UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) |
|
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended September 30, 2014 |
|
OR |
o |
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 033-25126-D
MedeFile International, Inc.
(Exact name of registrant as specified in its
charter)
Nevada |
|
85-0368333 |
State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization |
|
Identification No.) |
301 Yamato Rd, Suite 1200
Boca Raton, FL 33431
(Address of principal executive offices) (Zip
Code)
Registrant’s telephone
number, including area code (561) 912-3393
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. x Yes o No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). x Yes
o No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer |
o |
|
Accelerated filer |
o |
|
Non-accelerated filer |
o |
|
Smaller reporting company |
x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
o Yes x
No
Number of shares outstanding of registrant’s common stock,
par value $0.0001: 225,836,554 as of November 19, 2014.
Table of Content
Item 1. Financial Statements.
Medefile International, Inc. |
Condensed Consolidated Balance Sheets |
(unaudited) |
| |
| | |
| |
| |
| | |
| |
| |
| | |
| |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
Assets | |
| | |
Current assets | |
| | | |
| | |
Cash | |
$ | 159,751 | | |
$ | 266,843 | |
Accounts receivable | |
| 6,182 | | |
| 2,914 | |
Inventory | |
| 53,654 | | |
| 54,507 | |
Merchant services reserve | |
| 2,500 | | |
| 14,818 | |
Prepaid insurance | |
| 2,838 | | |
| 1,057 | |
Total current assets | |
| 224,925 | | |
| 340,139 | |
| |
| | | |
| | |
Website development, net of accumulated amortization | |
| 265,792 | | |
| 261,340 | |
Furniture and equipment, net of accumulated depreciation | |
| - | | |
| 413 | |
Intangibles | |
| 1,339 | | |
| 1,339 | |
Total assets | |
$ | 492,056 | | |
$ | 603,231 | |
| |
| | | |
| | |
Liabilities and Stockholders' (Deficit) | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 15,911 | | |
$ | 52,915 | |
Coverible debenture - net of discount | |
| 99,962 | | |
| 9,177 | |
Deferred revenues | |
| 1,143 | | |
| 2,075 | |
Derivative liability | |
| 21 | | |
| 1,062,141 | |
Total Current Liabilities | |
| 117,037 | | |
| 1,126,308 | |
| |
| | | |
| | |
Stockholders' (Deficit) | |
| | | |
| | |
Preferred stock, $.0001 par value: 10,000,000 authorized, | |
| | | |
| | |
no shares issued and outstanding | |
| - | | |
| - | |
Common stock, $.0001 par value: 500,000,000 authorized; | |
| | | |
| | |
225,836,554 and 40,706,899 shares issued and outstanding on | |
| | | |
| | |
September 30, 2014 and December 31, 2013, respectively | |
| 22,583 | | |
| 4,070 | |
Additional paid in capital | |
| 27,080,517 | | |
| 27,099,030 | |
Common stock to be issued | |
| 419,920 | | |
| 69,920 | |
Accumulated deficit | |
| (27,148,001 | ) | |
| (27,696,097 | ) |
Total stockholders' (deficit) | |
| 375,019 | | |
| (523,077 | ) |
Total liability and stockholders'(deficit) | |
$ | 492,056 | | |
$ | 603,231 | |
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc. |
Condensed Consolidated Statements of Operations |
(unaudited) |
| |
| | |
| | |
| | |
| |
| |
| For the | | |
| For the | | |
| For the | | |
| For the | |
| |
| Three Months | | |
| Three Months | | |
| Nine Months | | |
| Nine Months | |
| |
| Ended | | |
| Ended | | |
| Ended | | |
| Ended | |
| |
| September 30, | | |
| September 30, | | |
| September 30, | | |
| September 30, | |
| |
| 2014 | | |
| 2013 | | |
| 2014 | | |
| 2013 | |
Revenue | |
| 20,703 | | |
| 15,869 | | |
| 62,442 | | |
| 32,596 | |
Cost of goods sold | |
| 271 | | |
| 390 | | |
| 852 | | |
| 984 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 20,432 | | |
| 15,479 | | |
| 61,590 | | |
| 31,612 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative expenses | |
| 184,423 | | |
| 244,010 | | |
| 484,417 | | |
| 752,308 | |
Depreciation and amortization expenses | |
| - | | |
| 105 | | |
| 412 | | |
| 6,257 | |
Total operating expenses | |
| 184,423 | | |
| 244,115 | | |
| 484,829 | | |
| 758,565 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (163,991 | ) | |
| (228,636 | ) | |
| (423,239 | ) | |
| (726,953 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
Interest expense - convertible note | |
| (2,938 | ) | |
| - | | |
| (8,511 | ) | |
| - | |
Interest expense - discount on convertible note | |
| (27,726 | ) | |
| - | | |
| (82,274 | ) | |
| - | |
Gain (loss) on changes in fair value | |
| | | |
| | | |
| | | |
| | |
of derivative liabilities | |
| 9,999 | | |
| (919,066 | ) | |
| 1,062,120 | | |
| 1,892,928 | |
Total other income (expense) | |
| (20,665 | ) | |
| (919,066 | ) | |
| 971,335 | | |
| 1,892,928 | |
| |
| | | |
| | | |
| | | |
| | |
Gain (loss) before income tax | |
| (184,656 | ) | |
| (1,147,702 | ) | |
| 548,096 | | |
| 1,165,975 | |
Provision for income tax | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (184,656 | ) | |
$ | (1,147,702 | ) | |
$ | 548,096 | | |
$ | 1,165,975 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share: basic and diluted | |
$ | (0.00 | ) | |
$ | (0.04 | ) | |
$ | 0.01 | | |
$ | 0.06 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average share outstanding | |
| | | |
| | | |
| | | |
| | |
basic and diluted | |
| 201,221,169 | | |
| 25,687,118 | | |
| 99,058,652 | | |
| 19,644,427 | |
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc. |
Condensed Consolidated Statements of Cash Flows |
(unaudited) |
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
548,096 |
|
|
$ |
1,165,975 |
|
Adjustments to reconcile net loss to net |
|
|
|
|
|
|
|
|
cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
412 |
|
|
|
1,012 |
|
Amortization |
|
|
- |
|
|
|
5,245 |
|
Interest expense - covertible debenture |
|
|
8,511 |
|
|
|
- |
|
Interest expense - discount on convetible debenture |
|
|
82,274 |
|
|
|
- |
|
(Gain)loss in fair value of derivitave liabilities |
|
|
(1,062,120 |
) |
|
|
(1,892,928 |
) |
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(3,268 |
) |
|
|
(1,384 |
) |
Inventory |
|
|
853 |
|
|
|
607 |
|
Prepaid insurance |
|
|
(1,781 |
) |
|
|
(1,116 |
) |
Accounts payable and accrued liabilities |
|
|
(37,003 |
) |
|
|
(36,665 |
) |
Merchant service reserves |
|
|
12,318 |
|
|
|
49,501 |
|
Deferred revenue |
|
|
(932 |
) |
|
|
(1,522 |
) |
Net Cash used in operating activities |
|
|
(452,640 |
) |
|
|
(711,275 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Website development |
|
|
(4,452 |
) |
|
|
(99,340 |
) |
Net cash used in investing activities |
|
|
(4,452 |
) |
|
|
(99,340 |
) |
|
|
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
|
|
Proceeds from common stock sale |
|
|
350,000 |
|
|
|
644,920 |
|
Net cash provided by financing activities |
|
|
350,000 |
|
|
|
644,920 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(107,092 |
) |
|
|
(165,695 |
) |
Cash and cash equivalents at beginning of period |
|
|
266,843 |
|
|
|
234,356 |
|
Cash and cash equivalents at end of period |
|
$ |
159,751 |
|
|
$ |
68,661 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
- |
|
|
$ |
- |
|
Cash paid for income taxes |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements of MedeFile International Inc., a Nevada corporation (the "Company"), have been prepared in accordance
with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete consolidated financial statements. These unaudited condensed consolidated
financial statements and related notes should be read in conjunction with the Company's Form 10-K for the fiscal year ended December
31, 2013. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that
are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of September
30, 2014, and the results of operations and cash flows for the nine months ended September 30, 2014 and 2013. The results of operations
for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the entire
fiscal year.
Nature of Business Operations
Medefile International, Inc, has developed
and globally markets a proprietary, patient-centric, Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing,
maintaining, accessing and sharing an individual’s actual medical records. Medefile's goal is to revolutionize the medical
industry by bringing patient-centric digital technology to the business of medicine. Medefile intends to accomplish its objective
by providing individuals with a simple and secure way to access their lifetime of actual medical records in an efficient and cost-effective
manner. Medefile's products and services are designed to provide healthcare providers with the ability to reference their patients’
actual past medical records, thereby ensuring the most accurate treatment and services possible while simultaneously reducing redundant
procedures.
Interoperable with most electronic medical
record systems utilized by physician practices, clinics, hospitals and other care providers, the highly secure, feature-rich MedeFileiPHR
solution has been designed to gather all of its members’ actual medical records on behalf of each member, and create a single,
comprehensive Electronic Health Record (EHR). The member can access his/her records 24-hours a day, seven days a week – or
authorize a third party user – on any web-enabled device (PC, cell phone, PDA, e-reader, et al), as well as the portable
MedeFile flash drive/keychain or branded UBS-bracelet.
By subscribing to the MedeFile system, members
empower themselves to take control of their own health and well-being, and empower their healthcare providers to make sound and
lifesaving decisions with the most accurate, up-to-date medical information available. In addition, with MedeFile, members
enjoy the peace of mind that comes from knowing that their medical records are protected from fire, natural disaster, document
misplacement or the closing of a medical or dental practice.
MedeFilebelieves it enjoys a number of competitive
advantages over other firms within the medical records marketplace, including:
· |
MedeFile has developed products and services geared to the patient, which also have the depth and breadth of information required by treating physicians and medical personnel. |
· |
MedeFile does all the work of collecting and updating medical information on an ongoing basis; our products’ dependence on the patient taking action is minimal – particularly when compared to patient action required to support competing solutions. |
· |
MedeFile provides a complete medical record. Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), which are by no means complete or necessarily accurate records. |
· |
MedeFile provides a coherent mix of services and products that are intended to improve the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers. |
Going Concern
The accompanying financial statements have
been prepared contemplating a continuation of the Company as a going concern. However, the Company incurred operating losses of
$423,239 and $726,953 for the nine months ended September 30, 2014 and 2013, respectively. The Company has reported a net income
of $548,096 for the nine months ended September 30, 2014 as a direct result of the change in valuation of the Company’s
warrant derivative. During the comparable nine month period of 2013, the Company had a net income of $1,165,975. The Company had
an accumulated deficit of $27,148,001 as of September 30, 2014. The Company has working capital of $107,888 as of September
30, 2014.
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. The operating losses raise substantial doubt about the Company's
ability to continue as a going concern. The Company's ability to obtain additional financing depends on the success of its growth
strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory,
and other factors beyond the Company's control.
We will need additional investments in order
to continue operations. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments.
Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.
However, the trading price of our common stock
could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise
the funds required, we may incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected
cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities,
stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior
to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms,
we will have to curtail our operations.
Cash and Cash Equivalents
For purposes of these financial statements,
cash and cash equivalents includes highly liquid debt instruments with maturity of less than three months.
Concentrations of Credit Risk
Financial instruments and related items, which
potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places
its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the
FDIC insurance limit. Currently our operating account is not above the FDIC limit.
Income Taxes
The Company accounts for income taxes under
the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities
are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred
tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets
to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company
considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected
future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred
tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize
deferred income tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation
allowance which would reduce the provision for income taxes.
The Company follows the accounting guidance
which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position
will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical
merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially
and in subsequent periods. Also included is guidance on measurement, recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition.
Property and Equipment
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed
in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives being 3 years
up to 10 years.
Trademark Costs
Trademark costs incurred in the registration
and acquisition of trademarks and trademark rights are capitalized. These costs will be amortized over the legal life of the related
trademark once the trademark is awarded. The Company performs an annual review of its identified intangible assets to determine
if facts and circumstances exist which indicate that the useful life is shorter than originally estimated or that the carrying
amount of the assets may not be recoverable.
The Company expenses all software costs associated
with the conceptual formulation and evaluation of alternatives until the application development stage has been reached. Costs
to improve or support the technology are expensed as these costs are incurred.
Website Development
The Company's policy is to capitalize website
development costs at original cost and amortize the balance over the life of the product. The life of website is determined at
completion of the project. The Company reviews the amounts capitalized for impairment whenever events or circumstances indicate
that the carrying amounts of the assets may not be recoverable.
The Company expenses all development costs
associated with the conceptual formulation and evaluation of alternatives until the application development stage has been reached.
Costs to improve or support the technology are expensed as these costs are incurred.
Revenue Recognition
The Company generates revenue from licensing
the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity
groups. For revenue from product sales, the Company recognizes revenue on four basic criteria which must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed
and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's
judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period
the related sales are recorded.
Deferred Revenue
The Company generally receives subscription
fees for its services. From time to time, the Company will receive quarterly or annual subscriptions paid in advance and deferred
revenue is recorded at that time. The deferred revenue is amortized into revenue on a pro- rata basis each month. Customers with
quarterly or annual subscriptions may cancel their subscriptions and request a refund for future months' revenues at any time.
Therefore, a liability is recorded to reflect the amounts that are potentially refundable. At September 30, 2014 and December 31,
2013, deferred revenue totaled $1,143 and $2,075, respectively.
Reclassifications
Certain reclassifications have been made in
prior periods financial statements to conform to classifications used in the current period.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that are expected
to have a material effect on the Company’s financial statements.
Fair Value of Financial Instruments
Cash and Equivalents, Deposits In-Transit, Receivables, Prepaid
and Other Current Assets, Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities
The carrying amounts of
these items approximated fair value.
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase
the comparability of fair value measures, Financial Accounting Standards Board (“FASB”) ASC Topic 820-10-35 establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the
lowest priority to unobservable inputs (level 3 measurements).
Level 1—Valuations based on
quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable
inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable
or can be corroborated by observable market data.
Level 3—Valuations based on unobservable
inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These
valuations require significant judgment.
The application of the three levels of the fair value hierarchy
under Topic 820-10-35 to our assets and liabilities are described below:
| | |
| |
Fair Value Measurements |
| | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total |
| Assets | | |
| | | |
| | | |
| | |
| | |
Website development | |
$ | - | | |
$ | - | | |
$ | 265,792 | | |
$265,792 |
| | | |
Intangible assets | |
| - | | |
| - | | |
| 1,339 | | |
1,339 |
| | | |
Total | |
$ | - | | |
$ | - | | |
$ | 267,131 | | |
$267,131 |
| Liabilities | | |
| | | |
| | | |
| | |
| | | |
Deferred Revenues | |
$ | 1,143 | | |
$ | - | | |
$ | - | | |
$1,143 |
| | | |
Derivative Liability | |
| - | | |
| - | | |
| 21 | | |
21 |
| | | |
Total | |
$ | 1,143 | | |
$ | - | | |
$ | 21 | | |
$1,164 |
Impairment of Long Lived Assets
In accordance with Accounting Standards Codification
(“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used
are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. ASC 360-10 relates to assets that can be amortized and the life can be determinable. The Company reviews property
and equipment and other long-lived assets for impairment annually, or whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the asset’s carrying
amount to future undiscounted net cash flows the assets are expected to generate. Cash flow forecasts are based on trends of historical
performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic
conditions. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the projected discounted future cash flows arising from the assets or their fair values,
whichever is more determinable.
Inventory
Inventories are stated at the lower of cost
or market value. Cost is determined by the first-in, first-out basis and market being determined as the lower of replacement cost
or net realizable value. The Company records inventory write-downs for estimated obsolescence of unmarketable inventory based upon
assumptions about future demand and market conditions. For the nine months ended September 30, 2014 and 2013, the Company did not
have any inventory write downs.
Net Loss per Share
Basic and diluted loss per share amounts are
computed based on net loss divided by the weighted average number of common shares outstanding. Warrants to purchase 3,037,511
common shares were not included in the computation of diluted loss per share because the assumed conversion and exercise would
be anti-dilutive for the three and nine months ending September 30, 2014.
Management Estimates
The presentation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Stock Based Compensation
The Company accounts for all compensation related
to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes
pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for
compensation is valued using the market price of the stock on the date of the related agreement.
2. ACCOUNTS RECEIVABLE
Due
to the collection history of the Company, the Company does not maintain an allowance for doubtful accounts. Recognition
of a specific uncollectible account is written directly against the invoice in accounts receivable and expensed in the current
period.
3. WEBSITE DEVELOPMENT
Website development consists of the following:
| |
| September 30,
2014 | | |
| December 31, 2013 | |
Website development | |
$ | 62,946 | | |
$ | 62,946 | |
Additional development | |
| 265,792 | | |
| 261,340 | |
Accumulated amortization | |
| (62,946 | ) | |
| (62,946 | ) |
Net website development | |
$ | 265,792 | | |
$ | 261,340 | |
During May 2012 the Company began redesigning its website. The
Company anticipates that the redesign will be completed by December 2014.
Amortization is calculated over a three-year period. Amortization
expense for the nine months ending September 30, 2014 and 2013 is $0 and $5,245 respectively.
4. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
| |
September 30, 2014 | | |
December 31, 2013 | |
Computers and equipment | |
$ | 169,286 | | |
$ | 169,286 | |
Furniture and fixtures | |
| 38,618 | | |
| 38,618 | |
Subtotal | |
| 207,904 | | |
| 207,904 | |
Less: accumulated depreciation | |
| (207,904 | ) | |
| (207,491 | ) |
Net furniture and equipment | |
$ | - | | |
$ | 413 | |
Depreciation is calculated by using the straight-line
method over the estimated useful life. Depreciation expense totaled $412 and $1,012 for the nine months ended September
30, 2014 and 2013, respectively.
5. CONVERTIBLE DEBEBTURE – RELATED PARTY
The Company entered into two 10% Secured Convertible Debentures
with a significant shareholder. The debentures carry a one year term. The debentures were issued in the amount
of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. Both debentures have a conversion feature at a share
price of $0.10. The Company recognized a beneficial conversion feature (BCF) due to the intrinsic value of the conversion
rate compared to the market price of the common stock as of the grant date. A discount is computed based on the share value at
the time of issuance and amortized over the period of the debenture.
| |
September 30, 2014 | | |
December 31, 2013 | |
Convertible debenture – related party | |
$ | 119,525 | | |
$ | 111,013 | |
Beneficial conversion feature | |
| (19,563 | ) | |
| (101,836 | ) |
Convertible debenture, net of BCF | |
$ | 99,962 | | |
$ | 9,177 | |
6. WARRANT LIABILITY
In connection with certain securities purchase
agreements entered into during the third quarter of 2011 and the second quarter of 2012 (, the Company granted warrants with ratchet
provisions. The warrants contain an expiration date of four years from the date of grant. During the first two years following
the issuance date, if the Company issues any additional shares of common stock at a price per share less than the exercise price
in effect, the exercise price will be adjusted to equal the average price per share received by the Company for the additional
shares issued. After the first two years following the issuance date, if the Company issues any additional shares of common stock
at a price per share less than the exercise price in effect, the exercise price will be adjusted using a formula based on the existing
exercise price, the outstanding shares before and after the issuance of such shares, and the average price during the issuance
of such shares. In addition to the exercise price adjustment, the number of shares upon exercise of the warrants is also subject
to adjustment.
Upon grant, the Company assesses the fair value
of the warrants using the Black Scholes pricing model and records a warrant liability for the value. The Company then assesses
the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the warrant liability to the
new value, and records a corresponding gain or loss. (see below for variables used in assessing the fair value). The Company uses
expected volatility based primarily on historical volatility using weekly pricing observations for recent periods that correspond
to the expected life of the warrants. The risk-free interest rate is based on U.S. Treasury securities rates.
Due to the ratchet provisions, the Company
treats the warrants as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging”
(ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative
and to any freestanding financial instruments that potentially settle in an entity’s own common stock.
As of September 30, 2014, these warrants include
the following:
Warrants granted during July 2011 in connection
with the sale of 35,461 shares of common stock with the right to originally purchase up to 35,461 shares of the Company’s
common stock with an original exercise price of $2.50. Due to the issuance of the Company’s common stock in April 2012, the
exercise price was adjusted to $0.50 and the number of shares issuable upon exercise was adjusted to 1,808,511. Fair value was
determined using the following variables:
| |
Grant Date | | |
September 30, 2014 | | |
December 31, 2013 | |
Risk-free interest rate at grant date | |
| 1.21 | % | |
| 1.43 | % | |
| 1.27 | % |
Expected stock price volatility | |
| 194.9 | % | |
| 68.3 | % | |
| 189.65 | % |
Expected dividend payout | |
| - | | |
| - | | |
| - | |
Expected option in life-years | |
| 4 | | |
| .77 | | |
| 1.5 | |
Warrants granted during April 2012 in connection
with the sale of 100,000 shares of the Company’s preferred stock to a significant shareholder and brother of the then-Chief
Executive Officer with the right to purchase up to 200,000 shares of the Company’s common stock with an exercise price of
$0.50. Fair value was determined using the following variables:
| |
Grant Date | | |
September 30, 2014 | |
Risk-free interest rate at grant date | |
| 0.47 | % | |
| 1.43 | % |
Expected stock price volatility | |
| 137.8 | % | |
| 68.3 | % |
Expected dividend payout | |
| - | | |
| - | |
Expected option in life-years | |
| 3.75 | | |
| 1.53. | |
Warrants granted during April 2012 in connection
with the sale of 1,000,000 shares of the Company’s common stock with an exercise price of $0.50.
| |
Grant Date | | |
September 30, 2014 | |
Risk-free interest rate at grant date | |
| 0.47 | % | |
| 1.43 | % |
Expected stock price volatility | |
| 137.8 | % | |
| 68.3 | % |
Expected dividend payout | |
| - | | |
| - | |
Expected option in life-years | |
| 3.75 | | |
| 1.53 | |
Transactions involving warrants with ratchet provisions are as follows:
| |
Number of Warrants | | |
Weighted-Average Price Per Share | |
Outstanding at December 31, 2012 | |
| 3,008,511 | | |
$ | 0.50 | |
Granted | |
| | | |
| | |
Exercised | |
| | | |
| | |
Canceled or expired | |
| | | |
| | |
Additional due to ratchet trigger | |
| | | |
| | |
Outstanding at December 31, 2013 | |
| 3,008,511 | | |
| 0.50 | |
Granted | |
| | | |
| | |
Exercised | |
| | | |
| | |
Canceled or expired | |
| | | |
| | |
Addition due to ratchet trigger | |
| | | |
| | |
Outstanding at September 30, 2014 | |
| 3,008,511 | | |
$ | 0.50 | |
As of September 30, 2014 and December 31, 2013, the warrant liability
consisted of the following:
|
|
September 30, 2014 |
|
|
December 31,
2013 |
|
Warrant liability (beginning balance) |
|
$ |
1,062,141 |
|
|
$ |
5,618,819 |
|
Additional liability due to new grants |
|
|
|
|
|
|
|
|
Loss(gain) on changes in fair market value of warrant liability |
|
|
(1,062,120) |
|
|
|
(4,556,678) |
|
Net warrant liability |
|
$ |
21 |
|
|
$ |
1,062,141 |
|
Change in fair market value of warrant liability
resulted in a gain of $9,999 and a loss of $919,066 for the nine months ended September 31, 2014 and 2013, respectively. Changes
in fair market value of warrant liabilities resulted in a gain of $1,062,120 and $1,892,928 for the nine months ended September
30, 2014 and 2013 respectively.
7. EQUITY
Common Stock
On October 8, 2012, the Company filed a Certificate of Amendment
to its Articles of Incorporation with the Secretary of State of Nevada, pursuant to which (i) the Company effected a 5,000-to-1
reverse split of its common stock and (ii) the number of authorized shares of the Company’s common stock decreased from 75,000,000,000
to 100,000,000. The market effective date of the reverse split was October 9, 2012. The effect of the stock split has
been applied retroactively. On December 19, 2013 the Company increased its authorized shares of common stock from
100,000,000 to 500,000,000
2013
On January 17, 2013 the Company entered into a Securities
Purchase Agreement pursuant to which, the Company sold 400,000 shares of common stock for an aggregate purchase price of $200,000.
On April 15, 2013, the Company entered into a Securities
Purchase Agreement with accredited investors pursuant to which the Company sold 2,000,000 shares of common stock for an aggregate
purchase price of $400,000.
On May 1, 2013 the Company issued an aggregate of 11,872,281shares
of common stock to purchasers under the securities purchase agreements entered into by the Company in July 2011 and April 2012
pursuant to anti-dilution rights held by such purchasers.
On August 27, 2013, the Company entered into a Securities
Purchase Agreement with accredited investors pursuant to which, the Company sold 42,743 shares of common stock for an aggregate
purchase price of $29,920.
On September 23, 2013, the Company entered into a Securities
Purchase Agreement with accredited investors pursuant to which, the Company sold 21,429 shares of common stock for an aggregate
purchase price of $15,000.
On December 17, 2013, the Company entered into a Securities
Purchase Agreement with accredited investors pursuant to which, the Company sold 2,000,000 shares of common stock for an aggregate
purchase price of $40,000. In connection with this sale, the Company issued, in April 2014, an aggregate of 150,129,655
shares of common stock to existing stockholders for no additional consideration pursuant to anti-dilution rights held by such stockholders.
On December 20, 2013, the Company entered into a Securities
Purchase Agreement with accredited investors pursuant to which, the Company sold 15,000,000 shares of common stock for an aggregate
purchase price of $300,000.
2014
On September 3, 2014 the Company issued an aggregate of 35,000,000
shares of common stock to purchasers under the securities purchase agreements entered into by the Company in July 2011 and April
2012 pursuant to anti-dilution rights held by such purchasers.
Preferred Stock
On April 10, 2012, the Company filed a certificate of designation
of Series B Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of Nevada, pursuant
to which 100,000 shares of the Company’s preferred stock were designated as Series B Convertible Preferred Stock (the “Series
B Preferred Stock”). Pursuant to the Series B Certificate of Designation, the Series B Preferred Stock:
● |
Has a liquidation preference over the common stock equal to the stated value of $1.00 per share. |
|
|
● |
Votes as a single class with the common stock and entitles its holders, for each share of Series B Preferred Stock, to cast such number of votes equal to 0.00051% of the total number of votes entitled to be cast. Accordingly, a holder of all 100,000 shares of Series B Preferred Stock will have the right to cast 51% of the total number of votes entitled to be cast. |
|
|
● |
Will automatically convert into common stock at a ratio of 2 shares of common stock for each share of Series B Preferred Stock, effective upon the Company’s filing of a certificate of amendment to its articles of incorporation. |
On April 12, 2012, the Company entered into a securities
purchase agreement with Lyle Hauser (the “Preferred Stock Investor”). Lyle Hauser is the Company’s largest shareholder
and the brother of Kevin Hauser, the Company’s then-chief executive officer. Pursuant to the purchase agreement, on April
12, 2012, the Company sold 100,000 shares of Series B Preferred Stock to the Preferred Stock Investor for an aggregate purchase
price of $100,000, and the Company issued four-year warrants to purchase 200,000 shares of common stock to the Preferred Stock
Investor with an exercise price of $0.50. On April 23, 2012, 100,000 Series B Preferred shares were converted to 200,000 shares
of common stock
Stock Options
2008 Amended and Restated Incentive Stock
Plan
In November 2008, our Board of Directors adopted
the 2008 Equity Incentive Plan and subsequently amended it in January 2009, June 2009 and July 2009 (the “2008 Plan”).
The purpose of the 2008 Plan was to provide an incentive to attract and retain directors, officers, consultants, advisors and employees
whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons
into our development and financial success. Under the 2008 Plan, the Company is authorized to issue incentive stock options intended
to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted
stock and long term incentive awards. The 2008 Plan will be administered by our Board of Directors until such time as such authority
has been delegated to a committee of the board of directors.
Other Warrants
On June 22, 2011, the Company awarded 2,000
Common Stock warrants, at an exercise price of $50 per share, to consultants for services at the quoted stock price
on the effective date of the awards. The warrants have an expiration date of four years from the issue date and contain provisions
for a cash exercise. The estimated value of the compensatory warrants granted to non-employees in exchange for services and financing
expenses was determined using the Black-Scholes pricing model and the following assumptions listed below:
On July 28, 2011, the Company awarded 27,000 Common Stock Warrants,
at an exercise price of $25 per share to consultants for services at the quoted stock price on the effective date of the awards.
The warrants have an expiration date of three years from the issue date and contain provisions for a cash exercise. The estimated
value of the compensatory warrants granted to non-employees in exchange for services was determined using the Black-Scholes pricing
model and the assumptions listed below.
Risk-free interest rate at grant date | |
| 0.39 | % |
Expected stock price volatility | |
| 172.1 | % |
Expected dividend payout | |
| -- | |
Expected option in life-years | |
| 4 | |
Transactions involving warrants are summarized as follows:
| |
Number of Warrants | | |
Weighted-Average Price Per Share | |
Outstanding at December 31, 2012 | |
| 29,000 | | |
| 30.07 | |
Granted | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | |
Canceled or expired | |
| - | | |
| - | |
Outstanding at December 31, 2013 | |
| 29,000 | | |
$ | 30.07 | |
Granted | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | |
Canceled or expired | |
| - | | |
| - | |
Outstanding at September 30, 2014 | |
| 29,000 | | |
$ | 30.07 | |
Warrants Outstanding |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Remaining |
Exercise |
|
|
Number |
|
|
Contractual |
Prices |
|
|
Outstanding |
|
|
Life (years) |
|
$ |
25 |
|
|
|
2,000 |
|
|
|
.25 |
|
|
50 |
|
|
|
27,000 |
|
|
|
1.25 |
|
|
|
|
|
|
29,000 |
|
|
|
1.81 |
8. RELATED PARTY TRANSACTIONS
None.
9. SUBSEQUENT EVENTS
None.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
This Management’s Discussion and Analysis
of Financial Condition and Results of Operations may contain "forward-looking statements." The terms "believe,"
"anticipate," "intend," "goal," "expect," and similar expressions may identify forward-looking
statements. These forward-looking statements represent the Company's current expectations or beliefs concerning future events.
The matters covered by these statements are subject to certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements, including customer acceptance of new products, the impact of
competition and price erosion, as well as other risks and uncertainties. In light of the significant uncertainties inherent in
the forward-looking information included herein, the inclusion of such information should not be regarded as a representation that
the strategy, objectives or other plans of the Company will be achieved. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date made. Except as may be required under applicable
securities laws, we undertake no duty to update this information.
OVERVIEW
Organizational History
On November 1, 2005, Bio-Solutions International,
Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the "Agreement") with OmniMed Acquisition
Corp., (the "Acquirer), a Nevada corporation and a wholly owned subsidiary of Bio-Solutions, OmniMed International, Inc.,
a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the "OmniMed Shareholders"). Pursuant to
the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed from the OmniMed Shareholders. As consideration
for the acquisition of OmniMed, Bio-Solutions agreed to issue 1,979 shares of Bio-Solutions' common stock to the OmniMed Shareholders.
As a result of the Agreement, the OmniMed Shareholders
assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions changed its name to OmniMed International, Inc. Effective
January 17, 2006, OmniMed changed its name to MedeFile International, Inc. ("MedeFile" or the "Company").
Overview of Business
MedeFile International, Inc., through its MedeFile,
Inc. subsidiary, has developed and globally markets a proprietary, patient-centric, Internet-enabled Personal Health Record (iPHR)
system for gathering, digitizing, maintaining, accessing and sharing an individual’s actual medical records. Our goal is
to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. We intend to
accomplish our objective by providing individuals with a simple and secure way to access their lifetime of actual medical records
in an efficient and cost-effective manner. Our products and services are designed to provide healthcare providers with the ability
to reference their patient's actual past medical records, thereby ensuring the most accurate treatment and services possible while
simultaneously reducing redundant procedures.
Interoperable with most electronic medical
record systems utilized by physician practices, clinics, hospitals and other care providers, the highly secure, feature-rich MedeFileiPHR
solution has been designed to gather all of its members’ actual medical records on behalf of each member, and create a single,
comprehensive Electronic Health Record (EHR). The member can access his/her records 24-hours a day, seven days a week
– or authorize a third party user – on any web-enabled device (PC, cell phone, PDA, e-reader, et al), as well as the
portable MedeFile flash drive/keychain or branded UBS-bracelet.
By subscribing to the MedeFile system,
members can empower themselves to take control of their own health and well-being, as well as empower their healthcare providers
to make sound and lifesaving decisions with the most accurate, up-to-date medical information available. In addition, with
MedeFile, members enjoy the peace of mind that comes from knowing that their medical records are protected from fire, natural disaster,
document misplacement or the closing of a medical or dental practice.
We believe we enjoy a number of direct, competitive advantages
over others in the medical records marketplace, including that:
- We have developed products and services geared to the patient,
which also have the depth and breadth of information required by treating physicians and medical personnel
- We do all the work of collecting and updating medical information
on an ongoing basis; our products’ dependence on the patient taking action is minimal – particularly when compared
to patient action required to support competing solutions.
- We provide a complete medical record. Other companies
claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), which are
by no means complete or necessarily accurate records
- We provide a coherent mix of services and products that
are intended to improve the quality of healthcare by enabling the patient to manage and access the information normally retained
by doctors and other care providers
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER
30, 2014 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2013
Revenues
Revenues for the three months ended
September 30, 2014 totaled $20,703 compared to revenues of $15,869 during the three months ended September 30, 2013. The
increase in membership revenue is primarily related to amount of members and medical record reimbursement revenue received
from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors
for sending updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative expense. Revenues
received from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a
fraction of the membership in the quarter being reported.
Selling, General and Administrative
Expenses
Selling, general and administrative
expenses for the three months ended September 30, 2014 totaled $184,423, a decrease of $59,587 or approximately 24.4% compared
to selling, general and administrative expenses of $244,010 for the three months ended September 30, 2013. Overall there was a
decrease in the total selling, general and administrative which is primarily due to decreased costs associated with a previously
used telemarketing campaign and business development expenses.
Depreciation Expense
Depreciation expense totaled $0 for
the three months ended September 30, 2014, compared to depreciation expense of $105 during the three months ended September 30,
2013. The decrease in depreciation was due to some assets being fully depreciated. All assets are fully
depreciated.
Amortization Expense
Amortization expense for the three months
ended September 30, 2014 was $0, compared to $0 for the three months ended September 30, 2013. Amortization expense
is the expensing of the website development.
Interest Expense
Interest expense on convertible debentures
for the three months ended September 30, 2014 and 2013, was $2,938 and $0 respectively. The Company entered into
two secured convertible debentures during the third quarter of 2013. The notes have a one year term at a 10% interest
rate.
Interest expense on the discount for
convertible notes for the three months ended September 30, 2014 and 2013 was $27,726 and $0 respectively. The conversion
feature of the debentures allows the note to be converted at a share price of $0.10.
Net Income
Our net loss for the three
months ended September 30, 2014 was $184,656, or $.00 per share, a decrease of $963,046 compared to a net loss of $1,147,702, or
$0.04 per share for the three months ended September 30, 2013. The significant change is directly related to adjustments
in the fair value of our derivative liability. Our operating loss for the three months ended September 30, 2014 was $163,991 compared
to an operating loss of $228,636 for the three months ended September 30, 2013. The decrease in operating loss of $66,645 is primarily
the result of a decrease in our general and administrative and compensation expenses as detailed above.
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2014 COMPARED TO THE NINE MONTHS ENDED SEPTEMBERE 30, 2013
Revenues
Revenues for the nine months ended September
30, 2014 totaled $62,442 compared to revenues of $32,596 during the nine months ended September 30, 2013. The increase
in membership revenue is primarily related to amount of members and medical record reimbursement revenue received from members.
Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors for sending updated
medical records to MedeFile. The off-setting expense is charged to selling general and administrative expense. Revenues received
from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a fraction
of the membership in the quarter being reported.
Selling, General and Administrative
Expenses
Selling, general and administrative
expenses for the nine months ended September 30, 2014 totaled $484,417, a decrease of $267,891 or approximately 35.6% compared
to selling, general and administrative expenses of $752,308 for the nine months ended September 30, 2013. Overall there was a decrease
in the total selling, general and administrative which is primarily due to decreased costs associated with a previously used telemarketing
campaign and business development expenses.
Depreciation Expense
Depreciation expense totaled $412 for
the nine months ended September 30, 2014, compared to depreciation expense of $1,012 during the nine months ended September 30,
2013. The decrease in depreciation was due to some assets being fully depreciated. All assets are fully
depreciated.
Amortization Expense
Amortization expense for the nine months
ended September 30, 2014 was $0, compared to $5,245 for the nine months ended September 30, 2013. Amortization expense
is the expensing of the website development.
Interest Expense
Interest expense on convertible debentures
for the nine months ended September 30, 2014 and 2013, was $8,511 and $0 respectively. The Company entered into
two secured convertible debentures during the third quarter 2013. The notes have a one year term at a 10% interest rate.
Interest expense on the discount for
convertible notes for the nine months ended September 30, 2014 and 2013 was $82,274 and $0 respectively. The conversion
feature of the debentures allows the note to be converted at a share price of $0.10.
Net Income
Our net income for the nine
months ended September 30, 2014 was $548,096, or $.01 per share, a decrease of $617,879 compared to a net income of $1,165,975,
or $.18 per share, during the nine months ended September 30, 2013. The significant change is directly related to adjustments
in the fair value of our derivative liability. Our operating loss for the nine months ended September 30, 2014 was $423,239 compared
to an operating loss of $726,953 for the nine months ended September 30, 2013.The decrease in operating loss of $303,714 is primarily
the result of a decrease in our general and administrative and compensation expenses as detailed above.
FINANCIAL CONDITION
Liquidity and Capital Resources
As of September 30, 2014, we had cash and cash
equivalents of $159,751, inventory of $53,654, merchant services reserve of $2,500, prepaid insurance of $2,838, and accounts
receivable of $6,182. Net cash used in operating activities for the nine months ended September 30, 2014 was approximately
$452,640. Current liabilities of $117,037 consisted of: $15,911 for accounts payable and accrued liabilities, deferred revenues
of $1,143, convertible debenture of $99,962 and derivative liabilities of $21. As of September 30, 2014, we have a net working
capital of $107,888.
The accompanying financial statements have
been prepared contemplating a continuation of the Company as a going concern. The Company incurred operating losses of $423,239
and $726,953 for the nine months ended September 30, 2014 and 2013, respectively The Company has reported a net income of $548,096
for the nine months ended September 30, 2014 and had an accumulated deficit of $27,148,001 as of September 30, 2014.
The Company currently estimates that it will
require approximately $420,000 to continue its operations for the next twelve months. Additional investments are being
sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance
of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common
stock and conditions in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of
equity or debt securities. Even if we are able to raise the funds required, we may incur unexpected costs and expenses, fail to
collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.
Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities
may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is
not available or is not available on acceptable terms, we will have to curtail our operations
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements
as of September 30, 2014 or as of the date of this report.
Critical Accounting Policies
The preparation of our consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments
that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical
experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ
markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our
consolidated financial statements, we believe the following critical accounting policy involves the most complex, difficult and
subjective estimates and judgments:
Revenue Recognition
The Company generates revenue from licensing
the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity
groups. For revenue from product sales, the Company recognizes revenue on four basic criteria which must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed
and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's
judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period
the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund
until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Stock-based Compensation
The Company accounts for all compensation related
to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes
pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for
compensation is valued using the market price of the stock on the date of the related agreement.
Recent Accounting Pronouncements
There are no recent accounting pronouncements
that are expected to have a material effect on the Company’s financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
Not required for a smaller reporting company.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are controls
and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities
and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated
and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions
regarding required disclosure.
As of the end of the period covered by this
Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (Principal
Executive and Financial Officer) of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of
the Exchange Act). Based upon this evaluation, our Chief Executive Officer (Principal Executive and Financial Officer) concluded
that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by
the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and also are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including the Company’s Chief Executive Officer (Principal Executive and Financial Officer),
to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial
Reporting
During the quarter ended September 30, 2014,
there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f)
and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not party to any material legal proceedings.
Item 1A. Risk Factors
Not required for a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
EX-101.INS |
XBRL INSTANCE DOCUMENT |
|
|
EX-101.SCH |
XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT |
|
|
EX-101.CAL |
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
|
|
EX-101.DEF |
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
|
|
EX-101.LAB |
XBRL TAXONOMY EXTENSION LABELS LINKBASE |
|
|
EX-101.PRE |
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
SIGNATURES
Pursuant
to the requirements 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.
|
MEDEFILE INTERNATIONAL, INC. |
|
|
|
|
|
November 19, 2014 |
By: |
/s/ Niquana Noel |
|
|
|
Niquana Noel |
|
|
|
Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
|
|
|
|
|
19
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Niquana Noel, certify that:
1. I have reviewed this quarterly report on
Form 10-Q of MedeFile International, 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 financing 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: November 19, 2014 |
By: |
/s/ Niquana Noel |
|
|
|
Niquana Noel |
|
|
|
Chief Executive Officer (principal executive officer, principal financial officer) |
|
|
|
|
|
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the
Quarterly Report of MedeFile International, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2014
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Niquana Noel, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
|
|
|
Date: November 19, 2014 |
By: |
/s/ Niquana Noel |
|
|
|
Niquana Noel |
|
|
|
Chief Executive Officer (principal executive officer, principal financial officer) |
|
|
|
|
|