of the CARES Act. Such forgiveness was granted to the Company on February 18, 2021. Convertible Notes under 2007 and 2014 NPAs Overview Since November 14, 2007 and through December 10, 2014, the Company financed its working capital deficiency primarily through the issuance of its notes of up to $33,300,000 in principal (the “2007 NPA Notes”) under the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, as amended (the “2007 NPA”). On December 11, 2014 the Company entered into 2014 NPA for the sum of notes up to $40,000,000 in principal ("2014 NPA Notes"). At the request of the note holder any amounts borrowed under the 2007 NPA and the 2014 NPA allow the principal amount to be converted to common shares at a conversion price of $1.43 per share. Maturity of 2014 and 2007 NPA Notes had been extended several times. The most recent such extension moved maturity date to November 14, 2022. Notes under both 2014 and 2007 NPAs were issued with identical terms. Such main terms are as follows: (a) allow for optional conversion into common stock upon request of a noteholder at a price of $1.43 (b) pay 8% interest twice per year in January and July (c) subordinated to the Bank Loan. Majority of 2007 and 2014 NPA notes are related party notes. Grasford Investments, Ltd. ("Grasford"), the Company’s largest stockholder, owned $12,076,282 in face value amount of 2007 NPA Notes as of December 31, 2019. Grasford is controlled by Avy Lugassy, one of the Company’s principal shareholders. Grasford's entire holding was exchanged in the December 2020 Debt Exchange. UBP owned $27,617,180 in combined face value of 2007 and 2014 NPA Notes as of December 31, 2019 and is considered a significant beneficial owner. UBP's holdings grew to $28,817,180 during 2020, which was exchanged in the December 2020 Debt Exchange. Crystal Management owned $730,769 in face value of 2007 NPA Notes as of December 31, 2019. Crystal Management is controlled by Doron Rotler, the third largest shareholder of the Company. The entire holding was exchanged in the December 2020 Debt Exchange. During 2020 the Company issued $2,900,000 in 2014 NPA notes to an unrelated party on three different occasions. These notes were the only non-bank notes outstanding as of December 31, 2020 and were exchanged in the January 2021 Exchange transaction. The carrying value of the notes as of December 31, 2020 was $972,108 and represented face value of $2,900,000, net of discount of $1,927,892 . Subordinated Promissory Notes, Related Parties The Company has issued subordinated notes to related parties to finance its shortfall in working capital. The subordinated notes carry interest rate of 8% per year, which is paid twice a year. The subordinated notes are unsecured and are subordinated to all other Company debt. The subordinated notes had maturity date in November of 2022. Avy Lugassy, one of the Company's principal shareholders is a beneficial owner of the related parties holding the subordinated notes. The Company started the year with $3,518,250 on January 1, 2020 in outstanding notes and issued additional $1,910,000 notes during the year under the same terms. During the May 2020 Note Exchange $4,063,250 of subordinated promissory notes to related parties were exchanged for the same face value of 2014 NPA note under the terms described above (refer to "May 2020 Note Exchange" paragraph below for more detail), which were subsequently exchanged again in the December 2020 Debt Exchange. The remaining balance of $1,365,000 in subordinated promissory notes to related parties were also exchanged in the December 2020 Debt Exchange. April 2020 Debt Modification On April 30, 2020, the Company and the holders of the majority of the aggregate outstanding principal amount of the Notes issued under the 2014 NPA (the "2014 NPA Notes") and holders of the majority of the aggregate outstanding principal amount of the Secured Promissory Notes (the “2007 NPA Notes”) issued under the Convertible Secured Subordinated Note Purchase Agreement dated November 14, 2007 (the "2007 NPA”) agreed to extend the maturity dates of the 2014 NPA Notes and the 2007 NPA Notes to November 14, 2022. In addition, the 2014 NPA was amended to allow the Company to issue 2014 NPA Notes as consideration of cancellation of other indebtedness. Except as for above mentioned modifications, all of the terms relating to the outstanding 2007 NPA Notes and the 2014 Notes continue in full force and effect. The Company is entitled to utilize the amounts available for future borrowing under each of the 2007 Note Purchase Agreement and the 2014 Note Purchase Agreement through November 14, 2022. May 2020 Note Exchange On May 6, 2020, the Company and related party holders of $4,063,250 in subordinated promissory notes exchanged those notes for the 2014 NPA Notes issued under 2014 NPA (the "May 2020 Note Exchange"). Avy Lugassy, one of Company's principal shareholders is a beneficial owner of the entities holding newly issued 2014 NPA Notes. The newly issued 2014 NPA Notes mature on November 14, 2022 and have the terms identical to other 2014 NPA Notes. The May 2020 Note Exchange was accounted for as debt extinguishment and the newly issued 2014 NPA Notes were recorded at fair value in accordance with ASC 470 "Debt". The total fair value of the 2014 NPA Notes issued as a result of the May 2020 Note Exchange was determined to be $8,928,000. The May 2020 Note Exchange transaction resulted in loss recorded on the statement of operations of $4,864,750 and a premium on the newly issued convertible debt of $4,864,750. The embedded beneficial conversion feature present in the newly issued debt in the amount of $4,063,250 resulted in a debt discount and a charge to paid-in capital. Amortization of debt discount and debt premium was scheduled to be recorded in interest expense through the maturity date of the notes. December 2020 Debt Exchange On December 23, 2020, the Company and all but one debt investor entered into a debt exchange transaction where the Company exchanged its convertible and non-convertible debt plus accrued but unpaid interest into Series A Convertible Preferred equity. The December 2020 Debt Exchange transaction was accounted for as debt extinguishment and the newly issued Series A Convertible Preferred Shares were recorded at fair value in accordance with ASC 470 "Debt". The total of 1,158,141 shares were issued in December 2020 Debt Exchange fair valued at $103,299,344. The combined face value of debt exchanged was $47,989,660 in addition to accrued but unpaid interest of $1,694,467 for a total of $49,684,127. The carrying value of the debt exchanged was $48,810,508 due to inclusion of unamortized debt discounts and debt premiums in the amounts of $4,519,542 and $3,645,924, respectively. The difference between the carrying amount of extinguished debt and fair value of the Series A Preferred Shares issued resulted in loss recorded on the statement of operations of $54,488,834. As a result of the December 2020 Debt Exchange, the original 2007 and 2014 NPAs and related notes with participating investors were cancelled. During the year the Company recorded $3,184,641 in amortization of debt discount, offset by $1,218,824 of amortization of debt premium. As of December 31, 2020 the Company has approximately $250,000 in interest outstanding related to non-bank debt. |
4. COMMITMENTS AND CONTINGENCIE
4. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
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. |
5. STOCKHOLDERS' DEFICIT
5. STOCKHOLDERS' DEFICIT | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS' DEFICIT | Common Stock The Company is authorized to issue 100,000,000 shares of common stock, $0.001 par value per share. As of December 31, 2020, the Company had 28,389,493 shares of common stock outstanding. Holders of the Company’s shares of common stock are entitled to one vote for each share held. Preferred Stock The Board of Directors is authorized, without further stockholder approval, to issue up to 5,000,000 shares of $0.001 par value preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions applicable to such shares, including dividend rights, conversion rights, terms of redemption, and liquidation preferences, and to fix the number of shares constituting any series and the designations of such series. On December 10, 2020 the Board of Directors authorized to designate 1,750,000 of 5,000,000 as Series A Convertible Preferred Stock with the following 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 ● 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. On December 23, 2020 the Company issued 1,158,141 of Series A Convertible Preferred shares in the December 2020 Debt Exchange transaction (refer to "Debt" footnote for more detail on the transaction). The December 2020 Debt Exchange resulted in a debt extinguishment treatment and the Series A Convertible Preferred was recorded at its fair value of $103,299,344. On the date of the December 2020 Debt Exchange the market value of the common stock was above the Series A Preferred 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 December 2020 Debt Exchange and charged to loss attributable to common shareholders on the Company's Statement of Operations in the amount of $37,176,330. During the period ended December 31, 2020 the Company issued 8,156 share of Series A Convertible Preferred in exchange of 350,000 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 $261,850. Equity Compensation Plans 2016 Equity Compensation Plan In May 2016, the Company’s shareholders authorized adoption of the approved MobileSmith Inc. 2016 Equity Compensation Plan for officers, directors, employees and consultants, initially reserving for issuance thereunder 15,000,000 shares of Common Stock. The exercise price for incentive stock options granted under the above plans is required to be no less than the fair market value of the common stock on the date the option is granted, except for options granted to 10% stockholders, which are required to have an exercise price of not less than 110% of the fair market value of the common stock on the date the option is granted. Incentive stock options typically have a maximum term of 10 years, except for option grants to 10% stockholders, which are subject to a maximum term of five years. Non-statutory stock options have a term determined by either the Board of Directors or the Compensation Committee of the Board of Directors. Options granted under the plans are not transferable, except by will and the laws of descent and distribution. A summary of the status of the stock option issuances as of December 31, 2020 and 2019, and changes during the periods ended on these dates is as follows: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2018 $ 6,704,716 $ 1.83 7.4 $ 765,927 Cancelled (1,892,900 ) 1.52 Issued 7,533,980 1.66 Outstanding, December 31, 2019 12,345,796 1.73 8.3 $ 13,823,410 Cancelled (3,102,496 ) 1.73 Issued 1,440,000 2.64 Outstanding, December 31, 2020 10,683,300 1.85 7.58 $ 17,060,533 Vested and exercisable, December 31, 2020 5,018,530 $ 1.76 6.46 $ 8,501,174 Weighted-average grant-date fair values of options issued during 2020 and 2019 were $2.27 and $1.42, respectively. At December 31, 2020, $9,316,951 of expense remains to be recorded related to all options outstanding. Exercise prices for options outstanding as of December 31, 2020 ranged between $.90 and $2.75. The Company measures share-based compensation cost at the grant date based on the fair value of the award. The Company recognizes compensation cost on a straight-line basis over the requisite service period. The requisite service period is generally three years. The Company accounts for forfeitures as they occur. The Company uses the simplified method allowed by SAB 107 for estimating expected term of the options in calculating the fair value of the awards that have a term of more than 7 years because the Company does not have reliable historical data on exercise of its options. The simplified method was used for options granted in 2020 and 2019. The fair value of option grants under the Company’s equity compensation plan during the years ended December 31, 2020 and 2019 was estimated using Black-Scholes pricing model using the following weighted-average assumptions: 2020 2019 Dividend yield 0.00 % 0.00 % Expected volatility 115 % 112 % Risk-free interest rate .4 % 2.12 % Expected lives (years) 6.5 6 |
6. FAIR VALUE MEASUREMENTS
6. FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
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 2020 May 2020 Note Exchange and the December 2020 Debt Exchange resulted in transactions which required the Company to recognize debt extinguishments in both instances and to record newly issued financing instruments at fair value at the dates of the transactions on a non-recurring basis. Fair value measurements in both transactions were categorized as Level 3 fair value measurements due to use of various unobservable inputs to the pricing models. 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 transactions, 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 transactions. Fair value measurements in the May 2020 Note Exchange transaction (refer to "Debt" footnote for the description of the transaction) The Company used a binomial model to determine the fair value of the newly issued instrument. The significant unobservable inputs and information used to develop those inputs include the following: ● the volatility of stock price was determined to be 86% and was based on the volatility of the Company’s stock price as quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) for the period of 2.5 years, which approximated the period remaining until maturity of the convertible instrument at the time of the transaction; ● the risk free rate of .24%; ● the credit spread over the risk free rate of approximately 8%; ● the nodes of the binomial model were extended for two and a half years, which approximates the time period until maturity of the convertible instrument; and ● the conversion ratio of $1.43 per share of common stock The Company used income approach to arrive at the fair value of the Series A Convertible Preferred stock on December 23, 2020 - the date of the exchange. Using this approach the value of Series A Convertible Preferred 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 December 23, 2020 transaction date. The model used the following notable inputs: ● the market price of the Company common stock on December 23, 2020 of $2.50 as a starting point of simulation ● the risk free rate and discount rate of 1.23%; ● 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 Convertible Preferred Stock certificate of designation) and probabilities of payment of dividend in cash or in additional preferred shares. As of December 31, 2020 and 2019, we believe that the fair value of our financial instruments other than cash and cash equivalents, such as, accounts receivable, our bank loan, notes payable, and accounts payable approximate their carrying amounts. |
7. INCOME TAXES
7. INCOME TAXES | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company accounts for income taxes under the asset and liability method in accordance with the requirements of US GAAP. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The balances of deferred tax assets and liabilities are as follows: December 31, 2020 December 31, 2019 Net current deferred income tax assets related to: Allowance for doubtful accounts $ (5,000 ) $ 1,000 Depreciation, amortization and impairment 84,000 104,000 Deferred revenue 41,000 41,000 Stock-based expenses 53,000 53,000 Other 9,325 Net operating loss carryforwards 21,433,000 22,719,000 Total 21,606,000 22,927,325 Less valuation allowance (21,606,000 ) (22,927,325 ) Net current deferred income tax $ $ Tax benefit computed at statutory rate of 21% $ (14,996,067 ) $ (2,311,162 ) State income tax benefit, net of federal effect (856,918 ) (132,066 ) Permanent differences: Stock based compensation 690,367 770,688 Debt discount amortization 436,411 268,123 Loss on debt extinguishment 13,176,496 Other 145,036 (52,583 ) Expiration of NOLs 2,726,000 1,863,000 Change in valuation allowance - continuing operations (1,321,325 ) (406,000 ) Totals $ $ As of December 31, 2020, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $96.5 million, of which $19.3 million will never expire and approximately $77.2 million will expire between 2021 and 2040. For state tax purposes, the NOL carryforwards expire between 2021 and 2035. In accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a change in equity ownership of greater than 50% of the Company within a three-year period can result in an annual limitation on the Company’s ability to utilize its NOL carryforwards that were created during tax periods prior to the change in ownership. The Company has reviewed its tax positions and has determined that it has no significant uncertain tax positions at December 31, 2020. |
8. MAJOR CUSTOMERS AND CONCENTR
8. MAJOR CUSTOMERS AND CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS AND CONCENTRATIONS | A customer that individually generates more than 10% of revenue is considered a major customer. For the year ended December 31, 2020, one customer accounted for 12% of the Company’s revenue. Two customers accounted for 91% of the net accounts receivable balance as of December 31, 2020. Four vendors accounted for 60% of the accounts payable balance as of December 31, 2020. For the year ended December 31, 2019, one customer accounted for 16% of the Company’s revenue. Three customers accounted for 81% of the net accounts receivable balance as of December 31, 2019. One vendor accounted for 30% of the accounts payable balance as of December 31, 2019. |
9. EMPLOYEE BENEFIT PLAN
9. EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2020 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | All full-time employees who meet certain age and length of service requirements are eligible to participate in the Company’s 401(k) Plan. The plan provides for contributions by the Company in such amounts as the Board of Directors may annually determine, as well as a 401(k) option under which eligible participants may defer a portion of their salaries. The Company contributed a total of approximately $34,000 and $36,000 to the plan during 2020 and 2019, respectively. |
10. DISAGGREGATED PRESENTATION
10. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
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: 12 Months Ended December 31, 2020 12 Months Ended December 31, 2019 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 588,169 $ 589,858 $ 877,030 $ 787,386 All Other Customers $ 1,237,247 $ 1,607,221 $ 1,344,054 $ 2,014,322 $ 1,825,416 $ 2,197,079 $ 2,221,084 $ 2,801,708 New customer acquisition impact on billings and revenue: 12 Months Ended December 31, 2020 12 Months Ended December 31, 2019 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 1,620,831 $ 2,108,289 $ 1,964,834 $ 2,778,014 Customers Acquired During The Period $ 204,585 $ 88,790 $ 256,250 $ 23,694 $ 1,825,416 $ 2,197,079 $ 2,221,084 $ 2,801,708 As of December 31, 2020 the aggregate amount of the transaction price allocated to unsatisfied (or partially satisfied) performance obligations was $875,154 of which $649,789 had been billed to the customers and recorded as a contract liability and $225,365 remained unbilled as of December 31, 2020. The following table describes the timing of when the Company expects to recognize the revenue from the unsatisfied performance obligations. Billed (Contract Liability as of December 31, 2020) Unbilled Total 2021 649,789 125,930 775,719 2022 79,435 79,435 2023 20,000 20,000 649,789 225,365 875,154 At January 1, 2020 the total contract liability balance was $1,051,271 (net of the Topic 606 adoption adjustment), of which approximately $1,005,000 was recognized in revenue during the twelve months ended December 31, 2020. |
11. LEASES
11. LEASES | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
LEASES | 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: Year Ended December 31, 2020 The following table summarizes the information about operating lease: Operating lease expense $ 204,966 Remaining Lease Term (Years) 3.25 years Discount Rate 8% Future maturities of operating lease liability as of December 31, 2020, were as follows: Operating Lease Expense Variable Lease Expense Total Lease Expense 2021 191,074 13,686 204,760 2022 191,074 14,096 205,170 2023 191,074 14,519 205,593 2024 63,691 4,840 68,531 Total lease payments $ 636,913 $ 47,141 684,054 Less imputed interest (90,060 ) Total $ 593,994 |
12. SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | On January 28, 2021 the Company exchanged the remaining face value of $2,900,000 of convertible debt for 70,014 shares of Series A Convertible Preferred stock (the "January 2021 Debt Exchange"). Subsequent to December 31, 2020 the Company issued a total of 41,066 shares of Series A Convertible Preferred stock in exchange for $1,761,700 of cash investment. On February 18, 2021 the Company's PPP loan was forgiven in its entirety. In February 2021, the Company received approximately $542,000 of proceeds from a note payable issued under either the SBA's Paycheck Protection Program 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 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. 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. |
2. SIGNIFICANT ACCOUNTING POL_2
2. SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions in the Company’s financial statements and notes thereto. Significant estimates and assumptions made by management include the determination of performance obligations and the allocation of consideration among performance obligations, and the determination of when the Company has met the requirements to recognize revenue related to the performance obligations, share-based compensation and allowance for accounts receivable. Actual results could differ from those estimates. |
Cash and Cash Equivalents | All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Federal Deposit Insurance Corporation ("FDIC") covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. |
Revenue Recognition | Revenue Recognition: General Overview and Performance Obligations to Customers The Company derives revenue primarily from contracts for subscription to the suite of e-health mobile solutions and, to a much lesser degree, ancillary services provided in connection with subscription services. The Company’s contracts include the following performance obligations: ● Access to the content available on the App Blueprint Catalog, including hosting of the deployed apps; ● App Build and Managed Services; and ● Custom development work. The majority of the Company’s contracts are for a subscription to a catalog of mobile App Blueprints, and hosting of the deployed apps and related services. Custom work for specific deliverables is documented in statements of work or separate contracts. Customers may enter into subscription and various statements of work concurrently or consecutively. Most of the Company’s performance obligations are not considered to be distinct from the subscription to Blueprints, hosting of deployed apps and related services and are combined into a single performance obligation except for certain custom development work which is capable of being distinct. New statements of work and modifications of contracts are reviewed each reporting period and significant judgment is applied as to nature and characteristics of the new or modified performance obligations on a contract by contract basis. Revenue Recognition: Transaction Price of the Contract and Satisfaction of Performance Obligations The transaction price of the contract is an aggregate amount of consideration payable by customer for delivery of contracted services. The transaction price is impacted by the terms of a contracted agreement with the customer. Such terms range from one to three years. The transaction price excludes any marketing or sales discounts or any future renewal periods, unless the renewal periods represent a material right given to customer to extend the agreement. The transaction price may include a significant financing component in instances where the Company offers discounts for accelerated payments on the long-term contracts. Significant financing components are recorded in other assets and amortized as interest expense in the Company’s Statement of Operations over the term of the contract. The transaction price is predominantly allocated to a single performance obligation of access to the Blueprints, hosting and related services and, to a lesser degree, allocated between the access and other distinct performance obligations based on the stand-alone selling price. The subscription revenue is then recognized over time over the term of the contract, using the output method of time elapsed. Other performance obligations identified are evaluated based on the specific terms of the agreement are usually recognized at a point in time upon delivery of a specific documented output. Management believes that such chosen methods faithfully depict satisfaction of the Company performance obligations and transfer of benefit to the customers. The full transaction price of the contract may be billed in its entirety or in agreed upon installments. Billed transaction price in excess of revenue recognized results in the recording of a contract liability. The unbilled portion of transaction price related to revenue earned represents contracted consideration receivable by the Company that was not yet billed. |
Incremental Costs of Obtaining a Contract | The Company’s incremental costs of obtaining a contract include sales commissions. Sales commissions are recognized as other assets on the balance sheet for the contracts with a term exceeding 12 months. These costs are amortized through the term of the contract and are recorded as sales and marketing expense. |
Contract Liabilities | A new contract liability is created every time the Company records receivables due from its customers. The contract liability represents the Company’s obligation to transfer services for which the Company has already invoiced. Most of the contract liabilities will be recognized in revenue over a period of 12 to 36 months. |
Customer Credit Risk | Most of the Company's receivables (billings) are collected within 30-45 days. The majority of the Company's customers are healthcare organizations, which historically have had low credit risk. |
Cost of Revenues | Cost of revenues includes salaries of customer support teams, costs of infrastructure, expenses for outsourced work to fulfill the contracted work, and amortization charges for capitalized software. |
Allowance for Doubtful Accounts | The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or failure of its customers to make required payments. The need for an allowance for doubtful accounts is evaluated based on specifically identified amounts that management believes to be potentially uncollectible. If actual collections experience changes, revisions to the allowance may be required. |
Impairment of Long-Lived Assets | The Company evaluates the recoverability of its long-lived assets every reporting period or whenever events and circumstances indicate that the value may be impaired. |
Advertising Costs | Advertising costs consist primarily of industry related tradeshows and marketing campaigns. Advertising costs are expensed as incurred, or the first time the advertising takes place, applied consistently based on the nature of the advertising activity. The amounts related to advertising during the years ended December 31, 2020 and 2019 were $248,261 and $234,203, respectively. |
Net Loss Per Share | Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the periods. Diluted net loss per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Shares of common stock issuable upon conversion of Convertible Subordinated Promissory Notes (the “Notes”), conversion of Series A Convertible Preferred Stock and exercise of share-based awards are excluded from the calculation of the weighted average number, because the effect of the conversion and exercise would be anti-dilutive. |
Recently Issued Accounting Pronouncements | The Company evaluates new significant accounting pronouncements at each reporting period. For the year ended December 31, 2020, the Company did not identify any new pronouncement that had or is expected to have a material effect on Company’s presentation of its financial statements. |
3. DEBT (Tables)
3. DEBT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Company Debt | Debt Description December 31, December 31, 2020 2019 Maturity Rate Comerica Bank Loan and Security Agreement $ 5,000,000 $ 5,000,000 June 2022 3.85 % PPP Loan 542,100 April 2022 1.00 % Convertible notes - related parties, net of discounts of $0 and $1,193,801, respectively 39,230,432 November 2022 8.00 % Convertible notes, net of discount of $1,927,892 and $45,029, respectively 972,108 610,740 November 2022 8.00 % Subordinated Promissory Note, Related Party 3,518,250 November 2022 8.00 % Total debt 6,514,208 48,359,422 Less: current portion of long term debt 423,067 Debt - long term $ 6,091,141 $ 48,359,422 |
5. STOCKHOLDERS' DEFICIT (Table
5. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stock Option Activity | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2018 $ 6,704,716 $ 1.83 7.4 $ 765,927 Cancelled (1,892,900 ) 1.52 Issued 7,533,980 1.66 Outstanding, December 31, 2019 12,345,796 1.73 8.3 $ 13,823,410 Cancelled (3,102,496 ) 1.73 Issued 1,440,000 2.64 Outstanding, December 31, 2020 10,683,300 1.85 7.58 $ 17,060,533 Vested and exercisable, December 31, 2020 5,018,530 $ 1.76 6.46 $ 8,501,174 |
Weighted-Average Assumptions | 2020 2019 Dividend yield 0.00 % 0.00 % Expected volatility 115 % 112 % Risk-free interest rate .4 % 2.12 % Expected lives (years) 6.5 6 |
7. INCOME TAXES (Tables)
7. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax Assets and Liabilities | December 31, 2020 December 31, 2019 Net current deferred income tax assets related to: Allowance for doubtful accounts $ (5,000 ) $ 1,000 Depreciation, amortization and impairment 84,000 104,000 Deferred revenue 41,000 41,000 Stock-based expenses 53,000 53,000 Other 9,325 Net operating loss carryforwards 21,433,000 22,719,000 Total 21,606,000 22,927,325 Less valuation allowance (21,606,000 ) (22,927,325 ) Net current deferred income tax $ $ |
Income Tax Reconciliation | Tax benefit computed at statutory rate of 21% $ (14,996,067 ) $ (2,311,162 ) State income tax benefit, net of federal effect (856,918 ) (132,066 ) Permanent differences: Stock based compensation 690,367 770,688 Debt discount amortization 436,411 268,123 Loss on debt extinguishment 13,176,496 Other 145,036 (52,583 ) Expiration of NOLs 2,726,000 1,863,000 Change in valuation allowance - continuing operations (1,321,325 ) (406,000 ) Totals $ $ |
10. DISAGGREGATED PRESENTATIO_2
10. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Disaggregated Presentation Of Revenue And Other Relevant Information | |
Disaggregation of Revenue | Customer size impact on billings and revenue: 12 Months Ended December 31, 2020 12 Months Ended December 31, 2019 Billings GAAP Revenue Billings GAAP Revenue Top 5 Customers (Measured By Amounts Billed) $ 588,169 $ 589,858 $ 877,030 $ 787,386 All Other Customers $ 1,237,247 $ 1,607,221 $ 1,344,054 $ 2,014,322 $ 1,825,416 $ 2,197,079 $ 2,221,084 $ 2,801,708 New customer acquisition impact on billings and revenue: 12 Months Ended December 31, 2020 12 Months Ended December 31, 2019 Billings GAAP Revenue Billings GAAP Revenue Customers In Existence As Of The Beginning Of The Period (Including Upgrades) $ 1,620,831 $ 2,108,289 $ 1,964,834 $ 2,778,014 Customers Acquired During The Period $ 204,585 $ 88,790 $ 256,250 $ 23,694 $ 1,825,416 $ 2,197,079 $ 2,221,084 $ 2,801,708 |
Contract Liability | Billed (Contract Liability as of December 31, 2020) Unbilled Total 2021 649,789 125,930 775,719 2022 79,435 79,435 2023 20,000 20,000 649,789 225,365 875,154 |
11. LEASES (Tables)
11. LEASES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Operating Lease Information | Year Ended December 31, 2020 The following table summarizes the information about operating lease: Operating lease expense $ 204,966 Remaining Lease Term (Years) 3.25 years Discount Rate 8% |
Future Maturities of Operating Lease Liability | Operating Lease Expense Variable Lease Expense Total Lease Expense 2021 191,074 13,686 204,760 2022 191,074 14,096 205,170 2023 191,074 14,519 205,593 2024 63,691 4,840 68,531 Total lease payments $ 636,913 $ 47,141 684,054 Less imputed interest (90,060 ) Total $ 593,994 |
2. SIGNIFICANT ACCOUNTING POL_3
2. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Advertising Costs | $ 248,261 | $ 234,203 |
3. DEBT (Details)
3. DEBT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Total Debt | $ 6,514,208 | $ 48,359,422 |
Less: Current Portion of Long Term Debt | 423,067 | 0 |
Debt - Long Term | $ 6,091,141 | 48,359,422 |
Debt Instrument 1 | ||
Debt Description | Comerica Bank Loan and Security Agreement | |
Total Debt | $ 5,000,000 | $ 5,000,000 |
Maturity | June 2022 | |
Interest Rate | 3.85% | 3.85% |
Debt Instrument 2 | ||
Debt Description | PPP Loan | |
Total Debt | $ 542,100 | $ 0 |
Maturity | April 2022 | |
Interest Rate | 1.00% | 1.00% |
Debt Instrument 3 | ||
Debt Description | Convertible notes - related parties, net of discounts of $0 and $1,193,801, respectively | |
Total Debt | $ 0 | $ 39,230,432 |
Maturity | November 2022 | |
Interest Rate | 8.00% | 8.00% |
Debt Instrument 4 | ||
Debt Description | Convertible notes, net of discount of $1,927,892 and $45,029, respectively | |
Total Debt | $ 972,108 | $ 610,740 |
Maturity | November 2022 | |
Interest Rate | 8.00% | 8.00% |
Debt Instrument 5 | ||
Debt Description | Subordinated Promissory Note, Related Party | |
Total Debt | $ 0 | $ 3,518,250 |
Maturity | November 2022 | |
Interest Rate | 8.00% | 8.00% |
5. STOCKHOLDERS' DEFICIT (Detai
5. STOCKHOLDERS' DEFICIT (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Equity [Abstract] | |||
Number of Shares Outstanding, Beginning | 12,345,796 | 6,704,716 | |
Number of Shares Cancelled | (3,102,496) | (1,892,900) | |
Number of Shares Issued | 1,440,000 | 7,533,980 | |
Number of Shares Outstanding, Ending | 10,683,300 | 12,345,796 | 6,704,716 |
Number of Shares Vested and Exercisable | 5,018,530 | ||
Weighted Average Exercise Price Outstanding, Beginning | $ 1.73 | $ 1.83 | |
Weighted Average Exercise Price Cancelled | 1.73 | 1.52 | |
Weighted Average Exercise Price Issued | 2.64 | 1.66 | |
Weighted Average Exercise Price Outstanding, Ending | 1.85 | $ 1.73 | $ 1.83 |
Weighted Average Exercise Price Vested and Exercisable | $ 1.76 | ||
Weighted Average Remaining Contractual Life (in years) Outstanding | 7 years 6 months 29 days | 8 years 3 months 18 days | 7 years 4 months 24 days |
Weighted Average Remaining Contractual Life (in years) Vested and expected to vest | 6 years 5 months 16 days | ||
Aggregate Intrinsic Value Outstanding | $ 17,060,533 | $ 13,823,410 | $ 765,927 |
Aggregate Intrinsic Value Vested and Expected to Vest | $ 8,501,174 |
5. STOCKHOLDERS' DEFICIT (Det_2
5. STOCKHOLDERS' DEFICIT (Details 1) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | ||
Dividend Yield | 0.00% | 0.00% |
Expected Volatility | 115.00% | 112.00% |
Risk-Free Interest Rate | 0.40% | 2.12% |
Expected Lives (Years) | 6 years 6 months | 6 years |
5. STOCKHOLDERS' DEFICIT (Det_3
5. STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | ||
Common Stock, Par Value | $ 0.001 | $ 0.001 |
Common Stock, Authorized | 100,000,000 | 100,000,000 |
Common Stock, Issued | 28,389,493 | 28,271,598 |
Common Stock, Outstanding | 28,389,493 | 28,271,598 |
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Issued | 1,166,297 | 0 |
Preferred Stock, Outstanding | 1,166,297 | 0 |
Weighted-Average Grant-Date Fair Values of Options | $ 2.27 | $ 1.42 |
Option Expense Remaining | $ 9,316,951 |
7. INCOME TAXES (Details)
7. INCOME TAXES (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Net Current Deferred Income Tax Assets Related to: | ||
Allowance for Doubtful Accounts | $ (5,000) | $ 1,000 |
Depreciation, Amortization and Impairment | 84,000 | 104,000 |
Deferred Revenue | 41,000 | 41,000 |
Stock-Based Expenses | 53,000 | 53,000 |
Other | 0 | 9,325 |
Net Operating Loss Carryforwards | 21,433,000 | 22,719,000 |
Total | 21,606,000 | 22,927,325 |
Less Valuation Allowance | (21,606,000) | (22,927,325) |
Net Current Deferred Income Tax | $ 0 | $ 0 |
7. INCOME TAXES (Details 1)
7. INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Tax Benefit Computed at Statutory Rate of 21% | $ (14,996,067) | $ (2,311,162) |
State Income Tax Benefit, Net of Federal Effect | (856,918) | (132,066) |
Permanent Differences: | ||
Stock Based Compensation | 690,367 | 770,688 |
Debt Discount Amortization | 436,411 | 268,123 |
Loss on Debt Extinguishment | 13,176,496 | 0 |
Other | 145,036 | (52,583) |
Expiration of NOLs | 2,726,000 | 1,863,000 |
Change in Valuation Allowance - Continuing Operations | (1,321,325) | (406,000) |
Totals | $ 0 | $ 0 |
7. INCOME TAXES (Details Narrat
7. INCOME TAXES (Details Narrative) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Income Tax Disclosure [Abstract] | |
Federal Net Operating Loss Carryforward | $ 96,500,000 |
Carryforward Expiration | As of December 31, 2020, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $96.5 million, of which $19.3 million will never expire and approximately $77.2 million will expire between 2021 and 2040. For state tax purposes, the NOL carryforwards expire between 2021 and 2035 |
8. MAJOR CUSTOMERS AND CONCEN_2
8. MAJOR CUSTOMERS AND CONCENTRATIONS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
One Customer | Revenue | ||
% Concentration | 12.00% | 16.00% |
Two Customers | Accounts Receivable | ||
% Concentration | 91.00% | |
Four Vendors | Accounts Payable | ||
% Concentration | 60.00% | |
Three Customers | Accounts Receivable | ||
% Concentration | 81.00% | |
One Vendor | Accounts Payable | ||
% Concentration | 30.00% |
9. EMPLOYEE BENEFIT PLAN (Detai
9. EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Retirement Benefits [Abstract] | ||
Employee Benefit Plan Contibution | $ 34,000 | $ 36,000 |
10. DISAGGREGATED PRESENTATIO_3
10. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Billings | $ 1,825,416 | $ 2,221,084 |
Revenue | 2,197,079 | 2,801,708 |
Top 5 Customers | ||
Billings | 588,169 | 877,030 |
Revenue | 589,858 | 787,386 |
All Other Customers | ||
Billings | 1,237,247 | 1,344,054 |
Revenue | $ 1,607,221 | $ 2,014,322 |
10. DISAGGREGATED PRESENTATIO_4
10. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Billings | $ 1,825,416 | $ 2,221,084 |
Revenue | 2,197,079 | 2,801,708 |
Customers in Existence as of the Beginning of the Period | ||
Billings | 1,620,831 | 1,964,834 |
Revenue | 2,108,289 | 2,778,014 |
Customers Acquired During the Period | ||
Billings | 204,585 | 256,250 |
Revenue | $ 88,790 | $ 23,694 |
10. DISAGGREGATED PRESENTATIO_5
10. DISAGGREGATED PRESENTATION OF REVENUE AND OTHER RELEVANT INFORMATION (Details 2) | Dec. 31, 2020USD ($) |
2021 | $ 775,719 |
2022 | 79,435 |
2023 | 20,000 |
Total | 875,154 |
Billed | |
2021 | 649,789 |
2022 | 0 |
2023 | 0 |
Total | 649,789 |
Unbilled | |
2021 | 125,930 |
2022 | 79,435 |
2023 | 20,000 |
Total | $ 225,365 |