UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2015
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 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. ☒ Yes ☐ 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). ☒ Yes ☐ 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 |
☐ |
|
Accelerated
filer |
☐ |
|
Non-accelerated
filer |
☐ |
|
Smaller
reporting company |
☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Number
of shares outstanding of registrant’s common stock, par value $0.0001: 28,653,873 as of December 7, 2015.
Table
of Content
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements.
MedeFile International, Inc.
Condensed Consolidated Balance Sheets
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
Assets | |
(unaudited) | | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 147,489 | | |
$ | 36,170 | |
Accounts receivable | |
| 4,794 | | |
| 5,425 | |
Inventory | |
| 22,537 | | |
| 23,412 | |
Merchant services reserve | |
| 2,938 | | |
| 2,939 | |
Prepaid expense | |
| - | | |
| 5,709 | |
Total current assets | |
| 177,758 | | |
| 73,655 | |
| |
| | | |
| | |
Website development, net of accumulated amortization | |
| 199,344 | | |
| 265,792 | |
Furniture and equipment, net of accumulated depreciation | |
| - | | |
| - | |
Total assets | |
$ | 377,102 | | |
$ | 339,447 | |
| |
| | | |
| | |
Liabilities and Stockholders' Equity | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 18,248 | | |
$ | 47,697 | |
Convertible debenture - related party - net of discount | |
| 15,301 | | |
| 122,538 | |
Deferred revenues | |
| 480 | | |
| 684 | |
Derivative liability convertible note | |
| 1,958 | | |
| - | |
Derivative liability warrants | |
| - | | |
| 51 | |
Total current liabilities | |
| 35,987 | | |
| 170,970 | |
| |
| | | |
| | |
Stockholders' equity | |
| | | |
| | |
Preferred stock, $.0001 par value: 10,000,000 authorized, no shares issued and outstanding | |
| - | | |
| - | |
Common
stock, $.0001 par value: 700,000,000 authorized; 28,653,873 and 11,291,828 shares issued and outstanding on September 30,
2015 and December 31, 2014, respectively | |
| 2,865 | | |
| 1,129 | |
Additional paid in capital | |
| 28,221,235 | | |
| 27,451,971 | |
Common stock to be issued | |
| 69,920 | | |
| 69,920 | |
Accumulated deficit | |
| (27,952,905 | ) | |
| (27,354,543 | ) |
Total stockholders' equity | |
| 341,115 | | |
| 168,477 | |
Total liabilities and stockholders' equity | |
$ | 377,102 | | |
$ | 339,447 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
MedeFile International, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
| |
For the three months ended September 30, 2015 | | |
For the three months ended September 30, 2014 | | |
For the nine months ended September 30, 2015 | | |
For the nine months ended September 30, 2014 | |
Revenue | |
$ | 10,869 | | |
$ | 20,703 | | |
$ | 36,199 | | |
$ | 62,442 | |
Cost of goods sold | |
| 280 | | |
| 271 | | |
| 875 | | |
| 852 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 10,589 | | |
| 20,432 | | |
| 35,324 | | |
| 61,590 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative expenses | |
| 122,845 | | |
| 184,423 | | |
| 562,569 | | |
| 484,417 | |
Depreciation and amortization expenses | |
| 22,148 | | |
| - | | |
| 66,447 | | |
| 412 | |
Total operating expenses | |
| 144,993 | | |
| 184,423 | | |
| 629,016 | | |
| 484,829 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (134,404 | ) | |
| (163,991 | ) | |
| (593,692 | ) | |
| (423,239 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
Interest expense - convertible note - related party | |
| (370 | ) | |
| (2,938 | ) | |
| (2,763 | ) | |
| (8,511 | ) |
Interest expense - discount on convertible note - related party | |
| - | | |
| (27,726 | ) | |
| - | | |
| (82,274 | ) |
Change of derivative liabilities convertible note | |
| 1,072 | | |
| - | | |
| (1,958 | ) | |
| - | |
Change of derivative liabilities warrants | |
| - | | |
| 9,999 | | |
| 51 | | |
| 1,062,120 | |
Total other income (expense) | |
| 702 | | |
| (20,665 | ) | |
| (4,670 | ) | |
| 971,335 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (133,702 | ) | |
$ | (184,656 | ) | |
$ | (598,362 | ) | |
$ | 548,096 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) per share: basic | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.03 | ) | |
$ | 0.11 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) per share: diluted | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.03 | ) | |
$ | (0.08 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average share outstanding: basic | |
| 28,653,873 | | |
| 10,061,058 | | |
| 23,253,502 | | |
| 4,952,933 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average
share outstanding: diluted |
|
|
28,701,689 |
|
|
|
10,345,641 |
|
|
|
20,633,026 |
|
|
|
5,237,516 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
MedeFile International, Inc.
Condensed Consolidated Statements
of Cash Flows
(unaudited)
| |
For the nine months ended September 30, 2015 | | |
For the nine months ended September 30, 2014 | |
Cash flows from operating activities | |
| | |
| |
Net income (loss) | |
$ | (598,362 | ) | |
$ | 548,096 | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 66,447 | | |
| 412 | |
Interest expense - discount on convertible debenture | |
| - | | |
| 82,274 | |
Stock based compensation | |
| 111,000 | | |
| - | |
Change of derivative liabilities convertible note | |
| 1,958 | | |
| - | |
Change of derivative liabilities warrants | |
| (51 | ) | |
| (1,062,120 | ) |
Changes in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| 631 | | |
| (3,268 | ) |
Inventory | |
| 875 | | |
| 853 | |
Prepaid insurance | |
| 5,709 | | |
| (1,781 | ) |
Accounts payable and accrued liabilities | |
| (29,447 | ) | |
| (37,003 | ) |
Accrued interest - convertible debenture | |
| 2,763 | | |
| 8,511 | |
Merchant service reserves | |
| - | | |
| 12,318 | |
Deferred revenue | |
| (204 | ) | |
| (932 | ) |
Net cash used in operating activities | |
| (438,681 | ) | |
| (452,640 | ) |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Website development | |
| - | | |
| (4,452 | ) |
Net cash used in investing activities | |
| - | | |
| (4,452 | ) |
| |
| | | |
| | |
Cash flow from financing activities | |
| | | |
| | |
Payment on convertible note - related party | |
| (70,000 | ) | |
| - | |
Proceeds from common stock subscriptions | |
| 620,000 | | |
| 350,000 | |
Net cash provided by financing activities | |
| 550,000 | | |
| 350,000 | |
| |
| | | |
| | |
Net increase (decrease) in cash and cash equivalents | |
| 111,319 | | |
| (107,092 | ) |
Cash and cash equivalents at beginning of period | |
| 36,170 | | |
| 266,843 | |
Cash and cash equivalents at end of period | |
$ | 147,489 | | |
$ | 159,751 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information | |
| | | |
| | |
Cash paid for interest | |
$ | - | | |
$ | - | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Stock issued for conversion of debt | |
$ | (40,000 | ) | |
$ | - | |
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements
Medefile
International, Inc.
Notes
to Unaudited Condensed 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, 2014. 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, 2015, and the results of operations and cash flows for the nine months ended September
30, 2015 and 2014. The results of operations for the nine months ended September 30, 2015 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.
MedeFile
believes 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 has reported an operating loss of $593,692 and a net loss of $598,362 for the nine months ended September 30, 2015.
During the comparable nine month period of 2014, the Company had an operating loss of $423,239 and net income of $548,096 (as
a result of the change in the valuation of the Company’s warrant derivative). The Company had an accumulated deficit of
$27,952,905 as of September 30, 2015. The Company has working capital of $141,771 as of September 30, 2015.
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, 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 development cost 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, 2015 and December 31,
2014, deferred revenue totaled $480 and $684, respectively.
Recent
Accounting Pronouncements
In
August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The provisions
of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and
expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition
of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles
for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated
as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial
doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are
issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016,
and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s
financial statements.
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which provides guidance for revenue
recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or
enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605,
“Revenue Recognition,” and most industry-specific guidance. This ASU also supersedes some cost guidance included in
Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts.” The standard’s core
principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that
reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies
will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance
obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating
the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company beginning November 1,
2017 and, at that time the Company may adopt the new standard under the full retrospective approach or the modified retrospective
approach. Early adoption is not permitted. The Company is currently evaluating the method and impact of the adoption of ASU 2014-09
will have on the Company’s condensed consolidated financial statements and disclosures.
In
January 2014, the FASB issued ASU 2014-04, an update to ASC 310, "Receivables." The ASU clarifies that in substance
repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or the
borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion
of a deed in lieu of foreclosure or through a similar legal agreement. The amendments are effective for annual periods, and interim
reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a
modified retrospective transition method or a prospective transition method. Early adoption of the guidance is permitted. The
impact of this guidance is currently being evaluated by the Company, but is not expected to have a significant impact on the Company's
financial position, results of operations or disclosures.
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 as of September 30, 2015 are
described below:
| |
Fair Value Measurements | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | |
| | |
| | |
| |
Website development | |
$ | - | | |
$ | - | | |
$ | 199,344 | | |
$ | 199,344 | |
Total | |
$ | - | | |
$ | - | | |
$ | 199,344 | | |
$ | 199,344 | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Deferred Revenues | |
$ | 480 | | |
$ | - | | |
$ | - | | |
$ | 480 | |
Derivative Liability – convertible note | |
| - | | |
| - | | |
| 1,958 | | |
| 1,958 | |
Total | |
$ | 480 | | |
$ | - | | |
$ | 1,958 | | |
$ | 2,438 | |
Website
development for the nine months ending September 30, 2015 is $199,344 compared to $265,792 for the year ended December 31, 2014.
Deferred revenue for the nine months ended September 30, 2015 is $480, compared to $684 compared to the year ended December 30,
2014. Warrant liability for the nine months ended September 30, 2015 is $0, compared to $51 for the year ended December 31, 2014.
Derivative liability for convertible note for the nine months ended September 30, 2015 is $1,958, compared to $0 for the year
ended December 31, 2014
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 year ended December 31, 2014
the Company had an inventory write down in the amount of $30,000. There was no write down of inventory in the nine months ended
September 30, 2015.
Net
Loss per Share
Basic loss per share
is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share
reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common
stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock
method and the effect of convertible securities by the “if converted” method.
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. Accounts
receivables totaled $4,794 as of September 30, 2015 and $5,425 as of December 31, 2014.
3.
WEBSITE DEVELOPMENT
Website
development consists of the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Website development | |
$ | 328,738 | | |
$ | 324,285 | |
Additional development | |
| - | | |
| 4,453 | |
Accumulated amortization | |
| (129,394 | ) | |
| (62,946 | ) |
Net website development | |
$ | 199,344 | | |
$ | 265,792 | |
The Company
completed the redesign in January 2015. The redesign is being amortized over a three year period. Amortization expense for the
three month period ending September 30, 2015 was $22,148 compared to $0 for the three month period ended September 30, 2014, respectively.
Amortization expense for the nine month period ending September 30, 2015 was $66,447 compared to $0 for the nine month period
ended September 30, 2014, respectively.
4.
FURNITURE AND EQUIPMENT
Furniture
and equipment consists of the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Computers and equipment | |
$ | 169,286 | | |
$ | 169,286 | |
Furniture and fixtures | |
| 38,618 | | |
| 38,618 | |
Subtotal | |
| 207,904 | | |
| 207,904 | |
Less: accumulated depreciation | |
| (207,904 | ) | |
| (207,904 | ) |
Net furniture and equipment | |
$ | - | | |
$ | - | |
Depreciation
is calculated by using the straight-line method over the estimated useful life. Furniture and equipment was fully depreciated
as of September 30, 2015. Depreciation expense for the three months ended September 30, 2015 and 2014 totaled $0 and $0, respectively.
Depreciation expense for the nine months ended September 30, 2015 and 2014 totaled $0 and $412, respectively.
5.
CONVERTIBLE DEBENTURE – RELATED PARTY
The Company has entered into two 10%
Secured Convertible Debentures with a significant shareholder. The debentures carry a one year term. The debentures were issued
in the amounts of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. Both debentures are convertible into common stock
at a conversion price of 80% of the previous day’s market price of common stock
| |
September 30, 2015 | | |
December 31, 2014 | |
Convertible debenture – related party | |
$ | 122,538 | | |
$ | 122,538 | |
Accumulated interest | |
| 2,763 | | |
| - | |
Payment | |
| (110,000 | ) | |
| - | |
Convertible debenture | |
$ | 15,301 | | |
$ | 122,538 | |
6.
DERIVATIVE LIABILITY
The Secured Convertible Debentures entered
into in November and December 2013 contain ratchet provisions regarding the conversion of debt into shares of common stock.
The Company entered into a 10% Secured
Convertible Debenture in November 2013, for a term of 12 months. The debenture is in the amount of $110,000. The conversion price
of the note is based on 80% of the previous day’s market price.
The
Company assesses the fair value of the convertible debenture using the Black Scholes pricing model and records a derivative expense
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 liability to the new value, and records a corresponding gain or loss. 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 convertible debenture 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.
| |
September 30, 2015 | |
Risk-free interest rate at grant date | |
| .08 | % |
Expected stock price volatility | |
| 622 | % |
Expected dividend payout | |
| – | |
Expected option in life-years | |
| .50 | |
As
of September 30 2015, derivative liability for this note is $1,958 and the change of derivative liability for the nine months
ended September 30, 2015 was $1,958.
During November 2015, the Company determined
that the Company’s financial statements included in the Company’s Quarterly Reports on Form 10-Q for the periods ended
March 31, 2015 and June 30, 2015 filed with the Securities Exchange Commission could not be relied upon due to errors in valuation
of derivative liability on the convertible note described above. The Company plans to restate such financial statements and file
amended quarterly reports for these periods.
7.
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 of grant, 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.
In
July 2011 the company issued 90,426 warrants in connection with the sale of 1,773 shares of common stock. As of July 2015, these
warrants have expired.
Warrant liability for the outstanding
warrants amounted to $0 for the period ending September 30, 2015, compared to $51 for the year ended December 31, 2014. As of September
30, 2015, these warrants include the following:
Warrants granted during April 2012 in
connection with the sale of 5,000 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 10,000 shares of the Company’s common stock with an exercise
price of $10. Fair value was determined using the following variables:
| |
Grant Date | | |
March 31, 2015 | |
Risk-free interest rate at grant date | |
| 0.47 | % | |
| 1.13 | % |
Expected stock price volatility | |
| 137.8 | % | |
| 92.2 | % |
Expected dividend payout | |
| - | | |
| - | |
Expected option in life-years | |
| 4.00 | | |
| .50 | |
Warrants
granted during April 2012 in connection with the sale of 50,000 shares of the Company’s common stock with an exercise price
of $10.
| |
Grant Date | | |
March 31, 2015 | |
Risk-free interest rate at grant date | |
| 0.47 | % | |
| 1.13 | % |
Expected stock price volatility | |
| 137.8 | % | |
| 92.2 | % |
Expected dividend payout | |
| - | | |
| - | |
Expected option in life-years | |
| 4.0 | | |
| .50 | |
Transactions
involving warrants with ratchet provisions are as follows:
| |
Number of Warrants | | |
Weighted-Average Price Per Share | |
Outstanding at December 31, 2013 | |
| 150,426 | | |
$ | 10 | |
Granted | |
| | | |
| | |
Exercised | |
| | | |
| | |
Canceled or expired | |
| | | |
| | |
Additional due to ratchet trigger | |
| | | |
| | |
Outstanding at December 31, 2014 | |
| 150,426 | | |
| 10 | |
Granted | |
| | | |
| | |
Exercised | |
| | | |
| | |
Canceled or expired | |
| 90,426 | | |
| 10 | |
Addition due to ratchet trigger | |
| | | |
| | |
Outstanding at September 30, 2015 | |
| 60,000 | | |
$ | 10 | |
As of
September 30, 2015 and December 31, 2014, the warrant liability consisted of the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Warrant liability (beginning balance) | |
$ | 51 | | |
$ | 5,618,819 | |
Additional liability due to new grants | |
| | | |
| | |
Loss(gain) on changes in fair market value of warrant liability | |
| (51 | ) | |
| (5,618,786 | ) |
Net warrant liability | |
$ | - | | |
$ | 51 | |
Change
in fair market value of warrant liability resulted in a gain of $0 and a gain of $9,999 for the three months ended September 30,
2015 and 2014, respectively. Change in fair market value of warrant liability resulted in a gain of $51 and a gain of $1,062,120
for the nine months ended September 30, 2015 and 2014, respectively.
8.
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. On February 10, 2015 the Company increased its authorized
shares of common stock from 500,000,000 to 700,000,000. On July 6, 2015, the Company effected a 20-to-1 reverse split of its common
stock.
2014
On April
17, 2014, the Company issued an aggregate of 7,506,483 shares of common stock to certain shareholders of the Company, in accordance
with anti-dilution rights held by such shareholders, including 6,279,210 shares to Lyle Hauser and 1,227,273 shares to purchasers
under Securities Purchase Agreements entered into by the Company in July 2011. Lyle Hauser is the Company's largest shareholder.
On July
3, 2014, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold
750,000 shares of common stock for an aggregate purchase price of $200,000.
On July
6, 2014, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold
1,000,000 shares of common stock for an aggregate purchase price of $150,000.
2015
During
the first quarter of 2015, the Company issued an aggregate of 13,954,955 shares of common stock to purchasers under the securities
purchase agreements entered into by the Company in January and February 2015 for an aggregate price of $620,000.
On March
18, 2015 the Company issued 900,901 shares of common stock in exchange for $40,000 of debt owed by the Company.
On May
11, 2015 the Company issued 2,500,000 shares of common stock to its CEO and a consultant for a total expense of stock based compensation
of $111,000.
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
10,000 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 10,000 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
Transactions
involving warrants are summarized as follows:
| |
Number of Warrants | | |
Weighted-Average Price Per Share | |
Outstanding at December 31, 2013 | |
| 1,450 | | |
| 600 | |
Granted | |
| - | | |
| - | |
Exercised | |
| 1,350 | | |
| 500 | |
Canceled or expired | |
| - | | |
| - | |
Outstanding at December 31, 2014 | |
| 100 | | |
$ | 1,000 | |
Granted | |
| - | | |
| - | |
Exercised | |
| -100 | | |
| -2,000 | |
Canceled or expired | |
| - | | |
| - | |
Outstanding at September 30, 2015 | |
| - | | |
$ | - | |
9.
RELATED PARTY TRANSACTIONS
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
amounts of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. Both debentures are convertible into common stock at a
conversion 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, 2015 | | |
December 31, 2014 | |
Convertible debenture – related party | |
$ | 122,538 | | |
$ | 122,538 | |
Accumulated Interest | |
| 2,763 | | |
| - | |
Payment | |
| (110,000 | ) | |
| - | |
Convertible debenture | |
$ | 15,301 | | |
$ | 122,538 | |
10.
SUBSEQUENT EVENTS
Management
has evaluated all events through the date of issuance and there are no reportable subsequent events.
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 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, 2015 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2014
Revenues
Revenues
for the three months ended September 30, 2015 totaled $10,869 compared to revenues of $20,703 during the three months ended September
30, 2014. The decrease 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, 2015 totaled $122,845, a decrease of $61,578 or approximately
33.4% compared to selling, general and administrative expenses of $184,423 for the three months ended September 30, 2014. The
decrease was due mainly to decreased payroll, legal expense and consulting fees.
Depreciation
Expense
Depreciation
expense totaled $0 for the three months ended September 30, 2015, compared to depreciation expense of $0 during the three months
ended September 30, 2014. There was no depreciation in these comparable periods due to some assets being fully depreciated.
Amortization
Expense
Amortization
expense for the three months ended September 30, 2015 was $22,148, compared to $0 the three months ended September 30, 2014. Amortization
expense is the expensing of the website development.
Interest
Expense
Interest expense on convertible debentures
for the three months ended September 30, 2015 and 2014, was $370 and $2,938 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, 2015 and 2014 was $0 and $27,726 respectively. The conversion feature
of the debentures allows the note to be converted to common stock at conversion price of $2.00.
Change in derivative liability for convertible debenture for the three months ended September 30, 2015 and
2014, was $1,072 and $0 respectively.
Net
Loss
For the reasons stated above, our operating
loss for the three months ended September 30, 2015 was $134,404 compared to an operating loss of $163,991 for the three months
ended September 30, 2014. The decrease in operating loss of $29,587 is primarily the result of a decrease in our general and administrative
and compensation expenses partially offset by our increased amortization expense as detailed above. We had a net loss of $133,702,
or $0.00 per share, for the three months ended September 30, 2015, compared to a net loss of $184,656, or $(0.02) per share, for
the three months ended September 30, 2014. We had a change in the fair value of derivative liability of $1,072 and $9,999 for the
three months ended September 30, 2015 and September 30, 2014, respectively.
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2014
Revenues
Revenues
for the nine months ended September 30, 2015 totaled $36,199 compared to revenues of $62,442 during the nine months ended September
30, 2014. The decrease 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, 2015 totaled $562,569, an increase of $78,152 or approximately
16.1% compared to selling, general and administrative expenses of $484,417 for the nine months ended September 30, 2014. The increase
was due mainly to increased payroll, legal expense and consulting fees. There was a stock based compensation expense in the amount
of $111,000 and $0 during the nine months ended September 30, 2015 and September 30, 2014, respectively.
Depreciation
Expense
Depreciation
expense totaled $0 for the nine months ended September 30, 2015, compared to depreciation expense of $412 during the nine months
ended September 30, 2014. The decrease in depreciation was due to some assets being fully depreciated. All assets are fully depreciated
as on September 30, 2015.
Amortization
Expense
Amortization
expense for the nine months ended September 30, 2015 was $66,447, compared to $0 the nine months ended September 30, 2014. Amortization
expense is the expensing of the website development.
Interest
Expense
Interest
expense on convertible debentures for the nine months ended September 30, 2015 and 2014, was $2,763 and $8,511 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 nine months ended September 30, 2015 and 2014 was $0 and $82,274 respectively. The conversion feature
of the debentures allows the note to be converted to common stock at a conversion price of $2.00.
Change
in derivative liability for convertible debenture for the nine months ended September 30, 2015 and 2014, was $1,958 and $0 respectively
Net
Loss
For
the reasons stated above, our net loss for the nine months ended September 30, 2015 was $598,362, or $(0.03) per share, a decrease
of $1,146,458 compared to net income for the nine months ended September 30, 2014 of $548,096, or $0.11 per share. 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, 2015 was $593,692 compared to an operating loss of $423,239 for the nine months ended September 30, 2014.
The increase in operating loss of $170,453 is primarily the result of an increase in our general and administrative and compensation
expenses and increased amortization expense as detailed above.
FINANCIAL
CONDITION
Liquidity
and Capital Resources
As
of September 30, 2015, we had cash and cash equivalents of $147,489, inventory of $22,537, merchant services reserve of $2,938,
and accounts receivable of $4,794. Net cash used in operating activities for the nine months ended September 30, 2015 was approximately
$438,681. Our current liabilities as of September 30, 2015 of $35,987 consisted of: $18,248 for accounts payable and accrued liabilities,
deferred revenues of $480, convertible debenture of $15,301, and derivative liability of $1,958. We have net working capital of
$141,771 as of September 30, 2015.
The
accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company
has reported a net loss of $598,362 for the nine months ended September 30 2015 and had an accumulated deficit of $27,952,905
as of September 30, 2015.
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, it is possible that we could incur unexpected costs
and expenses, 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, 2015 or as of the date of this report.
Critical
Accounting Policies
The
preparation of our condensed 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 condensed consolidated financial statements, we believe the following critical
accounting policies involve 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
In
August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The provisions
of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and
expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition
of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles
for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated
as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial
doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are
issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016,
and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s
financial statements.
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which provides guidance for revenue
recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or
enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605,
“Revenue Recognition,” and most industry-specific guidance. This ASU also supersedes some cost guidance included in
Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts.” The standard’s core
principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that
reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies
will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance
obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating
the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company beginning November 1,
2017 and, at that time the Company may adopt the new standard under the full retrospective approach or the modified retrospective
approach. Early adoption is not permitted. The Company is currently evaluating the method and impact of the adoption of ASU 2014-09
will have on the Company’s condensed consolidated financial statements and disclosures.
In January 2014, the FASB issued ASU
2014-04, an update to ASC 310, "Receivables." The ASU clarifies that in substance repossession or foreclosure occurs
upon either the creditor obtaining legal title to the residential real estate property or the borrower conveying all interest in
the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or
through a similar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those
annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition
method or a prospective transition method. Early adoption of the guidance is permitted. The impact of this guidance is currently
being evaluated by the Company, but is not expected to have a significant impact on the Company's financial position, results of
operations or disclosures.
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 not 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 not 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.
Management concluded that the design and operation of our
disclosure controls and procedures are not effective because the following material weaknesses exist:
- Our chief executive officer also functions as our chief
financial officer. As a result, our officers may not be able to identify errors and irregularities in the financial statements
and reports.
- We were unable to maintain full segregation of duties within
our financial operations due to our reliance on limited personnel in the finance function.
- Documentation of all proper accounting procedures is not
yet complete.
To the extent reasonably possible given our limited resources,
we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, the following:
- Increasing the capacity of our qualified financial personnel
to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over
financial statement disclosures.
Changes in Internal Control over
Financial Reporting
During the quarter ended September 30,
2015, 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
31.1 |
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under
the Securities and Exchange Act of 1934, as amended. |
|
|
32.1 |
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
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. |
|
|
|
Date:
December 7, 2015 |
By: |
/s/
Niquana Noel |
|
|
Niquana
Noel |
|
|
Chief
Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
21
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: December 7, 2015 |
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, 2015
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: December 7, 2015 |
By: |
/s/ Niquana Noel |
|
|
Niquana Noel |
|
|
Chief Executive Officer
(principal executive officer,
principal financial officer) |