Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. MobileSmith, Inc. (1113513) 10-Q published on May 11, 2021 at 3:23 pm
Reporting Period: Mar 30, 2021
The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations and positive cash flows. Since November 2007, the Company has been funding its operations, in part, from the proceeds from the issuance of notes under a convertible secured subordinated note purchase agreement facility which was established in 2007 (the "2007 NPA"), and an unsecured convertible subordinated note purchase agreement facility established in 2014 (the "2014 NPA"), and subordinated promissory notes to related parties. In December of 2020 and January of 2021 we exchanged all non-bank, including the debt issued under the 2007 NPA and the 2014 NPA, into Series A Convertible Preferred Stock (the "Series A Preferred Stock") with the same investors. We expect to finance our operations through the issuance of Series A Preferred Stock going forward. If financing through issuance of Series A Preferred Stock becomes unavailable, we will need to seek other sources of funding. As such, there is substantial doubt about the Company's ability to continue as a going concern.
On August 5, 2020, the FASB issued ASU 2020-06 "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.
The ASU is not expected to have a material impact on the financial statements of the Company. For the Company the ASU is not effective until fiscal year 2024, but early adoption is permitted as early as current fiscal year ending December 31, 2021.
The ASU is not expected to have a material impact on the financial statements of the Company. For the Company the ASU is not effective until fiscal year 2024, but early adoption is permitted as early as current fiscal year ending December 31, 2021.
On January 28, 2021 the Company exchanged its remaining unsecured Convertible Subordinated Notes (the “2014 NPA Notes”) under its existing unsecured Convertible Subordinated Note Purchase Agreement dated December 10, 2014 (the “2014 NPA”) for Series A Preferred Stock. The carrying value of 2014 NPA Notes of $1,075,713 consisting of face value of $2,900,000 net of unamortized discount of $1,849,773 plus accrued interest of $103,605 was exchanged for 70,014 shares of Series A Preferred Stock ("the January 2021 Debt Exchange"). The January Debt Exchange transaction was accounted for as debt extinguishment and the newly issued shares of Series A Preferred Stock were recorded at fair value in accordance with ASC 470 "Debt". The issued shares were fair valued at $7,660,970. The difference between the carrying amount of extinguished debt and fair value of the Series A Preferred Stock issued resulted in loss recorded on the statement of operations of $6,507,137.
Selling and Marketing expense increased by $160,980 or 44%. During 2020 we kept certain sales positions unfilled, as we evaluated the impact of COVID-19 on the healthcare industry. In last quarter of 2020 and during the first quarter of 2021 we started expanding our sales team, which resulted in increase in payroll costs of $85,000, increase in related recruiting costs of $40,000 and increase in stock based compensation of $60,000. Marketing payroll decreased by $40,000 in 2021 Period compared to 2020 Period due to reallocation of our internal resources and finetuning of our marketing strategy for 2021.
General and Administrative
expense increased by $81,083 or 10%. Legal and audit increased by $40,000 due to complexities associated with multiple debt exchanges that took place in 2020. Information and technology products and software tools expense increased by $15,000. The remainder of increase is due to fluctuations in other various general and administrative costs.
expense increased by $81,083 or 10%. Legal and audit increased by $40,000 due to complexities associated with multiple debt exchanges that took place in 2020. Information and technology products and software tools expense increased by $15,000. The remainder of increase is due to fluctuations in other various general and administrative costs.