MOBILESMITH, INC. Information set forth in this Quarterly Report on Form 10-Q contains various
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act") and other laws. Forward-looking statements consist of, among other things,
trend analyses, statements regarding future events, future financial
performance, our plan to build our business and the related expenses, our
anticipated growth, trends in our business, our ability to continue as a going
concern, and the sufficiency of our capital resources including funds that we
may be able to raise through our Series A Preferred Stock, our ability to raise
financing from other sources and/or ability to defer expenditures, the impact of
the liens on our assets securing amounts owed to third parties, expectation
regarding competitors as more and larger companies attempt to market
products/services competitive to our company, market acceptance of our new
product offerings, including updates to our Platform, rate of new user
subscriptions, market penetration of our products and expectations regarding our
revenues and expense, all of which are based on current expectations, estimates,
and forecasts, and the beliefs and assumptions of our management. Words such as
"expect," "anticipate," "project," "intend," "plan," "estimate," variations of
such words, and similar expressions also are intended to identify such
forward-looking statements. These forward-looking statements are subject to
risks, uncertainties, and assumptions that are difficult to predict. Therefore,
actual results may differ materially and adversely from those expressed in any
forward-looking statements. Readers are directed to risks and uncertainties
identified under Part I, Item 1A, "Risk Factors," in the Annual Report on Form
10-K for the year ended
The following discussion is designed to provide a better understanding of our unaudited condensed financial statements, including a brief discussion of our business and products, key factors that impacted our performance, and a summary of our operating results. The following discussion should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited annual financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on the Form 10-K. Historical results and percentage relationships among any amounts in the condensed financial statements are not necessarily indicative of trends in operating results for any future periods.
Overview
? improve experience of healthcare patients and consumers, who are often at
the same time members of various medical insurance networks
? optimize delivery of healthcare and relationship between members and
insurance networks
? increase adoption, utilization and intelligence of EMRs (electronic
medical records), extend EMR's usability to patients and consumers of
healthcare
14
Table of Contents
Since 2013 the Company focused exclusively on the development of do-it-yourself customer facing platform that enabled organizations to rapidly create, deploy, and manage custom, native smartphone and tablet apps deliverable across iOS and Android mobile platforms without writing a single line of code. During 2017 the Company concluded that it had its highest rate of success with clients within the Healthcare industry and concentrated its development and sales and marketing efforts in that industry. During 2018 we further refined our Healthcare offering and redefined our product - a suite of e-health mobile solutions that consist of a catalog of ready to deploy mobile app solutions (App Blueprints) and support services. In 2019 and 2020 we consolidated our current solutions under a single offering branded Peri™. Peri™ is designed to bridge the gap between healthcare industry system tools and healthcare consumer's mobile device.
From time to time, we have provided custom software development services. Such services are not core to our business model and will likely decrease in significance in the future.
Target Market and Sales Channels
During 2017, we completed a strategic shift and focused our business and
research and development activities primarily on the Healthcare industry in
Both markets are targeted with a diversified sales workforce that includes direct sales and resellers, such as channel partners.
Significance of Human Capital in Our Operations.
Our success depends on the performance of employees and contractors that make up
our team of about 30 individuals. The team is by far our largest investment and
cost. We make significant investments in technical skills and knowledge of
healthcare industry. As such, expansion of the team often comes with additional
recruiting expenses. All of our employees are currently based in
RESULTS OF OPERATIONS
Comparison of the Three Months Ended
Three months Three months
ended ended Increase Increase
September 30, September 30, (Decrease) Decrease
2021 2020 % %
Revenue $ 387,051 $ 511,411 $ (124,360 ) -24 %
Cost of Revenue 189,948 199,031 (9,083 ) -5 %
Gross Profit 197,103 312,380 (115,277 ) -37 %
Selling and Marketing 571,122 249,565 321,557 129 %
Research and Development 964,557 719,043 245,514 34 %
General and
Administrative 716,902 835,775 (118,873 ) -14 %
Interest Expense 49,195 1,118,422 (1,069,227 ) -96 %
Loss on Debt
Extinguishment 607,285 - 607,285 -
Gain on Debt
Extinguishment - PPP
Loan Forgiveness $ 542,000 - $ 542,000 -
15
Table of Contents
Revenue decreased by
Cost of Revenue decreased by
Gross Profit decreased by
Selling and Marketing expense increased by
Research and Development expense increased by
General and Administrative expense decreased by
Interest Expense decreased by
Loss on Debt Extinguishments of
Gain on Debt Extinguishments - PPP Loan Forgiveness of
Comparison of the Nine Months Ended
Nine months Nine months
ended ended Increase Increase
September 30, September 30, (Decrease) Decrease
2021 2020 $ %
Revenue $ 1,203,394 $ 1,743,755 $ (540,361 ) -31 %
Cost of Revenue 604,195 638,815 (34,620 ) -5 %
Gross Profit 599,199 1,104,940 (505,741 ) -46 %
Selling and Marketing 1,575,563 917,931 657,632 72 %
Research and Development 2,698,794 2,097,276 601,518 29 %
General and
Administrative 2,328,275 2,485,093 (156,818 ) -6 %
Interest Expense 240,333 4,728,698 (4,488,365 ) -95 %
Loss on Debt
Extinguishment 7,114,422 4,864,750 2,249,672 46 %
Gain on Debt
Extinguishment - PPP
Loan Forgiveness $ 1,084,100 - $ 1,084,100 -
16
Table of Contents
Revenue decreased by
The remainder of the decrease is associated with loss of healthcare customers due to non-renewals of contracts, renewals for smaller value and new sales below target.
Cost of Revenue decreased by
Gross Profit decreased by
Selling and Marketing expense increased by
Research and Development expense increased by
General and Administrative expense decreased by
Interest Expense decreased by
Gain on Debt Extinguishment - PPP Loan Forgiveness of
Losses on Debt Extinguishments increased by
17
Table of Contents
Liquidity and Capital Resources
We have not yet achieved positive cash flows from operations, and our main
source of funds for our operations continues to be the sale of our Series A
Preferred Stock. We will continue to rely on this source until we are able to
generate sufficient cash from revenues to fund our operations or obtain
alternate sources of financing. We believe that anticipated cash flows from
operations, and additional funding under the Series A Preferred Stock, of which
no assurance can be provided, together with cash on hand, will provide
sufficient funds to finance our operations for the next 12 months. Changes in
our operating plans, lower than anticipated sales, increased expenses, impact of
COVID-19 pandemic (as described in "Risk Factors" of our Annual Report on Form
10-K for the period ending
Nonetheless, there are factors that can impact our ability to continue to fund our operating activities for the next twelve months. These include:
? Our ability to expand revenue volume;
? Our ability to maintain product pricing as expected, particularly in light
of increased competition and its unknown effects on market dynamics;
? 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.
? Our ability to predict and offset the extended impact COVID-19 will have
to our primary market's financial outcome, and our business.
In addition, we have an outstanding Loan and Security Agreement (the "LSA") with
Capital Expenditures and Investing Activities
Our capital expenditures are limited to the purchase of new office equipment and new mobile devices that are used for testing. Cash used for investing activities was not significant and we do not plan any significant capital expenditures in the near future.
Going Concern
Our independent registered public accounting firm has issued an emphasis of
matter paragraph in their report included in the Annual Report on Form 10-K for
the year ended
18
Table of Contents© Edgar Online, source
