þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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95-4439334
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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5400 Trinity Road, Suite 208
Raleigh, North Carolina
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27607
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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þ
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(Do not check if a smaller reporting company)
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PART I
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Item 1.
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Business
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3
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Item 1A.
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Risk Factors
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6
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Item 1B.
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Unresolved Staff Comments
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11
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Item 2.
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Properties
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12
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Item 3.
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Legal Proceedings
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12
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Item 4.
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Mine Safety Disclosures
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12
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PART II
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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13
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Item 6.
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Selected Financial Data
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13
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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14
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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21
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Item 8.
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Financial Statements and Supplementary Data
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22
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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23
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Item 9A.
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Controls and Procedures
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23
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Item 9B.
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Other Information
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24
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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25
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Item 11.
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Executive Compensation
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27
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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31
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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33
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Item 14.
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Principal Accounting Fees and Services
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35
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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35
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SIGNATURES
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39
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EXHIBIT INDEX
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40
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●
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Capabilities for our customers to add their own custom functionality as well as reuse software that they had previously created outside of the MobileSmith Platform in the form of the native plugin. Ability to reuse existing software code significantly decreased adoption cost of our Platform to a new customer.
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●
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Geo-fencing – functionality that allows our Platform users to create apps that react to geographical GPS-based “virtual boundaries” and generate target messages and/or notifications when an app user enters or exits these boundaries. These use cases are becoming more prevalent with retailers and showcase new ways of interaction with a customer based on customer’s physical location. In our Platform such sophisticated tools are configured and managed by non-developers.
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●
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Ability to create mobile apps with Beacon technology. A micro-proximity beacon is a low-power, low-cost transmitter device that notifies a nearby smartphone of its presence. The technology enables a smartphone to perform actions such as send a push notification when in close proximity to a beacon. This enables indoor positioning applications like hospital way-finding and interactive in-store displays in retail.
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●
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In fourth quarter of 2014, MobileSmith launched a private cloud appliance called MobileSmith Pod. The appliance provides an independent Platform-as-a-Service (PaaS) instance of our Platform for enterprise and government clients whose regulations require installations inside their corporate firewall.
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●
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A customer may hire an enterprise software application vendor and outsource the creation of a mobile app based on the defined specifications. A customer often does not have control over the creation of the final product and any subsequent modifications of the delivered product.
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●
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A large company with existing in-staff development teams may acquire a subscription to a Mobile Application Development Platform (“MADP”). MADP space is represented by the following solutions: HP’s Anywhere Mobile Development Platform, SAP’s Sybase Unwired Platform, IBM’s Worklight, KONY Solutions, Appcelerator, and Xamarin. Customers that use an MADP have full control over creation of the mobile apps, but are required to have developers on staff.
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●
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A company may subscribe to one of several do-it-yourself platforms (“DIY platforms”). Customers that use a DIY platform have full control over the app creation process and developer knowledge is not required to produce those apps. Current DIY platforms predominantly have narrow specializations (e.g., event app creation platforms).
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●
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The Platform allows for creation of apps with sophisticated functionality; and
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●
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The Platform is designed for use by non-developers. The primary users of the Platform within our customers’ organizations are marketing and designer teams – individuals who have the best understanding of the behavior and demands of the end users of the apps – those who actually download the apps on their phones.
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High
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Low
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|||||||
Year Ended December 31, 2013:
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||||||||
First Quarter
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$ | 1.40 | $ | 1.20 | ||||
Second Quarter
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$ | 1.60 | $ | 1.02 | ||||
Third Quarter
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$ | 1.40 | $ | 1.30 | ||||
Fourth Quarter
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$ | 1.35 | $ | 0.70 | ||||
Year Ended December 31, 2014:
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||||||||
First Quarter
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$ | 1.30 | $ | 1.10 | ||||
Second Quarter
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$ | 1.32 | $ | 1.00 | ||||
Third Quarter
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$ | 2.00 | $ | 1.15 | ||||
Fourth Quarter
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$ | 1.22 | $ | 0.51 |
Convertible Notes Type:
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Balance
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|||
2007 NPA notes, net of discount
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$ | 26,165,970 | ||
2014 NPA notes
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500,000 | |||
Total convertible notes
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$ | 26,665,970 |
●
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a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the 2014 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the 2014 NPA), such amounts are declared due and payable by a noteholder or made automatically due and payable in accordance with the terms of the Note;
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●
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an interest rate of 8% per year, with accrued interest payable in cash in quarterly installments commencing on the third month anniversary of the date of issuance of the Note with the final installment payable on the maturity date of the Note;
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●
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a conversion price per share that is fixed at $1.43;
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●
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optional conversion upon noteholder request; provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion, the noteholder may only convert that portion of their Notes outstanding for which the Company has a sufficient number of authorized shares of common stock. To the extent multiple noteholders under the 2014 NPA, the 2007 NPA, or both, request conversion of its Notes on the same date, any limitations on conversion shall be applied on a pro rata basis. In such case, the noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover conversions of the remaining portion of the Notes outstanding as well as the maximum issuances contemplated pursuant to the Company’s 2004 Equity Compensation Plan, within 90 calendar days after the Company’s receipt of such request; and
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●
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may not be prepaid without the consent of holders of at least two-thirds of the aggregate outstanding principal amount of Notes issued under the 2014 NPA.
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●
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a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the amended 2007 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the amended 2007 NPA) such amounts are declared due and payable by a 2007 NPA Noteholder or made automatically due and payable in accordance with the terms of the 2007 NPA;
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●
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an interest rate of 8% per year;
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●
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a total borrowing commitment of $33.3 million;
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●
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a conversion price that is fixed at $1.43; and
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●
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optional conversion upon 2007 NPA Noteholder request, provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion as well as the issuance of the maximum amount of common stock permitted under the Company’s 2004 Equity Compensation Plan, the 2007 NPA Noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover the remaining portion of the Notes outstanding as well as the maximum issuances permitted under the 2004 Equity Compensation Plan.
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● | In June 2012, we sustained a compromise of our internal corporate network which considerably slowed our operational advancement. The compromise resulted in an investigation by the government agencies that oversee cyber-crime; we incurred significant legal and consulting costs and personnel costs during the recovery time. Certain legal and consulting costs carried over into 2013, but were insignificant in 2014. | |
● |
In June 2013, we modified the 2007 NPA note facility. The modification was accounted for as debt extinguishment and a charge of $21,793,055 was recorded in the 2013 Statement of Operations. In addition, due to changes in the conversion price of the convertible debt, each Note issuable subsequent to the June 2013 debt modification resulted in an immediate benefit to the purchaser, because the conversion price was at a discount to the market price as quoted on the OTCBB. The calculated benefit was recorded as a debt discount, which is amortized through the date of Note maturity, resulting in additional interest expense. The Company included $1,899,060 and $208,680 of debt discount amortization in its interest expense presented in the Statement of Operations in 2014 and 2013, respectively. Our interest expense, net of any non-cash discount components, will continue to increase as we issue additional Notes
In May 2014 we modified its 2007 NPA note facility again. The modification was accounted for as extinguishment of debt, which resulted in a gain on extinguishment of debt of $50,129.
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● |
During the second quarter of 2013, we adopted a plan to discontinue our domain hosting and e-commerce operations in order to focus on our core mobile platform business and related services. In July 2013, we executed the plan and exited the business of domain hosting and e-commerce operations which were gradually on the decline over the past two years. We do not expect the exit to have any substantial impact on our operations and cash flows. We recorded a loss on impairment of assets used in discontinued operations of $14,654 for the year ended December 31, 2013. The results of operations presented in our financial statements and discussed below do not include any of the revenues and expenses related to the discontinued operations. Results of discontinued operations are reported separately in the Statements of Operations.
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● | In November 2013, we relocated our offices to a newly leased space. As a result of the move, we discarded most of our old furniture and some outdated network equipment and invested in new, more efficient equipment and expanded our use of cloud processing capacities. As a result, we recorded loss impairment and disposal of old assets in the amount of $137,903 for 2013. |
Year Ended December 31,
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Increase (Decrease)
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|||||||||||||||
2014
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2013
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$ | % | |||||||||||||
Revenue
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879,086 | 339,039 | 540,047 | 159 | % | |||||||||||
Cost of Revenue
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475,486 | 428,253 | 47,233 | 11 | % | |||||||||||
Gross Profit (Loss)
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403,600 | (89,214 | ) | 492,814 | ||||||||||||
Sales and Marketing
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962,123 | 892,679 | 69,444 | 8 | % | |||||||||||
Research and Development
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1,167,263 | 951,653 | 215,610 | 23 | % | |||||||||||
General and Administrative
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1,354,449 | 1,631,818 | (277,369 | ) | (17 | %) | ||||||||||
Impairment of Long Lived Assets, Net
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66,186 | 137,903 | (71,717 | ) | (52 | %) | ||||||||||
Interest Expense
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(4,418,468 | ) | (2,299,447 | ) | (2,119,021 | ) | 92 | % |
● |
$62,000 decrease is associated with relocation into the new office space in November of 2013. Savings resulted from a decrease in rent and cost reduction in general IT infrastructure
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● |
$25,000 decrease in our insurance expense due to optimization of our insurance coverage
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● |
$77,000 decrease in bank fees due to more favorable transaction terms obtained from moving our $5,000,000 bank loan from Israel Discount Bank of New York (IDB) to Comerica Bank
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● |
$154,000 decrease in legal and professional fees due to the optimization of our administrative, reporting and compliance processes and the absence in 2014 of costs associated with 2012 corporate breach
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● | Such decreases were offset by an increase in bed debt expense of $22,000 and an increase of $19,000 in other administrative expenses. |
● |
Our ability to expand revenue volume;
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● |
Our ability to maintain product pricing as expected, particularly in light of increased competition and its unknown effects on market dynamics;
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● |
Our continued need to reduce our cost structure while simultaneously expanding the breadth of our business, enhancing our technical capabilities, and pursing new business opportunities.
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Page
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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F-1
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CONSOLIDATED BALANCE SHEETS
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F-2
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CONSOLIDATED STATEMENTS OF OPERATIONS
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F-3
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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F-4
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
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F-5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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F-6
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/s/ Cherry Bekaert LLP | |
Raleigh, North Carolina
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March 20, 2015
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ASSETS
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||||||||
December 31,
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December 31,
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|||||||
2014
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2013
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|||||||
Current Assets
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||||||||
Cash and Cash Equivalents
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$ | 320,286 | $ | 223,514 | ||||
Restricted Cash
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125,000 | 131,757 | ||||||
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $22,000 and Zero, Respectively
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193,907 | 48,885 | ||||||
Prepaid Expenses and Other Current Assets
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64,973 | 97,957 | ||||||
Total Current Assets
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704,166 | 502,113 | ||||||
Property & Equipment, Net
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116,567 | 140,383 | ||||||
Capitalized Software, Net
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507,217 | 636,061 | ||||||
Intangible Assets, Net
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72,604 | 138,992 | ||||||
Other Assets
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21,312 | 15,370 | ||||||
Total Other Assets
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717,700 | 930,806 | ||||||
Total Assets
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$ | 1,421,866 | $ | 1,432,919 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
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||||||||
Current Liabilities
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||||||||
Trade Accounts Payable
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$ | 94,862 | $ | 58,901 | ||||
Accrued Expenses
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106,668 | 267,425 | ||||||
Accrued Interest
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501,957 | 290,560 | ||||||
Capital Lease Obligations and Bank Loans
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28,378 | 5,026,113 | ||||||
Deferred Revenue
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579,264 | 163,868 | ||||||
Total Current Liabilities
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1,311,129 | 5,806,867 | ||||||
Long-Term Liabilities
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||||||||
Bank Loan
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5,000,000 | - | ||||||
Convertible Notes Payable, Related Parties, Net of Discount
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25,985,330 | 23,512,836 | ||||||
Convertible Notes Payable, Net of Discount
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680,640 | 730,770 | ||||||
Capital Lease Obligations
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114,637 | 142,986 | ||||||
Deferred Rent
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61,010 | 25,314 | ||||||
Total Long-Term Liabilities
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31,841,617 | 24,411,906 | ||||||
Total Liabilities
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33,152,746 | 30,218,773 | ||||||
Commitments and Contingencies (Note 6)
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||||||||
Stockholders' Deficit
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- | - | ||||||
Preferred Stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding at December 31, 2014 and December 31, 2013
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- | - | ||||||
Common Stock, $0.001 par value, 45,000,000 shares authorized, 19,827,542 shares issued and outstanding at December 31, 2014 and December 31, 2013
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19,828 | 19,828 | ||||||
Additional Paid-in Capital
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97,453,374 | 93,059,983 | ||||||
Accumulated Deficit
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(129,204,082 | ) | (121,865,665 | ) | ||||
Total Stockholders' Deficit
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(31,730,880 | ) | (28,785,854 | ) | ||||
Total Liabilities and Stockholders' Deficit
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$ | 1,421,866 | $ | 1,432,919 |
Year Ended
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||||||||
December 31,
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December 31,
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|||||||
2014
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2013
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|||||||
REVENUES:
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||||||||
Subscription and Support
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$ | 819,626 | $ | 339,039 | ||||
Professional Services and Other
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59,460 | - | ||||||
Total Revenue
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879,086 | 339,039 | ||||||
COST OF REVENUES:
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||||||||
Subscription and Support
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456,382 | 428,253 | ||||||
Professional Services and Other
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19,104 | - | ||||||
Total Cost of Revenue
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475,486 | 428,253 | ||||||
GROSS PROFIT (LOSS)
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403,600 | (89,214 | ) | |||||
OPERATING EXPENSES:
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||||||||
Sales and Marketing
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962,123 | 892,679 | ||||||
Research and Development
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1,167,263 | 951,653 | ||||||
General and Administrative
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1,354,449 | 1,631,818 | ||||||
Impairment of Long Lived Assets, Net
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66,186 | 137,903 | ||||||
Total Operating Expenses
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3,550,021 | 3,614,053 | ||||||
LOSS FROM OPERATIONS
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(3,146,421 | ) | (3,703,267 | ) | ||||
OTHER INCOME (EXPENSE):
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||||||||
Other Income
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6,482 | 60,519 | ||||||
Interest Expense, Net
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(4,418,468 | ) | (2,299,447 | ) | ||||
Gain (Loss) on Debt Extinguishment
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50,129 | (21,793,055 | ) | |||||
Gain on Reversal of a Liability
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169,861 | 125,358 | ||||||
Change in the Market Value of Settlement Related Financial Instrument
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- | 147,500 | ||||||
Total Other Expense
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(4,191,996 | ) | (23,759,125 | ) | ||||
LOSS FROM CONTINUING OPERATIONS
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(7,338,417 | ) | (27,462,392 | ) | ||||
Income (Loss) from Discontinued Operations
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- | (52,154 | ) | |||||
Impairment of Assets of Discontinued Operations
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- | (14,654 | ) | |||||
NET LOSS
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$ | (7,338,417 | ) | $ | (27,529,200 | ) | ||
NET LOSS PER COMMON SHARE:
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||||||||
Basic and Fully Diluted from Continuing Operations
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$ | (0.37 | ) | $ | (1.50 | ) | ||
Basic and Fully Diluted from Discontinued Operations
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$ | - | $ | - | ||||
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE:
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||||||||
Basic And Fully Diluted
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19,827,542 | 18,356,639 |
Year Ended
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||||||||
December 31,
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December 31,
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|||||||
2014
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2013
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|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
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||||||||
Net Loss
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$ | (7,338,417 | ) | $ | (27,529,200 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
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||||||||
Depreciation and Amortization
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164,252 | 153,966 | ||||||
Bad Debt Expense
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22,000 | - | ||||||
Amortization of Debt Discount
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1,899,060 | 208,680 | ||||||
Share Based Compensation
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76,825 | 62,988 | ||||||
Impairment of Long Lived Assets
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66,186 | 156,531 | ||||||
Loss (Gain) on Debt Extinguishment
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(50,129 | ) | 21,793,055 | |||||
Change in Fair Value of Financial Instrument
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- | (147,500 | ) | |||||
Changes in Assets and Liabilities:
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||||||||
Accounts Receivable
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(167,022 | ) | (12,835 | ) | ||||
Prepaid Expenses and Other Assets
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27,042 | 2,783 | ||||||
Accounts Payable
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35,961 | (158,273 | ) | |||||
Deferred Revenue
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415,396 | 74,894 | ||||||
Accrued and Other Expenses
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86,336 | 212,959 | ||||||
Net Cash Used in Operating Activities
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(4,762,510 | ) | (5,181,952 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
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||||||||
Payments to Acquire Property, Plant and Equipment
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(11,391 | ) | (83,142 | ) | ||||
Payments to Acquire Intangible Assets
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- | (24,440 | ) | |||||
Investment in Internally Developed Software
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- | (164,797 | ) | |||||
Net Cash Used in Investing Activities
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(11,391 | ) | (272,379 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
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||||||||
Restricted Cash Used to Pay Interest Expense
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131,757 | 202,233 | ||||||
Deposit of Cash to Restricted Account
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(125,000 | ) | (202,887 | ) | ||||
Repayment of Bank Loan
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(5,000,000 | ) | - | |||||
Proceeds from Bank Loan
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5,000,000 | - | ||||||
Proceeds from Issuance of Long Term Debt
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4,890,000 | 5,665,000 | ||||||
Repayments of Debt Borrowings
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(26,084 | ) | (44,959 | ) | ||||
Net Cash Provided by Financing Activities
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4,870,673 | 5,619,387 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
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96,772 | 165,056 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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223,514 | 58,458 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 320,286 | $ | 223,514 | ||||
Supplemental Disclosures of Cash Flow Information:
|
||||||||
Cash Paid During the Period for Interest
|
$ | 2,249,503 | $ | 2,021,735 | ||||
Non-Cash Investing and Financing Activities
|
||||||||
Financed Purchase of Office Furniture
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$ | - | $ | 40,000 | ||||
The Company Recorded Debt Discount Associated with Beneficial Conversion Feature
|
$ | 4,316,566 | $ | 2,130,074 | ||||
The Company Issued 1,475,000 of Common Shares to Settle the Financial Liability
|
$ | - | $ | 1,917,500 |
Common Stock
|
Additional
|
|||||||||||||||||||
$ 0.001 |
Paid-In
|
Accumulated
|
||||||||||||||||||
Shares
|
Par
Value
|
Capital
|
Deficit
|
Totals
|
||||||||||||||||
BALANCES, DECEMBER 31, 2012
|
18,352,542 | $ | 18,353 | $ | 67,157,841 | $ | (94,336,465 | ) | $ | (27,160,271 | ) | |||||||||
Equity-Based Compensation
|
- | - | 62,988 | - | 62,988 | |||||||||||||||
Beneficial Conversion Feature Recorded as a Result of Issuance of June 27, 2013 Debt Modification and Subsequent Issuance of Convertible Debt
|
- | - | 23,923,129 | - | 23,923,129 | |||||||||||||||
Issuance of Shares Related to Class Action Settlement
|
1,475,000 | 1,475 | 1,916,025 | - | 1,917,500 | |||||||||||||||
Net Loss
|
- | - | - | (27,529,200 | ) | (27,529,200 | ) | |||||||||||||
BALANCES, DECEMBER 31, 2013
|
19,827,542 | $ | 19,828 | $ | 93,059,983 | $ | (121,865,665 | ) | $ | (28,785,854 | ) | |||||||||
Equity-Based Compensation
|
- | - | 76,825 | - | 76,825 | |||||||||||||||
Beneficial Conversion Feature Recorded as a Result of Issuance of Convertible Debt
|
- | - | 2,695,714 | - | 2,695,714 | |||||||||||||||
Non-cash Capital Contribution from Related Parties from the Extinguishment of Related Party Debt Resulting from May 12, 2014 Debt Modification
|
- | - | 1,620,852 | - | 1,620,852 | |||||||||||||||
Net Loss
|
- | - | - | (7,338,417 | ) | (7,338,417 | ) | |||||||||||||
BALANCES, DECEMBER 31, 2014
|
19,827,542 | $ | 19,828 | $ | 97,453,374 | $ | (129,204,082 | ) | $ | (31,730,880 | ) |
1.
|
SUMMARY OF BUSINESS AND DESCRIPTION OF GOING CONCERN
|
●
|
Subscription to its Software as a Service (“SaaS”) cloud based mobile app development platform to customers who design and build their own apps;
|
●
|
Dedicated internal and secure mobile development platform for the U.S. Department of Defense and related contractors;
|
●
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Custom mobile application design and development services;
|
●
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Mobile application marketing services; and
|
●
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Mobile strategy implementation consulting.
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
●
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persuasive evidence of an arrangement exists;
|
●
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delivery has occurred;
|
●
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the fees are fixed or determinable; and
|
●
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collection is considered reasonably assured.
|
Computer hardware and office equipment
|
5 years
|
Computer software
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5 years
|
Furniture and fixtures
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5 years
|
Leasehold improvements
|
Shorter of the estimated useful life or the lease term
|
Dividend yield
|
0.00
|
%
|
||
Expected volatility
|
188.00
|
%
|
||
Risk-free interest rate
|
1.43
|
%
|
||
Expected lives (years)
|
4.00
|
3.
|
PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Computer hardware
|
$ | 67,890 | $ | 57,585 | ||||
Computer software
|
37,884 | 37,884 | ||||||
Furniture and fixtures
|
78,918 | 78,405 | ||||||
Office equipment
|
7,832 | 7,832 | ||||||
Leasehold improvements
|
34,162 | 34,162 | ||||||
226,686 | 215,868 | |||||||
Less accumulated depreciation
|
(110,119 | ) | (75,485 | ) | ||||
Property and equipment, net
|
$ | 116,567 | $ | 140,383 |
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Capitalized software
|
$ | 768,535 | $ | 793,094 | ||||
Less accumulated amortization
|
(261,318 | ) | (157,033 | ) | ||||
Capitalized software, net
|
$ | 507,217 | $ | 636,061 | ||||
4.
|
INTANGIBLE ASSETS
|
31-Dec-14 | 31-Dec-13 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||
Asset Category | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||
Acquired license and costs
|
$ | 108,534 | $ | 43,930 | $ | 64,604 | $ | 108,534 | $ | 28,425 | $ | 80,109 | ||||||||||||
Patent development and application costs
|
- | - | - | 48,883 | - | 48,883 | ||||||||||||||||||
Other
|
10,000 | 2,000 | 8,000 | 10,000 | - | 10,000 | ||||||||||||||||||
Total
|
$ | 118,534 | $ | 45,930 | $ | 72,604 | $ | 167,417 | $ | 28,425 | $ | 138,992 |
5.
|
DEBT
|
Debt Description
|
December 31,
|
December 31,
|
|||||||||||
2014
|
2013
|
Maturity
|
Rate
|
||||||||||
Bank Loan
|
$ | 5,000,000 | $ | 5,000,000 |
Jun-16
|
3.85 | % | ||||||
Capital lease obligations - Noteholder lease
|
113,093 | 132,321 |
Aug-19
|
8.00 | % | ||||||||
Capital lease obligations - Office furniture
|
29,922 | 36,778 |
Sep-18
|
9.75 | % | ||||||||
Convertible notes - related parties, net of discount of $4,338,901 and $1,921,394, respectively
|
25,985,330 | 23,512,836 |
Nov-16
|
8.00 | % | ||||||||
Convertible notes, net of discount of $50,129 and zero, respectively
|
680,640 | 730,770 |
Nov-16
|
8.00 | % | ||||||||
Total debt
|
31,808,985 | 29,412,705 | |||||||||||
Less: current portion of long term debt
|
|||||||||||||
Capital lease obligations
|
28,378 | 26,113 | |||||||||||
Bank Loan
|
- | 5,000,000 | |||||||||||
Total current portion of long term debt
|
28,378 | 5,026,113 | |||||||||||
Debt - long term
|
$ | 31,780,607 | $ | 24,386,592 |
Convertible Notes Type:
|
Balance
|
|||
2007 NPA notes, net of discount
|
$ | 26,165,970 | ||
2014 NPA notes
|
500,000 | |||
Total convertible notes
|
$ | 26,665,970 |
●
|
a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the 2014 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the 2014 NPA), other than for a bankruptcy related, such amounts are declared due and payable by at least two-thirds of the aggregate outstanding principal amount of the 2014 NPA Notes;
|
●
|
an interest rate of 8% per year, with accrued interest payable in cash in quarterly installments commencing on the third month anniversary of the date of issuance of the
2014 NPA
Note with the final installment payable on the maturity date of the note;
|
●
|
a conversion price per share that is fixed at $1.43;
|
●
|
optional conversion upon noteholder request; provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion, the noteholder may only convert that portion of their Notes outstanding for which the Company has a sufficient number of authorized shares of common stock. To the extent multiple noteholders under the 2014 NPA, the 2007 NPA, or both, request conversion of its notes on the same date, any limitations on conversion shall be applied on a pro rata basis. In such case, the noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover conversions of the remaining portion of the notes outstanding as well as the maximum issuances contemplated pursuant to the Company’s 2004 Equity Compensation Plan, within 90 calendar days after the Company’s receipt of such request; and
|
●
|
may not be prepaid without the consent of holders of at least two-thirds of the aggregate outstanding principal amount of 2014 NPA Notes.
|
●
|
a maturity date of November 14, 2016;
|
●
|
an interest rate of 8% per year payable in quarterly installments;
|
●
|
optional conversion upon the noteholder request;
|
●
|
the borrowing facility commitment was increased by $10 million to $33.3 million;
|
●
|
a conversion price that is the greater of (i) 80% of the lowest closing price of the Company’s shares of common stock in the 12-month period immediately preceding the date of conversion or (ii) $0.50; and
|
●
|
if at the time of any requested conversion the Company does not have a sufficient number of shares of its common stock authorized to allow for such conversion, the 2007 NPA noteholders may request that the Company call a special meeting of the stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover the remaining portion of the 2007 NPA Notes outstanding; and
|
●
|
the Company is not permitted to prepay the 2007 NPA Notes without approval of the holders of at least a majority of the principal amount of the 2007 NPA Notes then outstanding.
|
●
|
a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the amended 2007 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the amended 2007 NPA) such amounts are declared due and payable by a 2007 NPA Noteholder or made automatically due and payable in accordance with the terms of the 2007 NPA;
|
●
|
an interest rate of 8% per year;
|
●
|
a total borrowing commitment of $33.3 million;
|
●
|
a conversion price that is fixed at $1.43; and
|
●
|
optional conversion upon 2007 NPA Noteholder request, provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion, as well as the issuance of the maximum amount of common stock permitted under the Company’s 2004 Equity Compensation Plan, the 2007 NPA Noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover the remaining portion of the Notes outstanding as well as the maximum issuances permitted under the 2004 Equity Compensation Plan.
|
●
|
the volatility of stock price was determined to be 47% and was based on the Company’s historical volatility;
|
●
|
the risk free rate of 1.41%;
|
●
|
the credit spread over the risk free rate was determined to be approximately 20%, which was derived from a combination of the credit spread of CCC rated bonds with added premium for lack of marketability of the convertible instrument;
|
●
|
the nodes of the binomial model were extended for 3 years, which approximates the time period until maturity of the convertible instrument; and
|
●
|
the conversion ratio varied from approximately 1.39 to .56 shares per dollar, depending on the node of the conversion tree. The conversion ratio varied due to projected change in value of the stock driven by historical volatility of 47%.
|
● |
volatility of stock price was determined to be 47% and was based on the Company’s historical volatility;
|
● |
risk free rate of 1.41%;
|
● |
credit spread over the risk free rate was determined to be approximately 20%, which was derived from a combination of the credit spread of CCC rated bonds with added premium for lack of marketability of the convertible instrument;
|
● |
nodes of the binomial model were extended for 2.5 years, which approximates the time period until maturity of the convertible instrument;
|
● |
conversion price was fixed at $1.43 per share.
|
●
|
a maturity date of June 9, 2016;
|
||
●
|
a variable interest rate at prime plus 0.6% (3.85% on the date of execution) payable quarterly;
|
||
●
|
secured by substantially all of the assets of the Company, including the Company’s intellectual property;
|
||
●
|
secured by an extended irrevocable SBLC issued by UBS AG (Geneva, Switzerland) (“UBS AG”) with an initial term expiring on May 31, 2015, which term is automatically 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; 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.
|
Year:
|
||||
2015
|
$ | 39,259 | ||
2016
|
39,259 | |||
2017
|
39,259 | |||
2018
|
34,189 | |||
2019
|
19,412 | |||
171,378 | ||||
Less amount representing interest
|
(28,363 | ) | ||
Capital lease obligations
|
$ | 143,015 |
6.
|
COMMITMENTS AND CONTINGENCIES
|
Year:
|
||||
2015
|
162,528 | |||
2016
|
165,678 | |||
2017
|
167,786 | |||
2018
|
172,418 | |||
2019
|
44,082 | |||
Total
|
$ | 712,492 |
7.
|
STOCKHOLDERS’ DEFICIT
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Number of
|
Average
|
Remaining
|
Intrinsic
|
|||||||||||||
Shares
|
Exercise Price
|
Contractual Term
|
Value
|
|||||||||||||
Outstanding, December 31, 2012
|
450,900 | $ | 2.02 | |||||||||||||
Cancelled
|
(187,900 | ) | 1.51 | |||||||||||||
Issued
|
267,378 | 1.62 | ||||||||||||||
Outstanding, December 31, 2013
|
530,378 | 1.99 | ||||||||||||||
Cancelled
|
(126,717 | ) | 3.72 | |||||||||||||
Issued
|
- | - | ||||||||||||||
Outstanding, December 31, 2014
|
403,661 | $ | 1.45 | 4.50 | $ | 7,353 | ||||||||||
Vested and exercisable, December 31, 2014
|
226,502 | $ | 1.34 | 5.08 | $ | 7,066 |
8.
|
INCOME TAXES
|
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Net current deferred income tax assets related to:
|
||||||||
Allowance for doubtful accounts
|
$ | 84,000 | $ | 75,000 | ||||
Depreciation and amortization
|
140,000 | 137,000 | ||||||
Impairment charges
|
18,000 | - | ||||||
Stock-based expenses
|
91,000 | 91,000 | ||||||
Accrued liabilities – litigation expenses
|
- | 12,000 | ||||||
Other liabilities
|
11,000 | 62,000 | ||||||
Other
|
7,000 | 7,000 | ||||||
Net operating loss carryforwards
|
31,580,000 | 28,601,000 | ||||||
Total
|
31,931,000 | 28,985,000 | ||||||
Less: valuation allowance
|
(31,931,000 | ) | (28,985,000 | ) | ||||
Net current deferred income tax
|
$ | - | $ | - |
Year Ended
|
Year Ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Tax benefit computed at statutory rate of 34%
|
$ | (2,495,000 | ) | $ | (9,337,000 | ) | ||
State income tax benefit, net of federal effect
|
(334,000 | ) | (1,251,000 | ) | ||||
Permanent differences
|
||||||||
Stock based compensation
|
30,000 | 24,000 | ||||||
Loss on debt extinguishment
|
- | 8,402,000 | ||||||
Debt discount amortization
|
732,000 | - | ||||||
Other
|
(18,000 | ) | 3,000 | |||||
Expiration of net operating losses carryforwards
|
- | 939,000 | ||||||
Change due to increase in NOL carryforwards from 15 to 20 years
|
(861,000 | ) | - | |||||
Change in valuation allowance - continuing operations
|
2,946,000 | 1,220,000 | ||||||
Totals
|
$ | - | $ | - |
Year Ended
|
Year Ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Tax expense (benefit) from discontinued operations
|
$ | - | $ | (26,000 | ) | |||
Change in valuation allowance - discontinued operations
|
- | 26,000 | ||||||
Net income tax expense, discontinued operations
|
$ | - | $ | - |
9.
|
MAJOR CUSTOMERS AND CONCENTRATIONS
|
10.
|
EMPLOYEE BENEFIT PLAN
|
11.
|
SUBSEQUENT EVENTS
|
(i)
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
(ii)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
(iii)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Name
|
Age
|
Position
|
Officer Since
|
|||
EXECUTIVE OFFICERS
:
|
||||||
Amir Elbaz
|
38
|
Chief Executive Officer, Director, Chairman of the Board
|
2013*
|
|||
Gleb Mikhailov
|
35
|
Chief Financial Officer
|
2013
|
|||
Bob Dieterle
|
48
|
Senior Vice President, Chief Operating Officer
|
2014
|
Name | Age | Position | Director Since | |||
NON-EMPLOYEE DIRECTORS: | ||||||
Ronen Shviki | 46 | Director | 2013 | |||
Jon Campbell | 52 | Director | 2013 |
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Option Awards ($) (1)
|
All Other Compensation ($)
|
Total ($)
|
||||||||||||||||
Amir Elbaz
|
2013
|
$ | 119,769 | $ | $ | - | $ | 20,000 | $ | 139,769 | ||||||||||||
Chief Executive Officer (2)
|
2014
|
$ | 181,039 | $ | $ | - | $ | - | $ | 181,039 | ||||||||||||
Bob Dieterle
|
2013
|
$ | 146,387 | $ | $ | - | $ | - | $ | 161,108 | ||||||||||||
Senior Vice President and Chief Operating Officer (3)
|
2014
|
$ | 155,565 | $ | $ | - | $ | - | $ | 159,245 | ||||||||||||
Gleb Mikhailov
|
2013
|
$ | 81,943 | $ | 10,000 | $ | - | $ | $ | 91,943 | ||||||||||||
Chief Financial Officer (4)
|
2014
|
$ | 112,503 | $ | $ | - | $ | - | $ | 112,503 |
(1)
|
Amounts in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC 718 with respect to employee stock options granted under our Equity Incentive Plan. The assumptions used to calculate the fair value of stock option grant are set forth in Note 2 (Significant Accounting Policies) to our financial statements, which are included in the Annual Report on Form 10-K. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our Common Stock on the date of exercise.
|
(2)
|
Mr. Elbaz has served on the Board since January 2010, as Chairman of the Board since November 2012 and as Chief Executive Officer of the Company since May 1, 2013. During 2013, Mr. Elbaz received $20,000 for his services on the Board, which is included in the All Other Compensation column above, and $119,769 for his services as Chief Executive Officer of the Company, which is included in the Salary column above.
|
(3)
|
Mr. Dieterle has served as Senior Vice President and General Manager of the Company since February 2011 and Chief Operating Officer since May 13, 2014. Mr. Dieterle receives monthly commissions tied to revenue realized from customers. Such commissions are included in the Salary column in the table above and were approximately $13,000 and $10,000 in the years ended December 31, 2014 and 2013, respectively.
|
(4)
|
Mr. Mikhailov has served as a Chief Financial Officer of the Company since April 3, 2013. Mr. Mikhailov’ s total compensation for 2013 included a signing bonus of $10,000.
|
Option Awards
|
|||||||||||||
Name
|
Number of securities underlying unexercised options (#) Exercisable
|
Number of Securities underlying unexercised Option (#) Unexercisable
|
Option exercise price ($/Sh)
|
Option
expiration
date
|
|||||||||
Amir Elbaz
|
20,000
|
-
|
$
|
1.14
|
3/25/2020
|
||||||||
Bob Dieterle
|
75,000
|
-
|
$
|
1.14
|
3/25/2020
|
Base Salary
($)
|
Continuation
of Benefits
($)
|
Accrued
Vacation
Pay
($)
|
Total Payments
and Value of
Equity Awards
($)
|
|||||||||||||
Payments | $ | 35,300 | $ | 2,820 | $ | 500 | $ | 38,620 |
Accrued
|
Total Payments
|
|||||||||||||||
Continuation
|
Vacation
|
and Value of
|
||||||||||||||
Base Salary
|
of Benefits
|
Pay
|
Equity Awards
|
|||||||||||||
($)
|
($)
|
($)
|
($)
|
|||||||||||||
Payments
|
$ | 176,500 | $ | 2,820 | $ | 500 | $ | 179,820 |
Name
|
Fees Earned or Paid in Cash ($)
|
Stock Awards ($)
|
Option Awards ($)
|
All Other Compensation ($)
|
Total ($)
|
|||||||||||||||
Ronen Shviki
|
$ | 18,000 | $ | - | $ | - | $ | - | $ | 18,000 | ||||||||||
Jon Campbell
|
$ | 18,000 | $ | - | $ | - | $ | - | $ | 18,000 |
Beneficial Owner
|
Amount and
|
|||||||
Name and Address(1)
|
Nature of
|
|||||||
Beneficial
|
||||||||
Ownership(2)
|
Percent of Class
|
|||||||
Avy Lugassy (3)
|
18,498,998 | 62.7 | % | |||||
126 Chemin des Hauts Crets, 1253
|
||||||||
Vandoeuvres, Geneva, Switzerland
|
||||||||
Union Bancaire Privée, UBP SA (4)
|
12,214,811 | 38.1 | % | |||||
Rue du Rhône 96-98 | CP | CH-1211 Geneva 1, Switzerland
|
||||||||
Doron Roethler (5)
|
2,516,555 | 12.4 | % | |||||
c/o S. Roethler
|
||||||||
134 Aluf David Street
|
||||||||
Ramat Gan 52236
|
||||||||
Israel
|
||||||||
Amir Elbaz (6)
|
20,000 | * | ||||||
Bob Dieterle (7)
|
75,000 | * | ||||||
Gleb Mikhailov
|
0 | * | ||||||
Jon Campbell
|
0 | * | ||||||
Ronen Shviki
|
0 | * | ||||||
All officers and directors as a group (5 persons) (8)
|
95,000 | 0.0 | % |
(1)
|
Unless otherwise noted, all addresses are in care of the Company at 5400 Trinity Rd, Suite 208, Raleigh, NC, 27607.
|
||||||||
(2)
|
Based upon 19,827,542 shares of the Company’s common stock outstanding on March 6, 2015. The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the person has sole or shared voting power or investment power and also any shares that the person has the right to acquire within 60 days of March 19, 2015, through the exercise of any stock options or other rights. Any shares that a person has the right to acquire within 60 days are deemed to be outstanding for the purpose of computing the percentage ownership of such person but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
|
||||||||
(3)
|
Shares held by Grasford Investments Ltd., or Grasford, which is controlled by Mr. Lugassy, as principal. Beneficial ownership is comprised of 8,830,269 shares of the Company’s common stock issued and 9,668,729 shares issuable upon conversion of the Notes.
|
||||||||
(4)
|
Consists of shares of the Company’s common stock issuable upon conversion of the Notes held by such person.
|
||||||||
(5)
|
Comprised of (i) 1,323,619 shares of the Company’s common stock owned by Greenleaf Ventures Ltd., a British Virgin Islands company, (ii) 121,116 shares of the Company’s common stock owned by Crystal Management Ltd., a company registered in Anguilla, (entities controlled by Mr. Roethler), (iii) 560,793 shares of the Company’s common stock owned directly by Mr. Roethler and (iv) 511,027 shares of the Company’s common stock issuable upon conversion of the Notes held by Mr. Roethler.
|
||||||||
(6)
|
Consists of 20,000 shares of the Company’s common stock issuable upon exercise of options.
|
||||||||
(7)
|
Consists of 75,000 shares of the Company’s common stock issuable upon exercise of options.
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)
|
Weighted average exercise price of outstanding options, warrants and rights (b)
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)(c))
|
|||||||||
Equity compensation plans approved by security holders
|
226,502 | (1) | $ | 1.34 | 4,596,339 | (2) | ||||||
Equity compensation plans not approved by security holders
|
- | - | ||||||||||
Total
|
226,502 | 4,596,339 |
(1)
|
Consists of shares issuable upon exercise of outstanding options under the Company’s 2004 Equity Compensation Plan.
|
(2)
|
All of the shares remaining for future issuance under the 2004 Equity Compensation Plan are available for issuance as options or restricted stock awards.
|
●
|
a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the 2014 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the 2014 NPA), such amounts are declared due and payable by a noteholder or made automatically due and payable in accordance with the terms of the Note;
|
||
●
|
an interest rate of 8% per year, with accrued interest payable in cash in quarterly installments commencing on the third month anniversary of the date of issuance of the Note with the final installment payable on the maturity date of the Note;
|
||
●
|
a conversion price per share that is fixed at $1.43;
|
||
●
|
optional conversion upon noteholder request; provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion, the noteholder may only convert that portion of their Notes outstanding for which the Company has a sufficient number of authorized shares of common stock. To the extent multiple noteholders under the 2014 NPA, the 2007 NPA, or both, request conversion of its Notes on the same date, any limitations on conversion shall be applied on a pro rata basis. In such case, the noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover conversions of the remaining portion of the Notes outstanding as well as the maximum issuances contemplated pursuant to the Company’s 2004 Equity Compensation Plan, within 90 calendar days after the Company’s receipt of such request; and
|
||
●
|
may not be prepaid without the consent of holders of at least two-thirds of the aggregate outstanding principal amount of Notes issued under the 2014 NPA.
|
●
|
a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the amended 2007 NPA), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the amended 2007 NPA) such amounts are declared due and payable by a 2007 NPA Noteholder or made automatically due and payable in accordance with the terms of the 2007 NPA;
|
||
●
|
an interest rate of 8% per year;
|
||
●
|
a total borrowing commitment of $33.3 million;
|
||
●
|
a conversion price that is fixed at $1.43; and
|
||
●
|
optional conversion upon 2007 NPA Noteholder request, provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion as well as the issuance of the maximum amount of common stock permitted under the Company’s 2004 Equity Compensation Plan, the 2007 NPA Noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover the remaining portion of the Notes outstanding as well as the maximum issuances permitted under the 2004 Equity Compensation Plan.
|
Twelve months ended December 31,
|
Twelve months ended December 31,
|
|||||||
2014
|
2013
|
|||||||
Audit Fees
|
$ | 64,500 | $ | 83,000 | ||||
Audit-Related Fees
|
None
|
None
|
||||||
Tax Fees
|
None
|
None
|
||||||
All Other Fees
|
None
|
None
|
||||||
Total Fees
|
$ | 64,500 | $ | 83,000 |
Exhibit No.
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation, dated January 4, 2005, as amended to date (incorporated herein by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013)
|
|
3.2
|
Seventh Amended and Restated Bylaws, effective July 1, 2013 (incorporated herein by reference to Exhibit 3.3 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013)
|
|
4.1
|
Specimen Common Stock Certificate (filed herewith)
|
4.2
|
Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
4.3
|
Form of Convertible Secured Subordinated Promissory Note (incorporated herein by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
4.4
|
First Amendment to Convertible Secured Subordinated Note Purchase Agreement, dated August 12, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 12, 2008)
|
|
4.5
|
Second Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement, dated November 21, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.5 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.6
|
Third Amendment to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement and Amendment to Convertible Secured Subordinated Promissory Notes, dated February 24, 2009, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.6 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.7
|
Form of Convertible Secured Subordinated Promissory Note to be issued post January 2009 (incorporated herein by reference to Exhibit 4.7 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.8
|
Fourth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Second Amendment to Convertible Secured Subordinated Promissory Notes and Third Amendment to Registration Rights Agreement, dated March 5, 2010, by and among Smart Online, Inc. Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010).
|
|
4.9
|
Form of Convertible Secured Subordinated Promissory Note to be issued post March 5, 2010 (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010).
|
|
4.10
|
Fifth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Third Amendment to Convertible Secured Subordinated Promissory Notes and Fourth Amendment to Registration Rights Agreement, dated June 13, 2012, by and among Smart Online, Inc., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to Form 8-K, as filed with the SEC on June 19, 2012)
|
|
4.11
|
Sixth Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement, Fourth Amendment to Convertible Secured Subordinated Promissory Notes and Fifth Amendment and Agreement to Join as a Party to Registration Rights Agreement, dated June 26, 2013, by and among Smart Online, Inc., Grasford Investments Ltd., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 10.1 to Form 8-K, as filed with the SEC on July 2, 2013)
|
|
4.12
|
Seventh Amendment to Convertible Secured Subordinated Note Purchase Agreement and Fifth Amendment to Convertible Secured Subordinated Promissory Notes (incorporated herein by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 5, 2015
|
|
4.13
|
Eighth Amendment to Convertible Secured Subordinated Note Purchase Agreement and Sixth Amendment to Convertible Secured Subordinated Promissory Note (incorporated herein by reference to Form 8-K, as filed with the SEC on June 13, 2014)
|
10.1*
|
2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|
10.2*
|
Form of Incentive Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.2 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
|
10.3*
|
Form of Incentive Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.4*
|
Form of Non-Qualified Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.3 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
10.5*
|
Form of Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.6*
|
Form of revised Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.7*
|
Form of Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.8*
|
Form of Restricted Stock Award Agreement (for Employees) under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 21, 2007)
|
|
10.9*
|
Form of Restricted Stock Agreement for Employees (incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 to our Current Report on Form 8-K, as filed with the SEC on February 11, 2008)
|
|
10.10*
|
Form of Restricted Stock Agreement (Non-Employee Director) under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on May 31, 2007)
|
|
10.11*
|
Form of Restricted Stock Agreement (Non-Employee Directors) (incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K, as filed with the SEC on December 3, 2007)
|
|
10.12*
|
Form of revised Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (Non-Employee Director) (incorporated herein by reference to Exhibit 10.12 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.13
|
Registration Rights Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
10.14
|
Security Agreement, dated November 14, 2007, among Smart Online, Inc. and Doron Roethler, as agent for certain investors (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
10.15
|
Letter Agreement for $6,500,000.00 Term Facility dated December 6, 2010, by Israel Discount Bank of New York, and agreed and accepted by Smart Online, Inc. (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
10.16
|
First Amendment to Office Lease Agreement dated April 28, 2011, between Smart Online, Inc. and Nottingham Hall LLC (incorporated herein by reference to our Annual Report on Form 10-K, as filed with the SEC on March 20, 2012)
|
10.17
|
Promissory Note dated June 6, 2013, made by Smart Online, Inc. for the benefit of Israel Discount Bank of New York, as lender (incorporated herein by reference to Exhibit 10.2 to Form 8-K, as filed with the SEC on July 2, 2013)
|
|||
10.18
|
Guaranty dated June 6, 2013, made by Atlas Capital, SA for the benefit of Israel Discount Bank of New York (incorporated by reference to Exhibit 10.3 to Form 8-K, as filed with the SEC on July 2, 2013)
|
10.19*
|
Professional Services Agreement, effective as of May 1, 2013, by and between Smart Online, Inc. and Entre-Strat Consulting, LLC (portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated herein by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013)
|
|||
10.20*
|
Partner Agreement, dated May 24, 2013, by and between Smart Online, Inc. and Jon Campbell (incorporated by reference herein to Exhibit 10.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2013)
|
|||
10.21
|
Amendment to Security Agreement, dated November 14, 2007, among Smart Online, Inc. and Doron Roethler, as agent for certain investors (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007), effective as of June 9, 2014 (incorporated by reference herein to Exhibit 10.2 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 13, 2014)
|
|||
10.22
|
Loan and Security Agreement dated June 9, 2014 by and between Comerica Bank and MobileSmith, Inc. (incorporated by reference herein to Exhibit 10.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 13, 2014)
|
|||
10.23
|
Convertible Subordinated Note Purchase Agreement dated December 11, 2014 (incorporated herein by reference to Exhibit 4.1 to form 8-K, as filed with the SEC on December 12, 2014)
|
|||
10.24
|
Form of Convertible Subordinated Promissory Note (incorporated herein by reference to Exhibit 4.1 to form 8-K, as filed with the SEC on December 12, 2014)
|
|||
10.25*
|
Employment Agreement between Smart Online, Inc. and Bob Dieterle dated April 1, 2010 (
filed herewith
)
|
|||
23.1
|
Consent of Independent Registered Public Accounting Firm
(filed herewith)
|
|||
31.1
|
Certification of Principal Executive Officer Pursuant to Rule 13a-14/15d-14
(filed herewith)
|
|||
31.2
|
Certification of Principal Financial Officer Pursuant to Rule 13a-14/15d-14 (
filed herewith)
|
|||
32.1
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
|||
32.2
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
|||
101.1
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL (eXtensible Business Reporting language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, (iv) the Statements of Stockholders’ Deficit and (v) related notes to these financial statements, tagged as blocks of text and in detail
(filed herewith)
|
/s/ Amir Elbaz
|
/s/
Gleb Mikhailov
|
|||
Amir Elbaz
|
Gleb Mikhailov
,
|
|||
Chief Executive Officer & Chairman (Principal Executive Officer)
|
Chief Financial Officer (Principal Financial Officer and Accounting Officer)
|
|||
Date: March 20, 2015
|
Date: March 20, 2015
|
March 20, 2015
|
By:
|
/s/ Amir Elbaz
|
|
Amir Elbaz
|
|||
Chief Executive Officer and Chairman of the Board of Directors
|
|||
(principal executive officer) | |||
March 20, 2015
|
By:
|
/s/ Gleb Mikhailov
|
|
Gleb Mikhailov
|
|||
Chief Financial Officer
|
|||
(principal financial and accounting officer) | |||
March 20, 2015
|
By:
|
/s/ Ronen Shviki
|
|
Ronen Shviki
|
|||
Director
|
|||
March 20, 2015
|
By
|
/s/ Jon Campbell
|
|
Jon Campbell
|
|||
Director
|
Exhibit No.
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation, dated January 4, 2005, as amended to date (incorporated herein by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013)
|
|
3.2
|
Seventh Amended and Restated Bylaws, effective July 1, 2013 (incorporated herein by reference to Exhibit 3.3 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013)
|
|
4.1
|
Specimen Common Stock Certificate (filed herewith)
|
4.2
|
Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
4.3
|
Form of Convertible Secured Subordinated Promissory Note (incorporated herein by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
4.4
|
First Amendment to Convertible Secured Subordinated Note Purchase Agreement, dated August 12, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 12, 2008)
|
|
4.5
|
Second Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement, dated November 21, 2008, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.5 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.6
|
Third Amendment to Convertible Secured Subordinated Note Purchase Agreement and Registration Rights Agreement and Amendment to Convertible Secured Subordinated Promissory Notes, dated February 24, 2009, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 4.6 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.7
|
Form of Convertible Secured Subordinated Promissory Note to be issued post January 2009 (incorporated herein by reference to Exhibit 4.7 to our Annual Report on Form 10-K, as filed with the SEC on March 30, 2009)
|
|
4.8
|
Fourth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Second Amendment to Convertible Secured Subordinated Promissory Notes and Third Amendment to Registration Rights Agreement, dated March 5, 2010, by and among Smart Online, Inc. Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010).
|
|
4.9
|
Form of Convertible Secured Subordinated Promissory Note to be issued post March 5, 2010 (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on March 8, 2010).
|
|
4.10
|
Fifth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Third Amendment to Convertible Secured Subordinated Promissory Notes and Fourth Amendment to Registration Rights Agreement, dated June 13, 2012, by and among Smart Online, Inc., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to Form 8-K, as filed with the SEC on June 19, 2012)
|
|
4.11
|
Sixth Amendment and Agreement to Join as a Party to Convertible Secured Subordinated Note Purchase Agreement, Fourth Amendment to Convertible Secured Subordinated Promissory Notes and Fifth Amendment and Agreement to Join as a Party to Registration Rights Agreement, dated June 26, 2013, by and among Smart Online, Inc., Grasford Investments Ltd., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 10.1 to Form 8-K, as filed with the SEC on July 2, 2013)
|
|
4.12
|
Seventh Amendment to Convertible Secured Subordinated Note Purchase Agreement and Fifth Amendment to Convertible Secured Subordinated Promissory Notes (incorporated herein by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 5, 2015
|
|
4.13
|
Eighth Amendment to Convertible Secured Subordinated Note Purchase Agreement and Sixth Amendment to Convertible Secured Subordinated Promissory Note (incorporated herein by reference to Form 8-K, as filed with the SEC on June 13, 2014)
|
10.1*
|
2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Registration Statement on Form SB-2, as filed with the SEC on September 30, 2004)
|
|
10.2*
|
Form of Incentive Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.2 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
|
10.3*
|
Form of Incentive Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.4*
|
Form of Non-Qualified Stock Option Agreement under 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.3 to our Annual Report on Form 10-K, as filed with the SEC on July 11, 2006)
|
10.5*
|
Form of Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.6*
|
Form of revised Non-Qualified Stock Option Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.7*
|
Form of Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2007)
|
|
10.8*
|
Form of Restricted Stock Award Agreement (for Employees) under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 21, 2007)
|
|
10.9*
|
Form of Restricted Stock Agreement for Employees (incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 to our Current Report on Form 8-K, as filed with the SEC on February 11, 2008)
|
|
10.10*
|
Form of Restricted Stock Agreement (Non-Employee Director) under Smart Online, Inc.’s 2004 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on May 31, 2007)
|
|
10.11*
|
Form of Restricted Stock Agreement (Non-Employee Directors) (incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K, as filed with the SEC on December 3, 2007)
|
|
10.12*
|
Form of revised Restricted Stock Agreement under Smart Online, Inc.’s 2004 Equity Compensation Plan (Non-Employee Director) (incorporated herein by reference to Exhibit 10.12 to our Annual Report on Form 10-K, as filed with the SEC on April 15, 2010)
|
|
10.13
|
Registration Rights Agreement, dated November 14, 2007, by and among Smart Online, Inc. and certain investors (incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
|
10.14
|
Security Agreement, dated November 14, 2007, among Smart Online, Inc. and Doron Roethler, as agent for certain investors (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007)
|
10.15
|
Letter Agreement for $6,500,000.00 Term Facility dated December 6, 2010, by Israel Discount Bank of New York, and agreed and accepted by Smart Online, Inc. (incorporated herein by reference to Form 8-K, as filed with the SEC on December 6, 2010)
|
|
10.16
|
First Amendment to Office Lease Agreement dated April 28, 2011, between Smart Online, Inc. and Nottingham Hall LLC (incorporated herein by reference to our Annual Report on Form 10-K, as filed with the SEC on March 20, 2012)
|
10.17
|
Promissory Note dated June 6, 2013, made by Smart Online, Inc. for the benefit of Israel Discount Bank of New York, as lender (incorporated herein by reference to Exhibit 10.2 to Form 8-K, as filed with the SEC on July 2, 2013)
|
|||
10.18
|
Guaranty dated June 6, 2013, made by Atlas Capital, SA for the benefit of Israel Discount Bank of New York (incorporated by reference to Exhibit 10.3 to Form 8-K, as filed with the SEC on July 2, 2013)
|
10.19*
|
Professional Services Agreement, effective as of May 1, 2013, by and between Smart Online, Inc. and Entre-Strat Consulting, LLC (portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated herein by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013)
|
|||
10.20*
|
Partner Agreement, dated May 24, 2013, by and between Smart Online, Inc. and Jon Campbell (incorporated by reference herein to Exhibit 10.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2013)
|
|||
10.21
|
Amendment to Security Agreement, dated November 14, 2007, among Smart Online, Inc. and Doron Roethler, as agent for certain investors (incorporated herein by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2007), effective as of June 9, 2014 (incorporated by reference herein to Exhibit 10.2 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 13, 2014)
|
|||
10.22
|
Loan and Security Agreement dated June 9, 2014 by and between Comerica Bank and MobileSmith, Inc. (incorporated by reference herein to Exhibit 10.1 to our Quarterly Report on Form 10-Q, as filed with the SEC on August 13, 2014)
|
|||
10.23
|
Convertible Subordinated Note Purchase Agreement dated December 11, 2014 (incorporated herein by reference to Exhibit 4.1 to form 8-K, as filed with the SEC on December 12, 2014)
|
|||
10.24
|
Form of Convertible Subordinated Promissory Note (incorporated herein by reference to Exhibit 4.1 to form 8-K, as filed with the SEC on December 12, 2014)
|
|||
10.25
*
|
Employment Agreement between Smart Online, Inc. and Bob Dieterle dated April 1, 2010 (
filed herewith
)
|
|||
Consent of Independent Registered Public Accounting Firm
(filed herewith)
|
||||
Certification of Principal Executive Officer Pursuant to Rule 13a-14/15d-14
(filed herewith)
|
||||
Certification of Principal Financial Officer Pursuant to Rule 13a-14/15d-14 (
filed herewith)
|
||||
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
||||
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (
furnished herewith
)
|
||||
101.1
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL (eXtensible Business Reporting language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, (iv) the Statements of Stockholders’ Deficit and (v) related notes to these financial statements, tagged as blocks of text and in detail
(filed herewith)
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2014 of MobileSmith, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 20, 2015
|
By:
|
/s/ Amir Elbaz
|
|
Amir Elbaz
Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2014 of MobileSmith, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: March 20, 2015
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By:
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/s/
Gleb Mikhailov
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Gleb Mikhailov
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Chief Financial Officer (Principal Financial and Accounting Officer)
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/s/
Amir Elbaz
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Amir Elbaz
|
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Chief Executive Officer | |
(Principal Executive Officer)
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|
March 20, 2015
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/s/
Gleb Mikhailov
|
|
Gleb Mikhailov
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer) | |
March 20, 2015
|