10-K/A 1 most_10KA.htm PRIMARY DOCUMENT most_10k-part3
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K/A (Amendment No. 1)
 
(Mark One)
 
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2019
 
or
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________
 
Commission file number 001-32634
 
MOBILESMITH, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
95-4439334
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
5400 Trinity Road, Suite 208
Raleigh, North Carolina
 
27607
(Address of principal executive offices)
 
(Zip Code)
 
(855) 516-2413
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act: None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, $0.001 par value
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐·No   ☑
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐·No   ☑
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑·No ☐
 
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑·No ☐
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☒
 
 
Emerging growth company
☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐·No ☑
 
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2019 was approximately $16.0 million (based on the closing sale price of $1.85 per share on such date).
 
The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of April 28, 2020 was 28,320,489.
 

 

 
EXPLANATORY NOTE 
 

    This Amendment No. 1 on Form 10-K/A, or this Amendment, amends the Annual Report on Form 10-K for the year ended December 31, 2019 of MobileSmith, Inc., or the Company, that was originally filed with the Securities and Exchange Commission, or the SEC, on March 24, 2020, or the Original Filing. This Amendment is being filed to provide the information required by Items 10, 11, 12, 13, and 14 of Part III. This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in the Form 10-K by reference from a definitive proxy statement or definitive information statement if such statement is filed no later than 120 days after the Company’s fiscal year end. The Company is filing this Amendment to include Part III information in its Form 10-K because the Company does not expect to file a definitive information statement containing this information before that date. The reference on the cover of the Original Filing to the incorporation by reference to portions of its definitive information statement into Part III of the Original Filing has been deleted. Except for the addition of the Part III information, the update to the cover page, and the filing of related certifications, this Amendment does not amend or otherwise update any other information in the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and with the Company’s other filings with the SEC subsequent to the Original Filing.
 
 
 PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
 
The following table sets forth certain information concerning the Company’s current executive officers and directors, their ages, their offices with the Company, if any, their principal occupations or employment for the past five years.
 
Name
 
Age
 
Position
 
Officer Since
 
 
 
 
 
 
 
 
 
EXECUTIVE OFFICERS:
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Jerry Lepore
  63 
Chief Executive Officer, Director
  2020 
Gleb Mikhailov
  40 
Chief Financial Officer
  2013 
 
 
Name
 
Age
 
Position
 
Director Since
 
 
 
 
 
 
 
 
 
DIRECTORS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Randy J. Tomlin
  59 
Director
  2016 
Ronen Shviki
  48 
Director
  2013 
Robert Smith                
  68 
Director, Chairman of the Board
  2017 
Amir Elbaz 
  42 
Director
  2010*
Chanan Epstein    
  66 
Director
  2019 
 
 * Mr. Elbaz was Chief Executive Officer through January 17, 2017, a position he held since May 2013.
  
 
2
 
 
 
Robert Smith, Director, Chairman of the Board
 
On October 31, 2017, the Board of Directors appointed Robert L. Smith to the Board.  On March 18, 2020 Mr. Smith was appointed as the Chairman of the Board after resignation from that office by Randy J. Tomlin, Company former Chairman of the Board and Chief Executive Officer.
 
Robert Smith is an experienced multi-facility health care executive with varied background  in complex urban and rural health care settings.  During his 40-year career in the industry he has held CEO and other executive positions of various for profit and non-profit hospitals and health care organizations, where he demonstrated ability to turnaround, create, and grow business units in complex and competitive environments.  Mr. Smith's broad business experience includes reorganization, restructuring and public company experience at the CEO and Board of Directors level.  Mr. Smith has served on the boards of various healthcare organizations.  He currently serves on the boards of Parkland Center for Clinical Innovation and Flashback Technologies.  He is a 2011 recipient of the Texas Hospital Associations Earl N. Collier Award for Distinguished Health Care Administration.  Mr. Smith received his Master of Health Administration Degree from Washington University School of Medicine, St. Louis, MO  and his Bachelor of Science Degree in Psychology from University of Missouri in St. Louis, MO.
 
The Board believes that Mr. Smith's background in healthcare will provide the Company management with insights regarding market penetration and enhance management's and Board's ability to interpret healthcare industry changes.   
 
Jerry Lepore, Director, Chief Executive Officer
 
On March 21, 2018, the Board of Directors appointed Jerry Lepore to the Board.   On January 17, 2020, subsequent to Randy Tomlin's announcement of a leave of absence from responsibilities as President and Chief Executive Officer, Mr. Lepore assumed the role of President and Chief Executive Officer.
 
Mr. Lepore is an experienced business and technology executive with strong background in healthcare, insurance, financial services, education, and software industries. In his 40 year career he has held CEO, COO and CTO positions in public and private companies. He has also provided transitional leadership in turnaround and/or growth situations.  Mr. Lepore has founded and operated several companies in the software and strategic services industries. He has experience in capital raises, public offerings, strategic sales, corporate acquisitions, and mergers.
 
Mr. Lepore has served on boards of healthcare and software organizations. He received a Bachelor of Science Degree in Mathematics from the University of Connecticut in Storrs, CT.
 
 
Gleb Mikhailov, Chief Financial Officer
 
Chief Financial Officer since April 2013. From January 2013 to March 2013, Mr. Mikhailov served as the Manager of Financial Reporting and SEC Consulting in the SEC Solutions Group of Citrin Cooperman, LLP, an accounting firm providing business solutions and accounting services to middle market companies. From January 2005 until December 2012, Mr. Mikhailov was employed by EisnerAmper LLP, a full-service advisory and public accounting firm, in its Private Business Services Group and Audit and Assurance Group. He was a Manager at EisnerAmper LLP since 2010. Mr. Mikhailov holds a B.A. in Accounting from Rutgers, The State University of New Jersey and an M.B.A. from Rutgers Business School. Mr. Mikhailov holds a CPA license issued by the State of New Jersey.
 
 
Randy J Tomlin,  Director

Randy J. Tomlin was appointed to the board on August 4, 2016.  From May 29, 2018 until January 17, 2020 Mr. Tomlin served in a position of Company President and Chief Executive Officer.  On January 17, 2017 the Board appointed Mr. Tomlin as the Chairman of the Board.  Mr. Tomlin served as the Chairman of the Board until March 18, 2020.
 
Until his retirement in February 2016, Mr. Tomlin, served as a Senior Vice President ­U­Verse Field Operations for AT&T, a position he has held since March 2008. At U­Verse Field Operations for AT&T Mr. Tomlin was responsible for all field operations for AT&T U­verse, including service, installation at customer homes, repair and maintenance.   From May 2006 to March 2008 Mr. Tomlin was a President of AT&T Network – California and Nevada, where he was in charge of teams that engineered, built and maintained the networks that carried all network traffic in two states. Mr. Tomlin began his career with Southwestern Bell in 1982, and has held various managerial positions in Customer Service, Network and External Affairs throughout his 34­year career at AT&T. During his career with AT&T he also served as Senior Vice President of Enterprise Operations Support, responsible for leading the Network Services Staff organization as well as the network standardization effort to move to common centers, best practices and a single suite of systems. Mr. Tomlin led many of SBC’s acquisitions integration activities, including AT&T, BellSouth, and Cingular. 
Mr. Tomlin received his bachelor’s degree in Finance from Texas A&M University in College Station, Texas.
 
The Board believes that Randy J. Tomlin’s contribution to the Company includes his experience in successfully managing a complex division of a global technology company with a contemporaneous focus on customer service and operational efficiency. In addition, Mr. Tomlin’s recognition in the technology industry may benefit us in the form of formation of valuable partnerships and other strategic opportunities.
 

 

3
 
Amir Elbaz, Director
 
Until January of 2017 Mr. Elbaz held positions of Chief Executive Officer since May 2013 and Chairman of the Company’s Board of Directors since November of 2012.   During his tenure as a member of the Board, and its Chairman and Company CEO, Mr. Elbaz has been actively involved in the Company operations and played significant role in ensuring that the Company's products and strategy had continued backing of investors and shareholders. Mr. Elbaz continues in the employ of the Company primarily focusing on investor and public relations and regulatory and operational compliance.
 
The Board believes Mr. Elbaz's significant experience in the technology sector, coupled with this extensive financial and economic background and his deep knowledge of our company provide invaluable insight with respect to the Company’s business and technologies.
 
Ronen Shviki, Director
 
Mr. Shviki has served on the Board since February 2013. Since January 2013, Mr. Shviki has served as the Vice President for Business Development of Mendelssohn Ltd., an Israeli distribution company. Prior to this, Mr. Shviki served in the Israel Defense Forces  as a Colonel in the Army branch. Mr. Shviki holds a B.A. in Business Administration from Interdisciplinary Center Herzliya and an LLB from Interdisciplinary Center Herzliya.  
 
The Board believes Mr. Shviki’s extensive marketing and management experience, in addition to his knowledge of the international marketplace, contributes to the strategic composition of the Board.

Chanan Epstein, Director
 
On July 2, 2019, the Board of Directors appointed Chanan Epstein to the Board.
 
Mr. Epstein is a US-based senior executive with substantial experience in domestic and international strategic business and technology ventures. Currently, as an Amdocs Senior Vice President, Mr. Epstein is responsible for developing and maintaining business relationships with key customers worldwide. Mr. Epstein is also a personal and business mentor to numerous executives. Prior to joining Amdocs, Mr. Epstein served as a Colonel in the Israeli Air Force, charged with the research and development of operational systems (avionics, command, control and intelligence), as well as joint strategic ventures and programs with the US Air Force and defense industries.

 
Section 16(a) Beneficial Ownership Reporting Compliance
 
The members of the Board, its executive officers, and persons who hold more than 10% of the Company’s outstanding shares of common stock, $0.001 par value per share, or common stock, are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which requires them to file reports with respect to their ownership of the Company’s common stock and their transactions in such common stock. Based upon the Company’s review of the Section 16(a) reports in its records for fiscal year 2019 transactions in the Company’s common stock, the Company believes that all reporting requirements under Section 16(a) for fiscal year 2019 were met in a timely manner by its directors, executive officers, and greater than 10% beneficial owners, except that Union Bancaire Privée, or UBP, has not filed a Form 3 or any subsequent reports in respect of its ownership of  7,167,832  shares of Company common stock and $27,617,180 in principal amount of the Company’s convertible Notes, which Notes may be converted into shares of the Company’s common stock by UBP at any time upon notice, as of December 31, 2019.
 
 
4
 
Code of Ethics
 
The Company has adopted a Code of Ethics applicable to its executives, including the principal executive officer, principal financial officer, and principal accounting officer, as defined by applicable rules of the SEC. The Company will promptly deliver free of charge, upon request, a copy the Code of Ethics to any stockholder requesting a copy. Requests should be directed to the Company’s Chief Financial Officer at 5400 Trinity Rd., Suite 208, Raleigh, NC, 27607.  If the Company makes any amendments to the Code of Ethics other than technical, administrative, or other non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of the Code of Ethics to the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer or certain other finance executives, the Company will disclose the nature of the amendment or waiver, its effective date, and to whom it applies in a Current Report on Form 8-K.
 
The Board
 
The size of the Board is currently comprised of six members.  The Board believes that the current number of directors is appropriate at this time; however, the Board will consider adding members in the future with additional skills and professional connections that will be of benefit to the Company.
 
We do not have any defined policy or procedure requirements for stockholders to submit recommendations or nominations for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management or stockholders, and make recommendations for election or appointment. A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our Chief Executive Officer, Jerry Lepore, at the address appearing on the first page of this report.
 
Audit Committee and Compensation Committee 
 
Effective April 3, 2020, the Board approved the dissolution of the Audit Committee and Compensation Committee of the Board.  The entire Board shall address all audit and compensation matters that would otherwise have been addressed by the Audit Committee and Compensation Committee.  Mr. Smith shall act as the lead Board member with respect to all audit matters and Mr. Elbaz shall act as the lead Board member with respect to all compensation matters. Messrs. Lepore and Tomlin shall recuse themselves from any vote on audit or compensation matters at the request of Messrs. Smith or Elbaz, as applicable. The Board has determined the following members of the Board are deemed to be independent in accordance with the rules promulgated by the Securities and Exchange Commission: (i) Mr. Elbaz, (ii) Mr. Epstein, (iii) Mr. Shviki and (iv) Mr. Smith.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
The following table summarizes the compensation earned during the years ended December 31, 2019 and December 31, 2018 by our principal executive officer, our former principal executive officer, the two other most highly paid executive officers who were serving as executive officers on December 31, 2019:
 
 
5
 
SUMMARY COMPENSATION TABLE
 
 
Name and Principal Position 
 Year
 Salary ($) 
 Bonus ($) 
 Option Awards ($) (1) 
 All Other Compensation ($) 
 Total ($) 
Randy J Tomlin
                                             2019
 $250,000 
 $- 
 $375,430 
 $  
 $625,430 
Chief Executive Officer, Executive Chairman of the Board
2018
 $125,000 
 $- 
 $1,660,000 
 $70,000 
 $1,855,000 
 
    
    
    
    
    
Gleb Mikhailov
2019
 $172,200 
 $9,900 
 $682,601 
 $  
 $864,701 
Chief Financial Officer
2018
 $164,000 
 $11,550 
 $714,630 
 $- 
 $890,180 
  
(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 Original Filing.  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.


 
 
6
 
Grants of Plan-­Based Awards for Year Ended December 31, 2019
 
There were no grants of plan-based awards in 2019 to our Named Executive Officers.
 
Outstanding Equity Awards
 
The following table provides information about outstanding equity awards held by the named executive officers as of December 31, 2019:
 
 
 Option Awards 
 Option Awards
 
   
 
 
 Number of 
 Number of 
   
 
 
 securities 
 securities 
   
 
 
 underlying 
 underlying 
   
 
 
 unexercised 
 unexercised 
   
 
 
 options (#) 
 option (#) 
 Option exercise 

Name
 Exercisable 
 Unexercisable 
 price ($/Sh) 
 Option expiration date
Randy J Tomlin
  468,860  
  -  
 $1.50  
8/1/2023 
Randy J Tomlin
  316,666  
  683,334  
 $1.95  
5/25/2028 
Randy J Tomlin
  41,250  
  233,750  
 $1.60  
5/15/2029 
Gleb Mikhailov
  135,000  
  -  
 $1.49  
11/21/2020 
Gleb Mikhailov
  136,325  
  294,175  
 $1.95  
5/25/2028 
Gleb Mikhailov
  75,000  
  425,000  
 $1.60  
05/15/2029 
 
    
    
    
 
 
Option Exercises and Stock Vested in 2019
 
None of our named executive officers acquired shares upon exercise of options during the year; 547,792 shares previously granted to the named executive officers vested during the year.
 
 
7
 

Compensation of Directors
 
The following table summarizes the compensation paid to the directors for the fiscal year ended December 31, 2019, not covered in the tables above.
 
2019 DIRECTOR COMPENSATION
 
Name
 Fees Earned or Paid in Cash ($) 
 Stock Awards ($) 
 Option Awards ($) 
 All Other Compensation ($) 
 Total ($) 
Ronen Shviki
 $23,000 
 $- 
 $902,795 
 $- 
 $925,795 
Amir Elbaz 
 $100,000 
 $- 
 $576,556 
 $- 
 $676,556 
Ray Hemmig
 $30,000 
 $- 
 $375,430 
 $- 
 $405,430 
Robert Smith                   
 $30,000 
 $- 
 $375,430 
 $- 
 $405,430 
Jerry Lepore
 $30,000 
 $, 
 $375,430 
 $- 
 $405,430 
Chanan Epstein
 $15,000 
 $ - 
 $998,413 
 $- 
 $1,013,413 
 
 
8
 
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
Principal Stockholders and Share Ownership by Management
 
The following table sets forth information regarding beneficial ownership of the Company’s common stock as of April 28, 2020, by (i) each person who is known by the Company to beneficially own more than 5% of the Company’s common stock; (ii) each person who served as a named executive officer of the Company in fiscal year 2019, (iii) each person serving as a director or nominated for election as a director; and (iv) all current executive officers and directors as a group. Except as otherwise indicated by footnote, to the Company’s knowledge, the persons named in the table below have sole voting and investment power with respect to all shares of the Company’s common stock shown as beneficially owned by them.
 
Name and Address of Beneficial Owner (1)
 Shares Beneficially Owned(2) 
 % of Shares Beneficially Owned 
 
   
   
 
   
   
Avy Lugassy
   
   
126 Chemin des Hauts, Crets 1253 Vandeeuvres, Geneva. Switzerland (3)
  18,498,998 
  50.32%
 
    
    
Union Bancaire Privee, UBP SA (4)
  27,179,845 
  56.24%
Rue du Rhone 96­98 | CP | CH­1211 Geneva 1, Switzerland
    
    
 
    
    
Doron Rotler (5)
  2,929,734 
  10.16%
c/o S. Rotler
    
    
134 Aluf David Street Ramat Gan 52236, Israel
    
    
 
    
    
Directors and Named Executive Officers:
    
    
Jerry Lepore, Director and Chief Executive Officer
  333,485 
  1.16%
Gleb Mikhailov, Chief Financial Officer
  414,375 
  1.44%  
Amir Elbaz, Director
  286,000 
  1.00%
Randy J. Tomlin, Director 
  468,860  
  1.63%   
Ronen Shviki, Director
  300,944 
  1.05%  
Robert Smith, Director
  371,010 
  1.29%  
Chanan Epstein, Director
  85,750 
  .30%  
 
    
    
All executive officers and directors as a group (7) persons 
  2,260,424 
  7.98%
 
 
* Less than 2%.
 
(1) Unless otherwise indicated, the address of such individual is c/o MobileSmith, Inc., 5400 Trinity Road, Suite 208, Raleigh, North Carolina 27607.
(2)  In computing the number of shares beneficially owned by a person and the percentage ownership of a person, shares of our common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of the Record Date are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of each other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock.
(3)  The record holder of the shares is Grasford Investments Ltd., or Grasford, which is controlled by Mr. Lugassy, as principal. Beneficial ownership is comprised of 10,054,045 shares of the Company’s common stock and 8,444,952 shares issuable upon conversion of the Company's Convertible Notes due November 2020 (the "Convertible Notes") held by Grasford.
(4)  Comprised of 7,167,832 shares issued and 20,012,014 shares  issuable upon conversion of the Convertible Notes.
(5)  Comprised of 2,332,807 shares of Common Stock held as of record by Mountain Top LTD., a British Anguilla company (an entity controlled by Mr. Rotler), 85,900 shares held in the name of Mr. Rotler and 511,027 shares of the Company’s common stock issuable upon conversion of Convertible Notes held by Crystal Management Ltd., a company registered in British Anguilla (entity controlled by Mr. Rotler).
 
 
9
 
Equity Compensation Plans
 
The following table provides information, as of December 31, 2019, regarding the Company’s compensation plans (including individual compensation arrangements) under which the Company is authorized to issue equity securities.
 
EQUITY COMPENSATION PLAN INFORMATION
 
 
 
 
 
Number of
 
 
 
 
 
securities
 
 
 
 
 
remaining
 
 
 
 
 
available for
 
 
Number of
 
 
future issuance
 
 
securities to be
 
Weighted
under equity
 
 
issued upon
 
average
compensation
 
 
exercise of
 
exercise price
plans
 
 
outstanding
 
of outstanding
(excluding
 
 
options,
 
options,
securities
 
 
warrants and
 
warrants and
reflected in
 
Plan Category
rights (a)
 
rights (b)
column (a)(c))
 
 
 
 
 
 
 
Equity compensation plans approved by security holders
12,345,796
(1)
 $ 1.73
2,654,204
(2)
Equity compensation plans not approved by security holders
 -
 
-
-
 
Total
12,345,796
 
 $ 1.73
2,654,204
 
 
 
(1)
Consists of shares issuable upon exercise of outstanding options under the Company’s 2004 and 2016 Equity Compensation Plans.
(2)
All of the shares remaining for future issuance under the 2016 Equity Compensation Plan are available for issuance as options or restricted stock awards.
 
 
10
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
Certain Relationships and Related Transactions
 
Sale of Convertible Notes to Certain Related Parties. As of April 28, 2020, the Company had $43 million of  Convertible Notes outstanding of which a) Grasford, an affiliated party, held $12.1 million, b) UBP, significant shareholder, held $28.6 million.
 
Sale of  Non-Convertible Notes to entities controlled by Avy Lugassy.  As of April 28, 2020, the Company issued $4,768,250 of non-convertible notes to entities controlled by Avy Lugassy, a major shareholder and beneficial owner.  The notes carry an interest rate of 8% and mature between November 14, 2020 and November 14, 2022  .
 
Sale of 2014 NPA Notes to Certain Related Parties
During 2019 the Company issued Convertible Notes in aggregate principal amount of $3,160,000 to UBP under the following terms:
 
●
a maturity date of the earlier of (i) November 14, 2020, (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 semi-annual installments in January and July with the final installment payable on the maturity date of the Convertible Note.
●
a conversion price per share that is fixed at $1.43.
●
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.
 
 
Policy for Approval of Related Party Transactions
 
The Company requires that any related party transactions must be approved by the full Board of Directors.
 
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  
Audit and Non-Audit Fees
 
Aggregate fees for professional services rendered for the Company by Cherry Bekaert LLP, our independent registered public accounting firm, for the fiscal years ended December 31, 2019 and 2018 are set forth below.
 
 
 Twelve months ended December 31, 
 Twelve months ended December 31, 
 
 2019
 
 2018 
Audit Fees
 $109,900  
 $89,500  
Audit-Related Fees
  3,700  
    
Tax Fees
  970 
 None 
All Other Fees
  15,000  
 None 
Total Fees
 $129,570  
 $89,500  
 
Audit Fees and audit related fees were for professional services rendered for the audits of our consolidated financial statements, quarterly review of the financial statements included in Quarterly Reports on Form 10-Q, consents, and other assistance required to complete the year-end audit of the consolidated financial statements.
 
Our full Board pre-approves all audit and permissible non-audit services to be provided by our independent registered public accountants and the estimated fees for these services. None of the services provided by the independent registered public accountants that are described above were approved by the Audit Committee pursuant to a waiver of the pre-approval requirements of the SEC’s rules and regulations.
 
 
11
 
TEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 
(a)(1) Financial Statements.
 
The response to this portion of Item 15 is included in Part II, Item 8 of the Original Filing.
 
(a)(2) Financial Statement Schedules.
 
All schedules have been omitted because they are not required or because the required information is provided in the Consolidated Financial Statements or Notes thereto set forth under Part II, Item 8 of the Original Filing.
 
(a)(3) Exhibits.
 
 
Exhibit                                 Description
No.
 
 
 
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)
 
 
12
 
 
 
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)
 
 
13
 
 
  
 
 
 
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   (incorporated herein by reference to Exhibit 10.25 to annual report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on December 12, 2014)
 
 
 
10.26*
 
  Letter Agreement dated as of October 11, 2017 between MobileSmith, Inc. and Robert Smith (incorporated herein by reference to Exhibit 10.1 to form 8­ K, as filed with the SEC on November 6, 2017) .
 
 
 
10.27*
 
  Letter Agreement dated as of August 11, 2017 between MobileSmith, Inc. and Ray Hemmig (incorporated herein by reference to Exhibit 10.1 to form 8­ K, as filed with the SEC on August 17, 2017).
 
 
 
10.28*
 
  Letter Agreement dated as of July 1, 2016 between MobileSmith, Inc. and Randy Tomlin (incorporated herein by reference to Exhibit 10.1 to form 8­ K, as filed with the SEC on August 10, 2016).
 
 
      
10.29* 
 
 Executive Employment Agreement dated as of March 18, 2020 between MobileSmith, Inc. and Jerry Lepore (incorporated herein by reference to Exhibit 10.1 to Form 8- K, as filed with the SEC on March 23, 2020)  
 
 
   
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)
_________________
* Management contract or compensatory plan.
 
 
SIGNATURES 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
/s/ Jerry Lepore
 
 
/s/ Gleb Mikhailov
 
Jerry Lepore
 
 
Gleb Mikhailov,
 
Chief Executive Officer (Principal Executive Officer)
 
 
Chief Financial Officer (Principal Financial Officer and Accounting Officer)
 
 
 
 
 
 
Date: April 29, 2020
 
 
Date: April 29, 2020