Although the Company is traded on the OTC Pink Sheets, the Board of Directors reviews the NASDAQ listing standards definition of independence for Audit Committee members on an
annual basis. In light of compensation received for consulting services, our Board of Directors has determined that one of the current members of our Audit Committee is not independent (as
independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). Further, our Board of Directors has determined that, notwithstanding the experience and education of
our Audit Committee members, we do not have an "audit committee financial expert," as defined in applicable SEC rules. Given the size of our company and the familiarity of the Audit
Committee members with our company, we believe it is not necessary to have such an expert at this time.
The following table sets forth certain information with respect to the compensation paid to our non-employee directors for the following fiscal years:
Page 34
Executive Compensation
Summary Compensation Table
The following table summarizes the compensation earned by each "named executive officer" of MMR for the past two fiscal years, determined on the basis of rules adopted by the
SEC relating to "smaller reporting companies."
Name
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Award (1)
|
|
|
Stock
Award (1)
|
|
|
All Other
Compensation
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Lorsch
|
|
2015
|
$
|
260,400
|
(2)
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
36,000
|
(3)
|
$
|
296,400
|
Chief Executive Officer
|
|
2014
|
$
|
248,000
|
(2)
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
68,461
|
(3)
|
$
|
316,461
|
Ingrid Safranek
|
|
2015
|
$
|
217,000
|
(4)
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
217,000
|
Chief Financial Officer (*)
|
|
2014
|
$
|
206,667
|
(5)
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
206,667
|
1.
|
Option and stock awards above are disclosed at their aggregate grant date fair values as calculated under FASB
ASC 718 (formerly SFAS 123(R)). Assumptions made for the purpose of computing these amounts are discussed in Note 2 of the
Notes to the Consolidated Financial Statements included in our annual report on Form 10-K for the fiscal year ended December 31,
2015.
|
2.
|
Mr. Lorsch earned $260,400 in salary during 2015 and $248,000 during 2014. As of December 31, 2015,
$251,400 and $182,744 respectively remained unpaid.
|
3.
|
During the year ended December 31, 2015, Other Compensation to Mr. Lorsch included $36,000 of auto
allowance. During the year ended December 31, 2014, Other Compensation to Mr. Lorsch included $36,000 of auto allowance and
$32,461 paid by the Company on behalf of Mr. Lorsch for a life insurance policy under which MMR was a 50% beneficiary. As of
December 31, 2015, $36,000 and $27,154 of the Auto Allowance portion remained unpaid.
|
4.
|
During 2015, Ms. Safranek earned $217,000 in salary per her employment agreement with the Company. Of that
amount, $23,820 was paid in cash during the year, and $193,180 remained unpaid as of December 31, 2015, which is included in
deferred salaries.
|
5.
|
During 2014, Ms. Safranek earned $206,667 in salary per her employment agreement with the Company. Of that
amount, $115,833 was paid in cash during the year, and $90,834 remained unpaid as of December 31, 2015, which is included in
deferred salaries.
|
*
|
On July 27, 2015, Ms. Safranek submitted her resignation to the Board of Directors. The resignation became
effective immediately. In recognition of her six years of service to our company, the Board of Directors determined by unanimous written
consent on July 27, 2015 that, notwithstanding Ms. Safranek's voluntary resignation, the Company agreed to accrue the remaining
balance due through December 31, 2015 pursuant to the terms of her existing employment agreement which is on file with the
SEC.
|
Employment Agreements
Through the end of 2015 the Company had employment agreements with its Chairman, President and Chief Executive Officer, Robert H. Lorsch, and its Vice President of Finance
and Chief Financial Officer, Ingrid Safranek. Ms. Safranek's employment agreement expired at the end of 2015. Under each employment agreement, the executive officer(s) receives a base
salary, subject to annual increases as determined by the Board of Directors and certain benefits as set forth in the employment agreements, and an annual bonus at the discretion of the
board of directors.
On January 29, 2009 we entered into an employment agreement with our Chairman, President and Chief Executive Officer, Robert H. Lorsch, with an initial term ending on December 31,
2011, subject to successive automatic extension unless we or Mr. Lorsch elect not to extend. Under the terms of his agreement, Mr. Lorsch shall serve as both our President and Chief
Executive Officer and President and Chief Executive Officer of our wholly-owned subsidiary, MMR. The agreement provides for a base salary of $15,000 per month, subject to an upward
increase of no less than 5% per year and with an annual bonus and stock option grants in such amounts, if any, as the Board of Directors may determine in its sole discretion. Mr. Lorsch
receives a monthly auto allowance, reimbursement of certain life insurance premiums, and reimbursement for certain other insurance coverage, and is entitled to participate in benefits
generally made to our senior executives.
On December 28, 2011, the Board of Directors agreed to renew Mr. Lorsch's employment agreement effective January 1, 2012 for an additional three year term ending on December 31,
2014. The term of the Renewal expired on December 31, 2014, but may be extended automatically for successive additional one-year periods at the expiration of the then-current term unless
written notice of non-extension is provided to Mr. Lorsch with at least 90 days prior notice to the expiration of such term. A notice of non-extension was not provided to Mr. Lorsch pursuant to
the terms of his employment agreement and as such the agreement automatically renewed through the end of 2016. On May 13, 2013, the Board of Directors approved a salary increase for
Mr. Lorsch to $20,000 per month effective May 16, 2013. In addition, on December 31, 2013, the Board of Directors agreed to extend Mr. Lorsch's employment term to December 31, 2015
under the same terms. Mr. Lorsch's current annual base salary will remain unchanged, and authorized a one-time catch up accrual for the minimum 5% annual increase as called under the
agreement which had not been previously booked, with the understanding that, as in the past, portions of the payments could be deferred into future periods. Mr. Lorsch may terminate the
agreement upon 30 days written notice without reason or for good reason (as defined in the agreements) if we fail to cure acts or omissions constituting good reason within 30 days. If Mr.
Lorsch's employment is terminated by us for cause or voluntarily by Mr. Lorsch without good reason, he will not be entitled to receive any severance payments or benefits under the
employment agreement. If Mr. Lorsch's employment is terminated by us without cause or voluntarily by Mr. Lorsch for good reason, Mr. Lorsch will be entitled to one year of salary at his then
current rate of pay, including all monthly benefits, and the pro rata portion of the annual bonus otherwise due Mr. Lorsch. In the event of his disability, Mr. Lorsch would be entitled to receive
compensation equal to 60% of his base salary as then in effect. Mr. Lorsch's employment agreement includes provisions that prohibit Mr. Lorsch from disclosing our confidential information
and trade secrets and competing with us during the term of his employment agreement or soliciting our employees for 12 months following termination of employment.
We also have entered into a consulting agreement with The RHL Group, Inc., which is wholly-owned by Mr. Lorsch that provides for a monthly fee of $25,000 plus reimbursement of
expenses including medical insurance. The RHL Group provides consulting, operational and technical services to the Company, which we refer to as the RHL Services. As part of the RHL
Services, the RHL Group provides the Company with unrestricted access to its internal business and relationship contact database of more than 10,000 persons and entities, which includes
clients of the RHL Group and other individuals which may hold value to the Company. The RHL Group also provides infrastructure support to the Company, including allowing the Company
unlimited access to its facilities, equipment, and data, information management and server systems. The RHL Group has also consented to allow the Company to utilize the full-time services
of Mr. Lorsch as the Company's President, Chairman and Chief Executive Officer, which requires substantial time and energy away from his required duties as The RHL Group's Chairman
and Chief Executive Officer. In addition, The RHL Group has made its President, Kira Reed, available as the Company's spokesperson. Ms. Reed, who is Mr. Lorsch's spouse, also manages
the Company's social networking activities.
Page 35
On January 26, 2010, we entered into an employment agreement with Ingrid Safranek as our Vice President, Chief Financial Officer and Secretary. Under the employment agreement,
Ms. Safranek receives a base salary, subject to annual increases as determined by the Board of Directors but in no event lower than 5%, certain benefits as set forth in the employment
agreement, and an annual bonus at the discretion of the board of directors. Ms. Safranek's employment agreement was effective until June 15, 2010, but was extended until June 15, 2011.
On December 10, 2010, the Board approved Ms. Safranek's employment agreement to be amended to extend the term for an additional one year commencing on January 1, 2011. On
December 28, 2011, the Board extended the current employment agreement for an additional two years term and approved an increase in her base salary with the understanding that, from
time to time, it could be necessary to defer certain payments or benefits into future periods. On May 13, 2013, the Board approved a salary increase for Ms. Safranek to $16,667 per month,
with the understanding that, as in the past, portions of the payments could be deferred into future periods. Furthermore, on December 31, 2013, the Board elected to renew Ms. Safranek's
agreement for an additional two year term under the same terms as before.
The current term of Ms. Safranek's employment agreement was effective until December 31, 2015 and automatically renewed for successive 12 month periods unless terminated at least
30 days prior to the end of the term. On July 27, 2015, Ms. Safranek submitted her resignation to the Board of Directors. The resignation became effective immediately. In recognition of her
six years of service to our company, the Board of Directors determined by unanimous written consent on July 27, 2015 that, notwithstanding Ms. Safranek's voluntary resignation, the
Company agreed to accrue the remaining balance due through December 31, 2015 pursuant to the terms of her existing employment agreement which is on file with the SEC. Ms. Safranek's
employment agreement includes provisions that prohibit her from disclosing our confidential information and trade secrets and competing with us during the term of his employment
agreement or soliciting our employees for 12 months following termination of employment.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information on all outstanding equity awards held by our named executive officers as of December 31, 2015.
|
Option/Warrant Awards
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options/Warrant
Exercisable (#)
|
Equity Incentive Plan Awards:
Number of Securities
Underlying Unexercised
Unearned Option/Warrant (#)
|
Option/Warrant
Exercise Price ($)
|
Option/Warrant
Expiration Date
|
|
|
|
|
|
Robert Lorsch
|
2,836,000
|
-
|
$0.1595 - $0.625
|
8/6/2019,
|
Chief Executive Officer
|
|
|
|
1/27/2020,
|
|
|
|
|
4/6/2017,
|
|
|
|
|
& 4/6/2022
|
Ingrid Safranek
|
2,836,000
|
-
|
$0.30 - $0.90
|
1/21/2020,
|
Chief Financial Officer(*)
|
|
|
|
6/15/2020,
|
|
|
|
|
1/3/2021,
|
|
|
|
|
& 4/6/2022
|
(*)
|
|
On July 27, 2015, Ms. Safranek submitted her resignation to the Board of Directors. The resignation became effective immediately. In recognition of her six years of service to
our company, the Board of Directors determined by unanimous written consent on July 27, 2015 that, notwithstanding Ms. Safranek's voluntary resignation, the Company agreed to
accrue the remaining balance due through December 31, 2015 pursuant to the terms of her existing employment agreement which is on file with the SEC.
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of March 31, 2016, as to shares of our common stock beneficially owned by: (1) each person known by us to beneficially own five
percent or more of the outstanding shares of our common stock; (2) each of our named executive officers listed in the summary compensation table; (3) each of our directors; and (4) all of our
named executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Except as otherwise noted in the footnotes below, we believe, based upon
information furnished to us, that each of the stockholders named in the tables have sole voting and investment power with respect to all shares of common stock shown as beneficially owned
by them, subject to applicable community property laws.
Shares of common stock subject to options, warrants and convertible notes exercisable or convertible within 60 days from March 31, 2016 are deemed outstanding for computing the
ownership percentage of the person holding such options, warrants or notes, but are not deemed outstanding for computing the ownership percentage of any other person.
Page 36
|
|
|
|
|
|
Number of Shares of Common
|
|
|
Name and Address of Beneficial Owner (1)
|
|
|
Stock Beneficially Owned (2)
|
|
Percentage
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
Robert H Lorsch (3)(4)(5)
|
|
|
54,274,135
|
|
|
21.8%
|
|
|
Titus Day
|
|
|
|
5,085,995
|
|
|
2.3%
|
|
|
Mike Finley
|
|
|
|
3,895,000
|
|
|
1.7%
|
|
|
Ivor Royston
|
|
|
|
3,672,114
|
|
|
1.6%
|
|
|
Bernie Stolar
|
|
|
|
6,415,581
|
|
|
2.9%
|
|
|
Ingrid Safranek (*)
|
|
|
|
2,575,000
|
|
|
1.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Executive Officers and Directors as a group
|
|
75,917,825
|
|
|
31.5%
|
|
|
(6 People)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
RHL Group (3)(5)
|
|
|
|
39,574,383
|
|
|
16.7%
|
|
|
Robert H Lorsch (3)(4)
|
|
|
|
14,699,752
|
|
|
6.3%
|
|
|
David Loftus
|
|
|
|
11,649,466
|
|
|
5.2%
|
|
|
Sherry Hackett
|
|
|
|
17,657,677
|
|
|
7.9%
|
(1)
|
|
The business address of each director and executive officer listed is c/o MMRGlobal, Inc., 4401 Wilshire Blvd., Suite 200, Los Angeles, CA
90010.
|
(2)
|
|
This table is based upon information supplied by officers, directors, principal stockholders, and Schedules 13D and 13G filed with the SEC. Beneficial
ownership is determined in accordance with the rules of the SEC. Applicable percentage ownership is based on 221,593,227 shares of common stock outstanding as of March 31,
2016. Shares of common stock subject to options, warrants and convertible notes exercisable or convertible within 60 days after March 31, 2016, are deemed outstanding for
computing the ownership percentage of the person holding such options, warrants or notes, but are not deemed outstanding for computing the ownership percentage of any other
person. Except as otherwise noted, we believe that each of the stockholders named in the table have sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to applicable community property laws.
|
(3)
|
|
Consists of (i) 1,863,752 shares of common stock held directly by Mr. Lorsch, (ii) 24,690,979 shares of common stock held directly by The RHL Group, which is
wholly owned and controlled by Mr. Lorsch, and Mr. Lorsch also has voting and/or investment power over such shares, (iii) fully vested warrants and/or options held by The RHL
Group to purchase 14,883,404 shares of common stock, and (iv) fully vested warrants and/or options held by Mr. Lorsch to purchase 12,836,000 shares of common
stock.
|
(*)
|
|
On July 27, 2015, Ms. Safranek submitted her resignation to the Board of Directors. The resignation became effective immediately. In recognition of her six years of service to
our company, the Board of Directors determined by unanimous written consent on July 27, 2015 that, notwithstanding Ms. Safranek's voluntary resignation, the Company agreed to
accrue the remaining balance due through December 31, 2015 pursuant to the terms of her existing employment agreement which is on file with the SEC.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
Our Board of Directors adopted a related party transaction policy, under which all related party transactions shall be presented to the disinterested directors of the Board for review
and approval in advance of such transactions. If it is not feasible to obtain advance approval of a related party transaction, such transaction shall be subject to the ratification of the
disinterested directors of the Board, and the Company may enter into such transaction prior to obtaining the approval of the disinterested directors only if the terms of such transaction allow it
to be rescinded at no cost to the Company in the event it is not ratified by the disinterested directors of the Board.
Other than the agreements and other arrangements set forth below, since January 1, 2013, there have not been any transactions or series of similar transactions to which we were or are
a party in which the amount involved exceeded or exceeds $120,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member
of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
Our Chairman and Chief Executive Officer, Robert H. Lorsch, is also the Chief Executive Officer of The RHL Group, Inc. and has full voting power over all of the capital stock of The RHL
Group, Inc. Mr. Lorsch directly and indirectly through The RHL Group, Inc., beneficially owns approximately 21.8% our total outstanding voting stock. The RHL Group, Inc. has loaned us
money pursuant to the Tenth Amended Note and any predecessor notes. See Note 3 - Related Party Note Payable above.
The RHL Group is an investment holding company which provides consulting, operational and technical services to the Company, which we refer to as the RHL Services. As part of the
RHL Services, the RHL Group provides the Company with unrestricted access to its internal business and relationship contact database of more than 10,000 persons and entities, which
includes clients of the RHL Group and other individuals which may hold value to the Company. The RHL Group also provides infrastructure support to us, including allowing us unlimited
access to its facilities, equipment, and data, information management and server systems. In addition to allowing us the use of its office support personnel, the RHL Group has also consented
to allow us to utilize the full-time services of Mr. Lorsch as the Company's President, Chairman and Chief Executive Officer, which requires substantial time and energy away from his required
duties as The RHL Group's Chairman and Chief Executive Officer. In addition, The RHL Group has made its President, Kira Reed, available as the Company's spokesperson. Ms. Reed, who
is Mr. Lorsch's spouse, also manages our social networking activities.
In consideration for the above, The RHL Group, Inc. has a consulting arrangement with MMR. A copy of the consulting agreement is filed as an Exhibit in our current report on Form 8-K
filed with the SEC on May 4, 2009 and is hereby incorporated by reference.
On March 28, 2016, the Board approved the issuance of the following securities, which shall be issued no later than April 19, 2016:
-
5-year Stock Options totaling 14,000,000 shares of Common Stock at $0.02 per share to our Directors (10,000,000 to Robert H. Lorsch, and 1,000,000 to each of the other directors.
-
An option for the RHL Group to convert up to $100,000 of principal on the Amended and Restated Note into 5,000,000 shares of Common Stock at a price of $0.02 per share
in addition to any conversion rights in the existing note.
Page 37
We incurred $50,000 each year during the years ended December 31, 2015 and 2014, toward marketing consulting services from Bernard Stolar, a director. We included $206,272 and
$174,273 in related party payables as of December 31, 2015, and 2014, respectively, in connection with these services.We contract with two significant vendors for the development and
maintenance of the software applications necessary to run our MyMedicalRecords PHR, MyEsafeDepositBox and MMRPro products. Our outside developer supports our software
development needs through a team of software engineers, programmers, quality control personnel and testers, who work with our internal product development team on all aspects of
application development, design, integration and support of our products. These vendors are also stockholders. For the year ended December 31, 2015 and 2014, the total expenses relating
to these stockholders amounted to $224,876 and 195,964, respectively. In addition, we capitalized $107,050 of software development costs for the year ended December 31, 2015. As of
December 31, 2015 and 2014, the total amounts due to the stockholder and included in related party payables amounted to $130,000 and $10,000, respectively.
On September 15, 2009, we entered into a five year agreement with E-Mail Frequency, LLC and David Loftus, Managing Partner of E-Mail Frequency, LLC, a significant stockholder of
the Company. Under the Agreement the Company acquired the rights to license an existing 80 million person direct marketing database (the "Database") of street addresses, cellular phone
numbers, e-mail addresses and other comprehensive data with E-Mail Frequency. The agreement allows us to market, through the use of the Database, our MyMedicalRecords PHR,
MyEsafeDepositBox virtual vault, and MMRPro document management system to physicians and their patients. Under the terms of the Agreement, we paid $250,000 to David Loftus as a
one-time consulting fee in the form of 555,556 shares of our common stock. We recorded the $250,000 one-time licensee fee as a prepaid consulting fee. Amortization expense for the years
ended December 31, 2014 and 2013 was $50,000 per year. In addition, we incurred a total of $0 and $15,020 during the years ended December 31, 2014 and 2013, respectively, toward
convertible notes interest to Mr. Loftus. We included in related party payables at December 31, 2014 and December 31, 2013 of $64,615 and $64,615, respectively, in respect to these
services. Furthermore, Mr. Loftus is a value-added-reseller of MMRPro systems. We recognized $0 and $ 0 in revenue from E-Mail Frequency for the sale of MMRPro systems, during 2015
and 2014, respectively. On July 19, 2012, we entered into a 6% Convertible Promissory Note with Mr. Loftus for a principal amount of $157,422 and warrants to purchase our common stock.
Effective September 1, 2011, we signed an Amendment to the Agreement dated September 15, 2009 to provide licensor a non- exclusive right to target, market and exploit the Employee
Benefits market.
On October 19, 2015 Mr. Loftus Converted the Promissory Notes into 5,588,651 shares of the Company's Common Stock.
The securities described above were issued to each of the foregoing persons or entities in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of
1933, as amended, and the rules promulgated thereunder. At the time of their issuance, the securities granted above were restricted securities for purposes of the Securities Act and the
certificates representing such securities bear legends to that effect, unless a legal opinion has been issued for the removal of such legends. The exercise/conversion prices of the securities
described above were equal to the closing price of our common stock as of the date of grant.
Director Independence
Our Board of Directors has determined that each of the following directors would be deemed "independent" under applicable
NASDAQ Stock Market LLC rules: Messrs. Day, Finley, and Royston. These persons represent a majority of our Board of Directors. Mr.
Lorsch, the Chairman of our Board of Directors and our Chief Executive Officer, and Bernard Stolar in his capacity as Acting Chief
Financial Officer, would not be deemed independent. Messrs. Stolar and Finley are members of our Compensation Committee and Mr.
Finley is the Chairman of our Compensation Committee. Messrs. Day and Finley are members of our Nominating and Corporate
Governance Committee. Messrs. Stolar, Day, Finley and Lorsch are members of our Audit Committee, but would not be deemed to be
independent under the more stringent independence requirements for Audit Committee members set forth in NASDAQ Listing Rule
5605(2). Mr. Stolar is Chairman of the Audit Committee.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees billed for the fiscal years ended December 31, 2015 and 2014 by Rose, Snyder & Jacobs. Rose, Snyder & Jacobs
performed the audit of our financial statements for the year ended December 31, 2015. All fees described below were approved by the Audit Committee pursuant to our pre-approval policy
also discussed below.
|
|
|
Fiscal Years Ended
|
|
|
|
2015
|
|
|
2014
|
Audit Fees
|
|
$
|
60,000
|
|
$
|
82,000
|
Audit Related Fees
|
|
|
-
|
|
|
-
|
Total Fees
|
|
$
|
60,000
|
|
$
|
82,000
|
Audit Fees include the audit of the Company's annual financial statements presented in the Company's Annual Reports on Form 10-K, reviews of interim
financial statements presented in the Company's Quarterly Reports on Form 10-Q and accounting, reporting and disclosure consultations related to those audits and fees related to consents
and reports in connection with regulatory filings.
Audit Related Fees included review and consent of shelf registration statements and related updates.
The Company's Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the independence of Rose, Snyder & Jacobs, and has
concluded that the provision of such services to the degree utilized is compatible with maintaining the independence of the Company's registered public accounting firm. All services provided
by Rose, Snyder & Jacobs in 2015 and 2014 were pre-approved by the Audit Committee after review of each of the services proposed for approval.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The Audit Committee has adopted a pre-approval policy for auditor services, which allows the Chief Executive Officer and/or the Chief Financial Officer of the Company to engage
the independent registered public accountants, on a case-by-case basis, to consult with our management as to the accounting or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards or interpretations by the SEC, Financial Accounting Standards Board or other regulatory or standard- setting bodies. In
addition, the Audit Committee may periodically obtain from the independent registered public accountants estimates of anticipated fees for services in the defined categories of audit services,
audit-related services, and tax services for a specified accounting period and pre-approves services in such categories up to specified amounts. Pre-approval may also be given as part of the
Audit Committee's approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent
registered public accountants are engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee's members, but the decision must
be reported to the full Audit Committee at its next scheduled meeting. The members of the Audit Committee approved the fees during subsequent meetings of the Audit Committee.
Page 38
PART IV
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS SCHEDULES
(a) The following documents are filed as part of this annual report on Form 10-K:
(1) Consolidated Financial Statements.
Reference is made to the Index to Consolidated Financial Statements under Item 8 of Part II hereof and incorporating by reference pages F-1 through F-20 hereto.
(2) Financial Statement Schedules.
All other schedules are omitted because they are not applicable or the amounts are immaterial or the required information is presented in the financial statements and notes thereto.
(3) Exhibits.
The following exhibits are either filed herewith or incorporated herein by reference:
EXHIBIT INDEX
|
Exhibit
Number
|
|
Exhibit Description
|
|
2.1
|
|
+ Agreement and Plan of Merger and Reorganization, dated as of November 8, 2008, by and among Favrille, Inc., Montana Merger Sub, Inc. and
mymedicalrecords.com, Inc. (incorporated by reference to Exhibit 2.1 of the registrant's current report on Form 8-K filed on November 13, 2008)
|
|
2.2
|
|
Form of Voting Agreement, dated as of November 8, 2008, by and among Favrille, Inc. and certain stockholders of mymedicalrecords.com, Inc. (incorporated by
reference to Exhibit 2.2 of the registrant's current report on Form 8-K filed on November 13, 2008)
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation, as amended by a Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 of the registrant's current report on Form 8-K filed on February 2, 2009)
|
|
3.2
|
|
Certificate of Amendment of Certificate of Incorporation of MMR Information Systems, Inc., dated as of July 10, 2009 (incorporated by reference to Exhibit 3.2 of the
registrant's current report on Form 8-K filed on July 13, 2009)
|
|
3.3
|
|
Certificate of Ownership and Merger (incorporated by reference to Exhibit 3.2 of the registrant's current report on Form 8-K filed on February 2, 2009)
|
|
3.4
|
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, as amended, dated as of June 15, 2010 (incorporated by reference to
Exhibit 3.1 of the registrant's current report on Form 8-K filed on June 18, 2010)
|
|
3.5
|
|
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the registrant's current report on Form 8-K filed on October 9, 2007)
|
|
3.7
|
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, as amended, dated as of June 22, 2012. (incorporated by reference to Exhibit 3.7 of the
registrant's annual report on Form 10-K for the year ended December 31, 2012)
|
|
3.8
|
|
Certificate of Amendment of Certificate of Incorporation of MyMedicalRecords, Inc., dated as of February 19, 2015. (incorporated by reference to Exhibit 3.8 of the
registrant's annual report on Form 10-K for the year ended December 31, 2014)
|
|
3.9
|
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of MMRGlobal, Inc., dated as of January 29, 2016 (incorporated by reference to
Exhibit 3.1 of the registrant's current report on Form 8-K filed on February 8, 2016).
|
|
4.1
|
|
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to registrant's registration statement on Form S-1 (File No. 333-114299) filed on May 11, 2004)
|
|
4.2
|
|
Amended and Restated Investor Rights Agreement dated March 26, 2004 among the registrant and certain of its stockholders (incorporated by reference to Exhibit 4.2
to registrant's registration statement on Form S-1 (File No. 333-114299) filed on April 8, 2004)
|
Page 39
|
4.3
|
|
Amendment No. 1 to Amended and Restated Investor Rights Agreement dated April 6, 2004 among the registrant and certain of its stockholders (incorporated by
reference to Exhibit 4.3 to registrant's registration statement on Form S-1 (File No. 333-114299) filed on April 8, 2004)
|
|
4.4
|
|
Securities Purchase Agreement dated March 6, 2006, by and among registrant and the individuals and entities identified on Exhibit A thereto (incorporated by reference
to Exhibit 4.4 of the registrant's current report on Form 8-K filed on March 10, 2006)
|
|
4.5
|
|
Form of Warrant issued pursuant to the Securities Purchase Agreement dated March 6, 2006, by and among registrant and the individuals and entities identified on
Exhibit A thereto (incorporated by reference to Exhibit 4.5 of the registrant's current report on Form 8-K filed on March 10, 2006)
|
|
4.6
|
|
Securities Purchase Agreement dated February 12, 2007, by and among registrant and certain investors (incorporated by reference to Exhibit 10.1 of the registrant's
current report on Form 8-K filed on February 13, 2007)
|
|
4.7
|
|
Warrant to purchase 250,000 shares of common stock dated December 19, 2006 issued to Kingsbridge Capital Limited (incorporated by reference to Exhibit 4.1 of the
registrant's current report on Form 8-K filed on December 20, 2006)
|
|
4.8
|
|
Registration Rights Agreement dated December 19, 2006, by and between registrant and Kingsbridge Capital Limited (incorporated by reference to Exhibit 4.2 of the
registrant's current report on Form 8-K filed on December 20, 2006)
|
|
4.9
|
|
Amendment No. 1 to Registration Rights Agreement dated December 19, 2006, by and between registrant and Kingsbridge Capital Limited dated August 10, 2007
(incorporated by reference to Exhibit 4.11 of the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2007)
|
|
4.10
|
|
Warrant to purchase 48,834 shares of common stock dated December 30, 2005 issued to General Electric Capital Corporation (incorporated by reference to Exhibit 4.6
of the registrant's annual report on Form 10-K for the year ended December 31, 2005)
|
|
4.11
|
|
Warrant to purchase 48,834 shares of common stock dated December 30, 2005 issued to Oxford Finance Corporation (incorporated by reference to Exhibit 4.7 of the
registrant's annual report on Form 10-K for the year ended December 31, 2005)
|
|
4.12
|
|
Form of Warrant issued to investors in November 2007 registered direct offering (incorporated by reference to Exhibit 4.1 of the registrant's current report on Form 8-K
filed on November 5, 2007)
|
|
4.13
|
|
Placement Agent Agreement dated November 2, 2007, by and between registrant and Lazard Capital Markets, LLC (incorporated by reference to Exhibit 1.1 of the
registrant's current report on Form 8-K filed on November 5, 2007)
|
|
4.14
|
|
Warrant to purchase 10,000 shares of common stock dated April 8, 2008 issued to Porter Novelli Life Sciences, LLC (incorporated by reference to Exhibit 4.13 of the
registrant's quarterly report on Form 10-Q for the quarter ended March 31, 2008)
|
|
4.15
|
|
Form of Warrant issued pursuant to the Creditor Plan dated as of November 8, 2008 by and among registrant, mymedicalrecords.com, Inc. and Kershaw, Mackie
& Co. as the administrative agent (incorporated by reference to Exhibit 4.15 of the registrant's current report on Form 8-K filed on February 2, 2009)
|
|
10.1
|
|
**Amended and Restated 2001 Equity Incentive Plan and Form of Stock Option Agreement thereunder (incorporated by reference to Exhibit 10.2 to registrant's
registration statement on Form S-1 (File No. 333-114299) filed on April 8, 2004)
|
|
10.2
|
|
** 2005 Non-Employee Directors' Stock Option Plan, as amended (incorporated by reference to Exhibit 10.4A of the registrant's annual report on Form 10-K for the year
ended December 31, 2006)
|
|
10.3
|
|
**Form of Stock Option Agreement to the 2005 Non-Employee Directors' Stock Option Plan, as amended (incorporated by reference to Exhibit 10.3 to registrant's
registration statement on Form S-1 (File No. 333-114299) filed on January 7, 2005)
|
|
10.4
|
|
**2005 Employee Stock Purchase Plan and Form of Offering Document thereunder (incorporated by reference to Exhibit 10.4 to registrant's registration statement on
Form S-1 (File No. 333-114299) filed on January 7, 2005)
|
|
10.5
|
|
Creditor Plan dated as of November 8, 2008 by and among registrant, mymedicalrecords.com, Inc. and Kershaw, Mackie & Co. as the administrative agent.
(incorporated by reference to Exhibit 10.1 of the registrant's current report on Form 8-K filed on November 13, 2008)
|
Page 40
|
10.9
|
|
Form of Indemnity Agreement for the registrant's directors and executive officers (incorporated by reference to Exhibit 10.9 of the registrant's current report on
Form 8-K filed on February 2, 2009)
|
|
10.10
|
|
**Employment Agreement dated as of January 27, 2009 by and among the registrant, MMR and Robert H. Lorsch (incorporated by reference to Exhibit 10.10 of the
registrant's current report on Form 8-K filed on February 2, 2009)
|
|
10.12
|
|
Amended and Restated Consulting Agreement dated as of January 27, 2009 by and between MMR and The RHL Group, Inc. (incorporated by reference to Exhibit
10.12 of the registrant's current report on Form 8-K filed on February 2, 2009)
|
|
10.14
|
|
Marketing and Strategic Planning Agreement dated November 23, 2005 by and between MMR and Bernard Stolar (incorporated by reference to Exhibit 10.14 of the
registrant's current report on Form 8-K filed on February 2, 2009)
|
|
10.18
|
|
Secured Credit Restructuring Agreement dated April 29, 2009, by and between the registrant, MMR, The RHL Group, Inc. and Robert H. Lorsch (incorporated by
reference to Exhibit 10.2 of the registrant's current report on Form 8-K filed on May 4, 2009)
|
|
10.19
|
|
Guaranty dated April 29, 2009, made by the registrant in favor of The RHL Group, Inc. (incorporated by reference to Exhibit 10.3 of the registrant's current report on
Form 8-K filed on May 4, 2009)
|
|
10.21
|
|
** Stock Option Agreement dated August 6, 2009, by and between MMR Information Systems, Inc. and Robert H. Lorsch (incorporated by reference to Exhibit 10.1 of
the registrant's quarterly report on Form 10-Q filed on August 27, 2009)
|
|
10.22
|
|
Waiver Agreement, dated August 18, 2009, by and among MMR Information Systems, Inc., MyMedicalRecords, Inc., and The RHL Group, Inc. (incorporated by
reference to Exhibit 10.2 of the registrant's quarterly report on Form 10-Q filed on August 27, 2009)
|
|
10.23
|
|
** Warrant dated August 18, 2009, issued by MMR Information Systems, Inc. in favor of Robert H. Lorsch (incorporated by reference to Exhibit 10.3 of the registrant's
quarterly report on Form 10-Q filed on August 27, 2009)
|
|
10.24
|
|
Warrant dated August 18, 2009, issued by MMR Information Systems, Inc. in favor of The RHL Group, Inc. (incorporated by reference to Exhibit 10.4 of the registrant's
quarterly report on Form 10-Q filed on August 27, 2009)
|
|
10.29
|
|
** Employment Agreement dated as of January 26, 2010 by and among MMR Information Systems and Ingrid Safranek. (incorporated by reference to Exhibit 10.29 of
the registrant's annual report on Form 10-K for the year ended December 31, 2009)
|
|
10.30
|
|
** Amendment No. 1, dated March 5, 2010, to that Stock Option Agreement, dated August 6, 2009, by and between MMR Information Systems, Inc., and Robert H.
Lorsch. (incorporated by reference to Exhibit 10.30 of the registrant's annual report on Form 10-K for the year ended December 31, 2009)
|
|
10.32
|
|
+ Non-Exclusive License Agreement dated December 21, 2010, by and between MMRGlobal, Inc. and Celgene Corporation. (incorporated by reference to Exhibit
10.32 of the registrant's annual report on Form 10-K for the year ended December 31, 2010)
|
|
10.34
|
|
**Employment Agreement dated as of December 15, 2010, by and between the Company and Ingrid Safranek. (incorporated by reference to Exhibit 10.33 of the
registrant's annual report on Form 10-K for the year ended December 31, 2010)
|
|
10.36
|
|
Guaranty dated April 29, 2011, made by the registrant in favor of The RHL Group, Inc. (incorporated by reference to Exhibit 10.3 of the registrant's current report on
Form 8-K filed on May 26, 2011)
|
|
10.37
|
|
+ Equipment Purchase Agreement, Effective as of July 11, 2011, by and between the Company and Eastman Kodak Company (incorporated by reference to Exhibit
10.1 of the registrant's quarterly report on Form 10-Q filed on August 15, 2011).
|
|
10.38
|
|
Settlement and Patent License Agreement, Effective as of December 9, 2011, by and between the Company and Surgery Center Management, LLC. (incorporated by
reference to Exhibit 10.1 of the registrant's current report on Form 8-K filed on January 17, 2012)
|
|
10.39
|
|
**Employment Agreement dated as of December 23, 2011, by and between the Company and Richard Lagani. (incorporated by reference to Exhibit 10.39 of the
registrant's annual report on Form 10-K for the year ended December 31, 2011)
|
Page 41
|
10.40
|
|
**Employment Agreement dated as of January 1, 2012 by and among the registrant, MMR and Robert H. Lorsch. (incorporated by reference to Exhibit 10.40 of the
registrant's annual report on Form 10-K for the year ended December 31, 2011)
|
|
10.41
|
|
**Employment Agreement dated as of January 1, 2012 by and among the registrant, MMR and Rafael ("Ralph") Salazar. (incorporated by reference to Exhibit 10.41 of
the registrant's annual report on Form 10-K for the year ended December 31, 2011)
|
|
10.42
|
|
**Amended Employment Agreement dated as of January 1, 2012 by and among the registrant, MMR and Ingrid Safranek. (incorporated by reference to Exhibit 10.42 of
the registrant's annual report on Form 10-K for the year ended December 31, 2011)
|
|
10.43
|
|
**2011 Equity Incentive Plan and Form of Stock Option Agreement thereunder. (incorporated by reference to Exhibit 10.43 of the registrant's annual report on
Form 10-K for the year ended December 31, 2011)
|
|
10.44
|
|
Investment Agreement, dated April 16, 2012, by and between the Company and Granite State Capital, LLC. (incorporated by reference to Exhibit 10.1 of the registrant's
current report on Form 8-K filed on April 18, 2012)
|
|
10.45
|
|
Registration Rights Agreement, dated April 16, 2012, by and between the Company and Granite State Capital, LLC. (incorporated by reference to Exhibit 10.2 of the
registrant's current report on Form 8-K filed on April 18, 2012)
|
|
10.47
|
|
First Amended Security Agreement dated June 26, 2012 by and between MMR and The RHL Group, Inc. (incorporated by reference to Exhibit 10.2 of the registrant's
current report on Form 10-Q filed on August 14, 2012)
|
|
10.49
|
|
+ Reseller Agreement, dated September 27, 2012, by and between the Company and VisiInc, PLC (incorporated by reference to Exhibit 10.1 of the registrant's current
report on Form 10-Q filed on November 14, 2012).
|
|
10.50
|
|
+ MMRPro Valued-Added Reseller Agreement dated September 27, 2012 by and between MMR and the Visilnc PLC Confidential portions omitted and filed separately
with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 10.1
of the registrant's current report on Form 10-Q filed on May 15, 2013).
|
|
10.51
|
|
Eighth Amended and Restated Secured Promissory Note dated August 13, 2013 by and between MMR and The RHL Group, Inc (incorporated by reference to Exhibit
10.1 of the registrant's current report on Form 10-Q filed on August 14, 2013).
|
|
10.52
|
|
+ Settlement Agreement and Mutual Releases, dated February 28, 2014, by and between MyMedicalRecords, Inc. and Walgreen Co. (incorporated by reference to
Exhibit 10.1 of the registrant's current report on Form 10-Q filed on May 15, 2014).
|
|
10.53
|
|
Ninth Amended and Restated Secured Promissory Note dated April 29, 2014 by and between MMR and The RHL Group, Inc (incorporated by reference to Exhibit 10.1
of the registrant's current report on Form 10-Q filed on August 14, 2014).
|
|
10.54
|
|
+ Patent License Agreement, dated June 30, 2014, by and between the Company and Salutopia, Inc. (incorporated by reference to Exhibit 10.2 of the registrant's
current report on Form 10-Q filed on August 14, 2014).
|
|
10.55
|
|
+ Patent License Agreement, dated June 30, 2014, by and between the Company and Claydata Australia Pty Ltd (incorporated by reference to Exhibit 10.3 of the
registrant's current report on Form 10-Q filed on August 14, 2014).
|
|
10.56
|
|
Tenth Amended and Restated Secured Promissory Note dated May 20, 2015 by and between MMR and the RHL Group, Inc. (incorporated by reference to Exhibit 10.1 of the registrant's
current report on Form 10-Q filed on August 14, 2015).
|
|
16.1
|
|
Letter re: Change in Certifying Accountant. (incorporated by reference to Exhibit 16.1 of the registrant's current report on Form 8-K/A filed on January 5,
2010)
|
|
21.1
|
|
* Schedule of Subsidiaries
|
|
23.1
|
|
* Consent of Rose, Snyder & Jacobs LLP, Independent Registered Public Accounting Firm
|
|
24.1
|
|
Power of Attorney (included in the signature pages hereof)
|
Page 42
|
31.1
|
|
* Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
|
|
31.2
|
|
* Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
|
|
32.1
|
|
* Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
|
|
101.INS
|
|
* XBRL Instance Document
|
|
101.SCH
|
|
* XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
|
* XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
|
* XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
|
* XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
|
* XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
+
|
The Company has requested confidential treatment with respect to portions of this exhibit.
|
|
|
*
|
Filed herewith.
|
|
|
**
|
This exhibit is identified as a management contract or compensatory plan or arrangement pursuant to Item 15(a)(3) of Form 10-K.
|
Page 43
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 hereunto duly authorized
this 14
th
day of April, 2016.
MMRGLOBAL, INC.
By
: /s/ Robert H. Lorsch
Name: Robert H. Lorsch
Title: Chairman, President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert H. Lorsch and Bernard Stolar, and each of
them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, to sign any and all amendments (including post-effective amendments) to
this annual report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, or any of
them, shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated:
Signature
|
Title
|
Date
|
/s/ Robert H. Lorsch
Robert H. Lorsch
|
Chairman, President and Chief Executive Officer
|
April 14, 2016
|
|
|
|
/s/ Bernard Stolar
Bernard Stolar
|
Director, Acting Chief Financial Officer (principal financial and accounting officer)
|
April 14, 2016
|
|
|
|
/s/ Mike Finley.
|
Director
|
April 14, 2016
|
Mike Finley
|
|
|
|
|
|
/s/ Bernard Stolar
|
Director
|
April 14, 2016
|
Bernard Stolar
|
|
|
|
|
|
/s/ Titus Day
|
Director
|
April 14, 2016
|
Titus Day
|
|
|
|
|
|
/s/ Ivor Royston
|
Director
|
April 14, 2016
|
Ivor Royston
|
|
|
Page 44
Index to Consolidated Financial Statements
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Balance Sheets at December 31, 2015 and 2014
|
F-3
|
Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014
|
F-4
|
Consolidated Statements Stockholders' Equity (Deficit) for the Years Ended December 31, 2015 and 2014
|
F-5
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014
|
F-6
|
Notes to Consolidated Financial Statements
|
F-7
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of MMRGlobal, Inc.
We have audited the accompanying consolidated balance sheets of MMRGlobal, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 2015 and
2014, and the related consolidated statements of operations, stockholders' deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards established by the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MMRGlobal,
Inc. and Subsidiaries as of December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from operations during the years ended December 31, 2015 and
2014. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Rose, Snyder & Jacobs LLP
Rose, Snyder & Jacobs LLP
Encino, California
April 14, 2016
F-2
MMRGLOBAL, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
$
|
309,393
|
Accounts receivable, less allowances of $215,483 and $173,591 in 2015 and 2014, Respectively
|
|
|
27,934
|
|
|
47,718
|
Inventory
|
|
|
-
|
|
|
13,537
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
162,184
|
Total current assets
|
|
|
27,934
|
|
|
532,832
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
19,071
|
|
|
32,118
|
Intangible assets, net of accumulated amortization of $38,567 and $1,141,121 respectively
|
|
|
669,603
|
|
|
1,790,622
|
Total assets
|
|
$
|
716,608
|
|
$
|
2,355,572
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Line of credit, related party
|
|
$
|
1,002,428
|
|
$
|
753,704
|
Related party payables
|
|
|
1,351,083
|
|
|
952,835
|
Compensation payable
|
|
|
727,509
|
|
|
491,109
|
Severance liability
|
|
|
620,613
|
|
|
620,613
|
Accounts payable and accrued expenses
|
|
|
4,420,585
|
|
|
4,668,960
|
Deferred revenue
|
|
|
-
|
|
|
51,312
|
Convertible notes payable
|
|
|
323,749
|
|
|
932,047
|
Notes payable, current portion
|
|
|
369,413
|
|
|
360,343
|
Notes payable, related party
|
|
|
91,561
|
|
|
253,664
|
Capital leases payable, current portion
|
|
|
13,221
|
|
|
13,221
|
Total current liabilities
|
|
|
8,920,162
|
|
|
9,097,808
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,920,162
|
|
|
9,097,808
|
|
|
|
|
|
|
|
Commitments and contingencies (See Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
Preferred stock - $0.001 par value, 5,000,000 shares authorized, 0 issued and outstanding.
|
|
|
|
|
|
|
Common stock, $0.001 par value, 1,250,000,000 shares authorized, 211,851,177 and 154,883,548 shares issued and outstanding as of December 31, 2015
and December 31, 2014, respectively
|
|
|
1,059,050
|
|
|
774,211
|
Additional paid-in capital
|
|
|
57,687,270
|
|
|
56,437,812
|
Accumulated deficit
|
|
|
(66,949,874)
|
|
|
(63,954,259)
|
Total stockholders' deficit
|
|
|
(8,203,554)
|
|
|
(6,742,236)
|
Total liabilities and stockholders' deficit
|
|
$
|
716,608
|
|
$
|
2,355,572
|
The accompanying notes are an integral part of these consolidated financial statements
F-3
MMRGLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Subscriber
|
|
$
|
100,719
|
|
$
|
134,984
|
MMRPro
|
|
|
47,259
|
|
|
44,547
|
License fees
|
|
|
34,480
|
|
|
2,392,538
|
Other income
|
|
|
8,917
|
|
|
7,500
|
Total revenues
|
|
|
191,375
|
|
|
2,579,569
|
Cost of revenues
|
|
|
232,685
|
|
|
378,342
|
Gross (loss) profit
|
|
|
(41,310)
|
|
|
2,201,227
|
General and administrative expenses
|
|
|
2,931,559
|
|
|
4,238,320
|
Sales and marketing expenses
|
|
|
564,001
|
|
|
1,305,901
|
Technology development
|
|
|
-
|
|
|
76,247
|
Loss from operations
|
|
|
(3,536,870)
|
|
|
(3,419,241)
|
Other income
|
|
|
781,126
|
|
|
1,672,820
|
Interest and other finance charges, net
|
|
|
(239,871)
|
|
|
(433,791)
|
Net loss
|
|
$
|
(2,995,615)
|
|
$
|
(2,180,212)
|
Net loss available to common shareholders per share:
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.02)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
|
175,846,916
|
|
|
148,120,906
|
The accompanying notes are an integral part of these consolidated financial statements
F-4
MMRGLOBAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
-
|
|
$
|
-
|
|
|
136,873,492
|
|
$
|
684,536
|
|
$
|
53,215,960
|
|
$
|
(61,774,047)
|
|
$
|
(7,873,551)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services or reduction to liabilities
|
-
|
|
|
-
|
|
|
3,708,506
|
|
|
18,542
|
|
|
585,853
|
|
|
-
|
|
|
604,395
|
Convertible debt conversions and warrants exercises
|
-
|
|
|
-
|
|
|
3,073,896
|
|
|
15,369
|
|
|
324,631
|
|
|
-
|
|
|
340,000
|
Shares issued for financing activities
|
-
|
|
|
-
|
|
|
10,627,654
|
|
|
53,138
|
|
|
1,367,108
|
|
|
-
|
|
|
1,420,246
|
Stock based compensation
|
-
|
|
|
-
|
|
|
(100,000)
|
|
|
(500)
|
|
|
621,632
|
|
|
-
|
|
|
621,132
|
Warrant exercises (cash)
|
-
|
|
|
-
|
|
|
300,000
|
|
|
1,500
|
|
|
40,500
|
|
|
-
|
|
|
42,000
|
Warrants issued for services
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
159,169
|
|
|
-
|
|
|
159,169
|
Creation of note discount
|
-
|
|
|
-
|
|
|
400,000
|
|
|
1,626
|
|
|
122,959
|
|
|
-
|
|
|
124,585
|
Net loss
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,180,212)
|
|
|
(2,180,212)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
-
|
|
|
-
|
|
|
154,883,548
|
|
|
774,211
|
|
|
56,437,812
|
|
|
(63,954,259)
|
|
|
(6,742,236)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services or reduction to liabilities
|
-
|
|
|
-
|
|
|
25,557,562
|
|
|
127,788
|
|
|
272,156
|
|
|
-
|
|
|
399,944
|
Convertible debt conversions
|
-
|
|
|
-
|
|
|
27,812,768
|
|
|
139,064
|
|
|
884,543
|
|
|
-
|
|
|
1,023,607
|
Shares issued for financing activities
|
-
|
|
|
-
|
|
|
3,597,299
|
|
|
17,987
|
|
|
43,790
|
|
|
-
|
|
|
61,777
|
Stock-based compensation
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,426
|
|
|
-
|
|
|
22,426
|
Warrants issued for services
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26,543
|
|
|
-
|
|
|
26,543
|
Net loss
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,995,615)
|
|
|
(2,995,615)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
-
|
|
$
|
-
|
|
|
211,851,177
|
|
$
|
1,059,050
|
|
$
|
57,687,270
|
|
$
|
(66,949,874)
|
|
$
|
(8,203,554)
|
The accompanying notes are an integral part of these consolidated financial statements
F-5
MMRGLOBAL, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,995,615)
|
|
$
|
(2,180,212)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
used in operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
267,378
|
|
|
302,762
|
Gain on write-off of liabilities
|
|
|
(721,461)
|
|
|
(1,672,820)
|
Non-cash writedown of assets
|
|
|
1,054,449
|
|
|
152,738
|
Allowance for doubtful accounts
|
|
|
-
|
|
|
69,784
|
Bad debt expense
|
|
|
41,892
|
|
|
-
|
Warrants issued for services
|
|
|
26,543
|
|
|
159,169
|
Stock-based compensation
|
|
|
22,426
|
|
|
621,132
|
Common stock issued for services
|
|
|
38,200
|
|
|
296,422
|
Amortization of loan discount
|
|
|
78,560
|
|
|
214,953
|
Subtotal - Non-cash adjustments
|
|
|
807,987
|
|
|
144,140
|
Effect of changes in:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(22,108)
|
|
|
28,796
|
Inventory
|
|
|
-
|
|
|
(13,537)
|
Prepaid expenses and other current assets
|
|
|
162,184
|
|
|
(7,547)
|
Accounts payable and accrued expenses
|
|
|
640,774
|
|
|
1,162,790
|
Related party payables
|
|
|
398,248
|
|
|
121,938
|
Compensation payable
|
|
|
236,400
|
|
|
89,030
|
Deferred revenue
|
|
|
(51,312)
|
|
|
(9,899)
|
Subtotal - net change in operating assets & liabilities
|
|
|
1,364,186
|
|
|
1,371,571
|
Net cash used in operating activities
|
|
|
(823,442)
|
|
|
(664,501)
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
Purchase of property and equpment
|
|
|
(1,252)
|
|
|
(7,401)
|
Payments for filing of patents
|
|
|
-
|
|
|
(356,047)
|
Costs of continuing MMRPro and website development
|
|
|
-
|
|
|
(52,485)
|
Net cash used in investing activities
|
|
|
(1,252)
|
|
|
(415,933)
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
Net proceeds from convertible notes
|
|
|
-
|
|
|
200,000
|
Proceeds from shares issued for financing activities
|
|
|
61,777
|
|
|
1,422,246
|
Net proceeds from warrant exercises
|
|
|
-
|
|
|
42,000
|
Proceeds from note payable
|
|
|
30,000
|
|
|
85,000
|
Payments of note payable
|
|
|
-
|
|
|
(50,000)
|
Proceeds on line of credit
|
|
|
423,524
|
|
|
-
|
Payments of line of credit
|
|
|
-
|
|
|
(316,141)
|
Payments of capital lease
|
|
|
-
|
|
|
(3,637)
|
Net cash provided by financing activities
|
|
|
515,301
|
|
|
1,379,468
|
Net increase (decrease) in cash
|
|
|
(309,393)
|
|
|
299,034
|
Cash, beginning of period
|
|
|
309,393
|
|
|
10,359
|
Cash, end of period
|
|
$
|
-
|
|
$
|
309,393
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
137,254
|
|
$
|
200,929
|
Cash paid for income taxes
|
|
$
|
1,600
|
|
$
|
1,457
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
Conversion of convertible notes into common stock
|
|
$
|
1,023,607
|
|
$
|
340,000
|
Cancellation of investment in equity securities
|
|
$
|
-
|
|
$
|
87,500
|
Shares issued for reduction of payables
|
|
$
|
361,744
|
|
$
|
296,422
|
The accompanying notes are an integral part of these consolidated financial statements
F-6
MMRGLOBAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
MMRGlobal Inc. (referred to herein, unless otherwise indicated, as "MMR," the "Company," "we," "us," and "our") was originally incorporated as Favrille, Inc. ("Favrille") in Delaware in
2000, and since its inception and before the Merger (with MyMedicalRecords, Inc. in 2009), operated under a different management team as a biopharmaceutical company focused on the
development and commercialization of targeted immunotherapies for the treatment of cancer and other diseases of the immune system. In May 2008, Favrille's ongoing Phase 3 registration
trial for its lead product candidate failed to show a statistically significant improvement in the treatment of patients with follicular B-cell non-Hodgkin's lymphoma.
Through our wholly-owned operating subsidiary MyMedicalRecords, Inc. ("MMR Inc."), we provide secure and easy-to-use online Personal Health Records ("PHR") and
MyEsafeDepositBox storage solutions, serving consumers, healthcare professionals, employers, insurance companies, financial institutions, retailers, and professional organizations and
affinity groups. Our PHR, marketed both directly via our website at
www.mymedicalrecords.com
at online
retailers and as a private-label service, enables individuals and families to access their medical records and other important documents, such as birth certificates, passports, insurance
policies and wills, anytime from anywhere using an Internet-connected device. The MyMedicalRecords PHR is built on proprietary, patented and patent-pending technologies to allow
documents, images and voicemail messages to be transmitted and stored in the system using a variety of methods, including fax, phone, or file upload without relying on any specific
electronic medical record platform to populate a user's account.
The Company's professional offering, MMRPro, is an end-to-end electronic document management and imaging system designed to give physicians' offices, community hospitals and
surgery centers an easy and cost-effective solution to digitizing paper-based medical records and sharing them with patients in a timely manner through an integrated patient portal,
MMRPatientView. The MMR Stimulus Program is offered with the MMRPro product offerings to help healthcare professionals recoup some or all of the cost of digital conversion of patient
charts when they upgrade patients from the free MMRPatientView portal to a full-featured MyMedicalRecords PHR. In addition, in January 2009, as a result of the Merger, we acquired
biotech assets and other intellectual property including anti-CD20 antibodies and data and samples from its FavId/Specifid vaccine clinical trials for the treatment of B-cell Non-Hodgkin's
lymphoma.
Since 2005, MMR Inc. began filing for patent protection for its products and services. Through the most recent year, the Company
had received thirteen U.S. health IT patents pertaining to Personal Health Records, patient portals and Electronic Health Records and
numerous other patents issued, pending and applied for in other countries and territories of commercial interest. The Company believes
these patents represent a foundational patent portfolio which could have significant ramifications to healthcare professionals and
vendors of health IT products and services. As a result of the issuance of these patents, and certain requirements affecting the use of
health IT products and services, the Company's business is evolving to include both an operating entity and a licensor of intellectual
property.
On March 8, 2011, we formed a subsidiary, which we named MMR Life Sciences Group, Inc., exclusively to maximize the value of our biotech assets including the Company's anti-CD20
antibodies and related FavId vaccine technologies acquired by MyMedicalRecords, Inc. through the merger with Favrille. As of this date the assets have not been transferred to the
subsidiary.
The Company (formerly Favrille) was incorporated in Delaware in 2000, MMR Inc. was incorporated in Delaware in 2005, and both are headquartered in Los Angeles, CA.
Principles of Consolidation
The consolidated financial statements include the accounts of MMRGlobal, and its wholly-owned subsidiaries MMR and MMR Life Sciences Group, Inc. All intercompany transactions and
balances are eliminated upon consolidation.
Basis of Presentation and Going Concern
The accompanying financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP.
GOING CONCERN
As of December 31, 2015, the Company's current liabilities exceeded its current assets by $8.89 million. Furthermore, during the years ended December 31, 2015, and 2014, the
Company incurred losses of $3.0 million and $2.18 million, respectively.
At December 31, 2015 and December 31, 2014, we had $0 and $309,393, respectively, in cash and cash equivalents. Historically, we issued capital stock, sold debt and equity securities
and received funds from The RHL Group, Inc. (a significant stockholder that is wholly-owned by our Chairman and Chief Executive Officer, Robert H. Lorsch) to operate our business.
Although we received additional funding from The RHL Group pursuant to the Tenth Amended and Restated Note effective May 20, 2015 (the "Line of Credit"), we will still be required to
obtain additional financing in order to meet installment payment obligations and the previously existing obligations under the Line of Credit, which had a balance of $1,942,693 at December
31, 2015 and a total Unpaid Balance (as defined in the Line of Credit) of $2,192,693, which includes amounts borrowed under the Line of Credit, unpaid interest fees, any amounts
guaranteed by The RHL Group, and other obligations due the RHL Group pursuant to the terms of the Tenth Amended and Restated Note and the Security Agreement. As a result of the
above, we express uncertainty about our ability to continue as a going concern. The components of the RHL Group Note payable and the related balance sheet presentation as of December
31, 2015 are as follows: $1,002,428, which is included in the line of credit, related party; and $70,352 related to other obligations due to The RHL Group which are included in related party
payables.
Management's plan regarding this matter is to, amongst other things, continue to utilize our available line of credit with The RHL Group (see Note 3). At December 31, 2015, we had
approximately $2.3 million remaining as available under The RHL Group line of credit. Additionally, we plan to continue selling additional debt and equity securities, continue to settle our
existing liabilities through issuance of equity securities, explore other debt financing arrangements, continue to increase our existing subscriber and affiliate customer base, sell MMRPro
products, and continue licensing our intellectual property to obtain additional cash flow over the next twelve months. We cannot assure that funds from these sources will be available when
needed or, if available, will be on terms favorable to us or to our stockholders. If we raise additional funds or settle liabilities by issuing equity securities, the percentage ownership of our
stockholders will be reduced, stockholders may experience additional dilution or such equity securities may provide for rights, preferences or privileges senior to those of the holders of our
common stock. If we are unable to utilize our available line of credit with The RHL Group or obtain suitable alternative debt or equity financing, our ability to execute our business plan and
continue as a going concern may be adversely affected.
F-7
These matters raise substantial doubt about our ability to continue as a going concern. These financial statements were prepared under the assumption that the Company will continue as
a going concern and do not include any adjustments that might result from the outcome of that uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period. On an ongoing basis, management evaluates its estimates, including
those related to revenue recognition, allowances for doubtful accounts, the valuation of deferred income taxes, tax contingencies, long-lived and intangible assets, valuation of derivative
liabilities and stock-based compensation. These estimates are based on historical experience and on various other factors that management believes to be reasonable under the
circumstances, although actual results could differ from those estimates.
(b) CASH AND CASH EQUIVALENTS
We consider cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of 90 days or less at the purchase date. We maintain our
cash in bank deposit accounts that, at times, may exceed federally insured limits. We have not experienced any losses in such accounts and believe that we are not exposed to any significant
credit or deposit risk on our cash. We had cash and cash equivalents of $0 and $309,393 as of December 31, 2015 and 2014, respectively.
(c) TRADE AND OTHER RECEIVABLES
Receivables represent claims against third parties that will be settled in cash. The carrying value of receivables, net of an allowance for doubtful accounts, if any, represents their
estimated net realizable value. We estimate the allowance for doubtful accounts, if any, based on historical collection trends, type of customer, the age of outstanding receivables and existing
economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, we give further consideration to the collectability of those balances
and the allowance is adjusted accordingly. We write off past due receivable balances when collection efforts have been unsuccessful in collecting the amount due.
(d) FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC 820-10,
Fair Value Measurements and Disclosures,
requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could
be exchanged in a current transaction between willing parties. As of December 31, 2015, and 2014, the carrying value of accounts receivable, deposits, related party payables, compensation
payable, severance liabilities, and accounts payable and accrued expenses approximates fair value due to the short-term nature of such instruments. The carrying value of short-term debt
approximates fair value as the related interest rates approximate rates currently available to us.
We utilize ASC 820-10 for valuing financial assets and liabilities measured on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and
GAAP and expands disclosures about fair value measurements. This standard applies in situations where other accounting pronouncements either permit or require fair value measurements.
ASC 820-10 does not require any new fair value measurements.
Accounting guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.
The standard describes three levels of inputs that may be used to measure fair value:
|
Level 1:
|
Quoted prices in active markets for identical or similar assets and liabilities.
|
|
Level 2:
|
Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or
similar assets and liabilities.
|
|
Level 3:
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
(e) PROPERTY AND EQUIPMENT
We record property and equipment at cost. We record equipment under capital leases at the present value of the minimum lease payments. We calculate depreciation using the straight-
line method, based upon the following estimated useful lives:
Furniture and Fixtures: 5 Years
Computer Equipment: 5 Years
When we retire or dispose of items, we charge or credit income for the difference between the net book value of the asset and the proceeds realized thereon.
We charge expenditures for maintenance and repairs to operations as incurred while we capitalize renewals and betterments.
We have pledged as collateral all property and equipment, along with all of our other assets, for a line of credit from The RHL Group, a related party (see Note 3 - Related Party Note
Payable).
F-8
(f) INTANGIBLE ASSETS
Intangible assets are comprised of website and software development costs, domain names and patents. We account for website and software development costs in accordance with
ASC 350-50,
Website Development Costs
, and ASC 985-20,
Costs of Software to Be Sold, Leased or Marketed
. Pursuant to ASC 350-50 and 985-20, we capitalize internally
developed website and software costs when the website or software under development has reached technological feasibility. We amortize these costs, typically over an estimated life of five
years, using the larger of the amount calculated using the straight-line method or the amount calculated using the ratio between current period gross revenues and the total of current period
gross revenues and estimated future gross revenues. At each balance sheet date, we evaluate the unamortized capitalized website and software costs compared to the net realizable value.
We then write off the amount by which the unamortized capitalized website costs exceed its net realizable value.
We account for domain names and patents in accordance with ASC 350-30,
General Intangibles Other than Goodwill
. We capitalize patent costs representing legal fees
associated with filing patent applications and amortize them on a straight-line basis. We amortize the patents
when they are brought to the market or otherwise commercialized. We amortize identifiable intangible assets over their estimated useful lives as follows:
Website and Software Development Costs: 5 Years
Domain Name: 5 Years
Patents: 20 Years
(g) IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES
We account for long-lived assets, which include property and equipment and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with ASC 350-30.
ASC 350-30 requires that we review long-lived assets for impairment whenever events or changes in circumstances indicate that we may not recover the carrying amount of an asset. We
measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be
recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair
value and the asset's carrying amount.
(h) REVENUE RECOGNITION
We generate our revenues from services, which are comprised of providing electronic access to consumer medical records and other vital documents and from the licensing of our
services. We recognize revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and we reasonably are assured of
collectability of the resulting receivable.
Our subscriber revenues consist of annual and monthly recurring retail subscriptions and usage-based fees, which are primarily paid in advance by credit card, and corporate accounts
that are based on either an access-fee or actual number of users, and in each case billed in advance at the beginning of each month of service. We defer the portions of annual recurring
subscription fees collected in advance and recognize them on a straight line basis over the subscription period. Deferred revenue was insignificant in 2015.
We grant exclusive licenses for the sale and marketing of our services in international territories in consideration of an up-front license fee and an ongoing royalty. The royalty fee is
usually a percentage of revenue earned by the licensee and there usually are certain minimum guarantees. We defer the recognition of license fee revenues received in advance from
international licensees for the grant of the license and recognize them over the period covered by the agreement. We defer the recognition of minimum guaranteed royalty payments received
in advance and recognize them over the period to which the royalty relates. We include all such revenues under "License Fees." In those cases where a license agreement contains multiple
deliverables, we account for the agreement in accordance with ASC 605-25,
Revenue Recognition - Multiple-Element Arrangements
.
We recognize revenue on sales of our MMRPro system in accordance with ASC 605-25,
Revenue Recognition, Multiple-Element Arrangements
.
Our multiple-deliverable arrangements consist solely of our MMRPro product. Significant deliverables within these arrangements include sophisticated scanning equipment, various
licenses to use third party software, a license to use our proprietary MMRPro application software, installation and training, dedicated telephone lines, secure online storage and
warranties.
We determined all elements to be separate units of accounting as they have standalone value to the customers and/or they are sold by other vendors on a standalone basis. Delivery of
the hardware and certain software elements of these arrangements occur at the inception of the agreement. We deliver installation and training at the inception of the agreement. We provide
other software licenses, telephone lines and online secure storage over the three year term of the agreement. We include warranties in the arrangements, however the third party product
manufacturer, and not us, is obligated to fulfill such warranties. The third-party warranty contracts are paid in advance and are not refundable.
We allocate the revenue derived from these arrangements among all the deliverables. We base such allocation on the relative selling price of each deliverable. With the exception of our
proprietary MMRPro application software, we use third party evidence to set the selling prices used for this allocation. In all such cases, third parties sell the same or very similar products. For
the MMRPro application software, we estimate the selling price based on recent discussions regarding licensure of that particular application on a standalone basis. To date, we have not
licensed this software on a standalone basis.
We recognize the allocated revenue for each deliverable in accordance with SEC Staff Accounting Bulletin ("SAB") No. 104,
Topic 13: Revenue Recognition
. Under this guidance,
we recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable and collectability is
reasonably assured. This results in us recognizing revenue for the hardware, certain software and the warranties upon delivery to the customer, for the installation and training upon
completion of these services, and ratably over the contract period for the software licenses, telephone lines and online secure storage.
Revenue from the licensing of our biotech assets may include non-refundable license and up-front fees, non-refundable milestone payments that are triggered upon achievement of a
specific event and future royalties or lump-sum payments on sales of related products. For agreements that provide for milestone payments, such as the Celgene Agreement, we adopted
ASC 605-28-25,
Revenue Recognition, Milestone Method
.
F-9
(i) INCOME TAXES AND UNCERTAIN TAX POSITIONS
We account for income taxes in accordance with ASC 740-10,
Income Taxes
. We recognize deferred tax assets and liabilities to reflect the estimated future tax effects,
calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of
the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition,
measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. We classify interest and penalties as a component of interest and other
expenses. To date, we have not been assessed, nor have we paid, any interest or penalties.
We measure and record uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a
tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.
(j) ADVERTISING
We expense advertising costs as we incur them. Advertising expense for the years ended December 31, 2015 and 2014 was $1,454 and $23,884, respectively.
(k) SHARE-BASED COMPENSATION
We account for share-based compensation in accordance with ASC 718-20,
Awards Classified as Equity
. We apply ASC 718-20 in accounting for stock-based awards
issued to employees under the recognition of compensation expense related to the fair value of employee share-based awards, including stock options and restricted stock. Determining the
fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the
expected dividends. Judgment is required in estimating the amount of share-based awards expected to be forfeited prior to vesting. If actual forfeitures differ significantly from these estimates,
share-based compensation expense could be materially impacted.
We account for options and warrants issued to non-employees in accordance with ASC 505-50,
Equity-Based Payments to Non-Employees
. We treat options and warrants
issued to non-employees the same as those issued to employees with the exception of determination of the measurement date. The measurement date is the earlier of (1) the date at which a
commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Options and warrants granted
to consultants are valued at their respective measurement dates, and recognized as expense based on the portion of the total consulting services provided during the applicable period. As
further consulting services are provided in future periods, we will revalue the associated options and warrants and recognize additional expense based on their then current values.
We estimate the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. We determine assumptions relative to volatility and anticipated
forfeitures at the time of grant. We valued grants of warrants during the years ended December 31, 2015 and 2014 using the following assumptions.
|
December 31, 2015
|
|
December 31, 2014
|
|
|
|
|
Expected life in years
|
0 - 5 Years
|
|
0 - 5 Years
|
Stock price volatility
|
431.32% - 435.13%
|
|
144.64% - 171.22%
|
Risk free interest rate
|
0.14% - 1.10%
|
|
0.10% - 1.64%
|
Expected dividends
|
None
|
|
None
|
Forfeiture rate
|
0%
|
|
0%
|
We base the assumptions used in the Black-Scholes models upon the following data: (1) our use of the contractual life of the underlying non-employee warrants
as the expected life; the expected life of the employee options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on
historical exercise experience; (2) in the absence of an extensive public market for our shares, the expected stock price volatility of the underlying shares over the expected term of the option
or warrant was taken at approximately the mid-point of the range for similar companies at the various grant dates; (3) we base the risk free interest rate on published U.S. Treasury
Department interest rates for the expected terms of the underlying options or warrants; (4) we base expected dividends on historical dividend data and expected future dividend activity; and
(5) we base the expected forfeiture rate on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.
(l) NET INCOME/LOSS PER SHARE
We apply the guidance of ASC 260-10,
Earnings Per Share
for calculating the basic and diluted loss per share. We calculate basic loss per share by dividing the net
loss attributable to common stockholders by the weighted average number of common shares outstanding. We compute diluted loss per share similar to basic loss per share except that the
denominator is increased to include the number of additional common shares that would have been outstanding if the potential shares had been issued and if the additional shares were
dilutive. We exclude common equivalent shares from the computation of net loss per share if their effect is anti-dilutive.
We excluded all potential common shares from the computation of diluted net loss per common share for the years ended December 31, 2015 and 2014 because they were anti-dilutive
due to our net loss position. Stock options, warrants and convertible notes excluded from the computation totaled 20,272,887 and 38,393,068 shares as of December 31, 2015 and 2014, respectively.
(m) RESEARCH, DEVELOPMENT AND ENGINEERING
We expense research, development and engineering costs as incurred and presented as technology development in the accompanying consolidated statements of operations. We
capitalize and amortize costs for software development relating to our website incurred subsequent to establishing technological feasibility, in the form of a working model, over their estimated
useful lives.
F-10
(n) RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers
. The standard will
eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for
determining revenue recognition. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is not
permitted. The revenue recognition standard is required to be applied retrospectively, including any combination of practical expedients as allowed in the
standard. We are evaluating the impact, if any, of the adoption of ASU 2014-09 to our financial statements and related disclosures. The Company has not
yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
In August 2014, the FASB issued ASU 2014-15,
Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entity's Ability to Continue as a Going Concern
. ASU 2014-15 changes to the disclosure of uncertainties about an entity's ability
to continue as a going concern. These changes require an entity's management to evaluate whether there are conditions or events, considered in the
aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that financial statements are
issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one
year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should
be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management's evaluation of the
significance of those conditions or events in relation to the entity's ability to meet its obligations, (iii) management's plans that alleviated the initial
substantial doubt or, if substantial doubt was not alleviated, management's plans that are intended to at least mitigate the conditions or events that raise
substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity's ability to
continue as a going concern. These changes become effective for the Company for the 2017 annual period. Management is evaluating the impact of the
adoption of these changes will have on the consolidated financial statements. Subsequent to adoption, this guidance will need to be applied by
management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial
statements in a given reporting period.
In April 2015, the FASB issued ASU No 2015-3,
Simplifying the Presentation of Debt Issuance Costs.
This update changes the presentation of
debt issuance costs in the balance sheet. ASU 2015-03 requires debt issuance costs related to a recognized debt obligation to be presented in the balance
sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. Amortization of debt issuance
costs will continue to be reported as interest expense. In August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent Measurement
of Debt Issuance Costs Associated with Line-of-Credit Arrangements". This ASU clarified guidance in ASC 2015-03 stating that the SEC staff would
not object to a company presenting debt issuance costs related to a line-of-credit arrangement on the balance sheet as a deferred asset, regardless of
whether there were any outstanding borrowings at period-end. This update is effective for annual and interim periods beginning after December 15, 2015,
which will require us to adopt these provisions in the first quarter of 2016. We do not expect this guidance to have a material impact to our financial position
or results of operations.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which supersedes existing guidance on accounting for leases
in "Leases (Topic 840)" and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for
annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied
using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial
statements.
In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
. This ASU affects entities
that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment
award transactions which include - the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of
cash flows and forfeiture rate calculations. ASU 2016-09 will become effective for the Company in the first quarter of fiscal 2018. Early adoption is
permitted in any interim or annual period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
3. RELATED PARTY NOTE PAYABLE
On May 20, 2015, we and The RHL Group entered into a Tenth Amended and Restated Promissory Note (the "
Amended Note
"), effective as of May
20, 2015. The Tenth Note amends and restates that certain Ninth Amended Note entered into between the foregoing parties, effective July 10, 2014 (the "
Existing Note
"
and together with its predecessor notes and the Amended Note, the "
Credit Facility
"), by: (i) extending the maturity date to April 29,
2016. In connection with the Tenth Amended Note, we issued The RHL Group warrants to purchase 352,928 shares of our common stock at $0.015 per share on
May 20, 2015. Except as set forth above, the Amended Note does not materially alter the terms of the Existing Note.
Historically, the predecessor notes have increased over time the maximum amount of credit available under the Credit Facility from $100,000 to $1,000,000 to
$3,000,000 to $4,500,000. The maximum amount of the Amended Note is $4,500,000. The Amended Note continues to bear interest at the lesser of 10% or the
highest rate then permitted by law, and is secured (similar to the Existing Note) by a Security Agreement, which has been in effect since July 31, 2007, as renewed
and amended to date (the "Security Agreement").
The Tenth Amended Note had a current balance of $1.95 million at December 31, 2015. The components of the Tenth Amended Note and the related balance
sheet presentation as of December 31, 2015 are as follows: $1.87 million, which is included in the line of credit, related party; and $0.07 million for other obligations
due to The RHL Group, which is included in related party payables.
Total interest expense
on the Line of Credit for the twelve months ended December 31, 2015 and 2014 amounted to $142,337 and $134,523, respectively. The unpaid interest balances
as of December 31, 2015 and December 31, 2014 were $62,492 and $30,160, respectively.
In conjunction with the Tenth Amended Note, we were required to maintain certain financial covenants, including the requirement that we have at least
$200,000 of cash in our bank accounts or such other amount as necessary to maintain operations through the subsequent thirty (30) days and timely pay any
obligations due respecting payroll and all associated payroll taxes on and after June 30, 2015. Since we did not meet these covenants as of December 31, 2015,
we received a waiver from The RHL Group until April 25, 2016.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets include the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
Prepaid consulting fees from issuance of common stock
|
|
$
|
-
|
|
$
|
125,625
|
Prepaid insurance
|
|
|
-
|
|
|
5,984
|
Prepaid trade shows
|
|
|
-
|
|
|
30,575
|
|
|
|
|
|
|
|
Total prepaid expenses and other current assets
|
|
$
|
-
|
|
$
|
162,184
|
F-11
5. PROPERTY AND EQUIPMENT
Property and equipment, at year end consisted of the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
Furniture and fixtures
|
|
$
|
5,295
|
|
$
|
4,041
|
Computers and related equipment
|
|
|
137,465
|
|
|
137,465
|
|
|
|
142,760
|
|
|
141,506
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(123,689)
|
|
|
(109,389)
|
|
|
|
|
|
|
|
|
|
$
|
19,071
|
|
$
|
32,118
|
Depreciation expense for the years ended December 31, 2015 and 2014 amounted to $14,299 and $13,677, respectively, which is recorded in general and administrative expenses in the
Consolidated Statement of Operations.
6. INTANGIBLE ASSETS
Intangible assets as of December 31, 2015 and 2014 consisted primarily of pattents, which are amortizable assets.
Amortization expense for the years ended December 31, 2015 and 2014 amounted to $253,078 and $289,085, respectively. Estimated amortization expense for each of the next five
succeeding years is expected to be as follows:
Year Ending
December 31,
|
|
|
|
2016
|
|
$
|
109,528
|
2017
|
|
|
28,566
|
2018
|
|
|
26,703
|
2019
|
|
|
24,786
|
2020
|
|
|
24,787
|
Total
|
|
$
|
214,370
|
During the year ended December 31, 2015, we performed an analysis of our intangible assets under FASB ASC 350-30 using discounted cash flows and we recorded a write down of our patents
totaling $1,040,912. The charge is recorded as part of general & administrative expenses in the attached statement of operations.
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
Legal and accounting fees
|
|
$
|
2,721,983
|
|
$
|
3,524,788
|
Accounts payable and accruals from Favrille Merger
|
|
|
309,791
|
|
|
309,791
|
Trade payables and consulting services
|
|
|
1,552,741
|
|
|
732,234
|
Accrued vacation
|
|
|
145,861
|
|
|
102,147
|
|
|
|
|
|
|
|
Total accounts payable and accrued expenses
|
|
$
|
4,420,585
|
|
$
|
4,668,960
|
F-12
8. INCOME TAXES
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes were as follows:
|
|
Years Ended December 31,
|
|
|
2015
|
|
2014
|
Federal statutory rate
|
|
-34.00%
|
|
-34.00%
|
State tax, net of federal benefit
|
|
-5.65%
|
|
-5.65%
|
Non-deductible items
|
|
0.84%
|
|
0.84%
|
Valuation allowance
|
|
38.81%
|
|
38.81%
|
Effective income tax rate
|
|
0.00%
|
|
0.00%
|
Significant components of deferred tax assets and (liabilities) are as follows:
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
Net operating loss carryforwards
|
|
$
|
20,124,072
|
|
$
|
19,345,922
|
Depreciation and amortization
|
|
|
435,026
|
|
|
(55,855)
|
Share-based compensation
|
|
|
2,494,629
|
|
|
2,494,629
|
R&D tax credit
|
|
|
2,455,964
|
|
|
2,455,964
|
State tax and other
|
|
|
(1,597,575)
|
|
|
(1,509,212)
|
Deferred tax assets, net
|
|
|
23,912,116
|
|
|
22,731,448
|
Less: valuation allowance
|
|
|
(23,912,116)
|
|
|
(22,731,448)
|
|
|
$
|
-
|
|
$
|
-
|
At December 31, 2015 and 2014, the Company had Federal and State net operating loss carry forwards available to offset future taxable income of $47,187,635 and $46,156,969.
These carry forwards will begin to expire in the years ending December 31, 2027 and December 31, 2016, respectively.
These net operating losses may be subject to
various limitations on utilization based on ownership changes under Internal Revenue Code Section 382 as a result of the Merger, and the Company is in the process of evaluating
the impact of this before any losses are used to offset future taxable income.
The Company's net operating loss carry forwards are subject to examination until such time as the NOLs are used and the tax year is closed.
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by a valuation allowance
to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future
realization of our deferred tax assets, including recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carry-forward periods
available to us for tax reporting purposes, and other relevant factors.
At December 31, 2015, based on available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company determined that it was
more likely than not that its deferred tax assets would not be realized. The Company has recorded a 100% valuation allowance.
The Company performed an analysis of its tax filings and determined that there were no positions taken that it considered uncertain. Therefore, there were no unrecognized tax
benefits as of December 31, 2015 and 2014.
Future changes in the unrecognized tax benefit are not expected to have an impact on the effective tax rate due to the existence of the valuation allowance. The Company
estimates that the unrecognized tax benefit will not change within the next twelve months. The Company will continue to classify income tax penalties and interest, if any, as part of
interest and other expenses in its consolidated statements of operations. The Company incurred $0 of interest and penalties during the years ended December 31, 2015 and 2014.
The Company files income tax returns in the United States ("Federal") and California ("State") jurisdictions. The Company is subject to Federal and State income tax
examinations by the tax authorities.
As the Company has significant net operating loss carryforwards, even if certain of the Company's tax positions were disallowed, it is not foreseen that the Company would have
to pay any taxes in the near future. Consequently, the Company does not calculate the impact of interest or penalties on amounts that might be disallowed. The Company's net
operating loss carryforwards are subject to examination until they are fully utilized and such tax years are closed.
F-13
9. COMMITMENTS AND CONTINGENCIES
Leases
Effective September 1, 2013, we renewed our lease for office space in Los Angeles, California with a term through August 31, 2018. The lease currently requires a monthly payment of
$8,250. Total rent expense for the years ended December 31, 2015 and 2014 were $113,299 and $150,720 respectively. Future minimum lease payments as of December 31, 2015, under
non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows:
Year Ending
|
|
|
Operating
|
|
|
Capital
|
December 31,
|
|
|
Leases
|
|
|
Leases
|
|
|
|
|
|
|
|
2016
|
|
$
|
187,550
|
|
$
|
13,221
|
2017
|
|
|
206,305
|
|
|
-
|
2018
|
|
|
146,410
|
|
|
-
|
Total minimum lease payments
|
|
$
|
540,265
|
|
$
|
13,221
|
Guarantee provided by The RHL Group
On May 6, 2011, the RHL Group agreed to guarantee up to $250,000 in payments to a vendor for future services to be rendered. In consideration of this guarantee, the RHL Group
received (i) a warrant to purchase 625,000 shares of our common stock, at an exercise price of $0.046 per share, which was the closing price of our common stock on the date of the
transaction, and (ii) 125,000 shares of our common stock priced as of the same date. In the event that the RHL Group has to perform on this guarantee, interest on any outstanding balance
paid to the vendor by the RHL Group will be added to the balance of the Tenth Amended Note or any subsequent renewals. Additionally, any balances due to this vendor at any given time will
reduce the amount available under the Tenth Amended Note or any subsequent renewals. The warrants and shares were issued on November 11, 2011 to the RHL Group.
Employment Agreements
The Company has employment agreements with its Chairman, President and Chief Executive Officer, Robert H. Lorsch, its Vice President of Finance and Chief Financial Officer, Ingrid
Safranek. Under each employment agreement, the executive officers receive a base salary, subject to annual increases as determined by the board of directors, certain benefits as set forth in
the employment agreements, and an annual bonus at the discretion of the board of directors. Ms. Safranek's employment agreement expired at the end of 2015.
On January 29, 2009 we entered into an employment agreement with our Chairman, President and Chief Executive Officer, Robert H. Lorsch, with an initial term ending on December 31,
2011, subject to successive automatic extension unless we or Mr. Lorsch elect not to extend. Under the terms of his agreement, Mr. Lorsch shall serve as both our President and Chief
Executive Officer and President and Chief Executive Officer of our wholly-owned subsidiary, MMR. The agreement provides for a base salary of $15,000 per month, subject to an upward
increase and with an annual bonus and stock option grants in such amounts, if any, as the Board of Directors may determine in its sole discretion. Mr. Lorsch receives a monthly auto
allowance, reimbursement of certain life insurance premiums, and reimbursement for certain other insurance coverage, and is entitled to participate in benefits generally made to our senior
executives.
On December 28, 2011, the Board of Directors agreed to renew Mr. Lorsch's employment agreement effective January 1, 2012 for an additional three year term ending on December 31,
2014. The term of the Renewal expired on December 31, 2014, but may be extended automatically for successive additional one-year periods at the expiration of the then-current term unless
written notice of non-extension is provided to Mr. Lorsch with at least 90 days prior notice to the expiration of such term. A notice of non-extension was not provided to Mr. Lorsch pursuant to
the terms of his employment agreement and as such the agreement automatically renewed through the end of 2016. In addition, on December 31, 2013, the Board of Directors agreed to
extend Mr. Lorsch's employment term to December 31, 2015 under the same terms. Mr. Lorsch's current annual base salary will remain unchanged, except for the minimum 5% annual
increase as called under the agreement, with the understanding that, as in the past, portions of the payments could be deferred into future periods. Mr. Lorsch may terminate the agreement
upon 30 days written notice without reason or for good reason (as defined in the agreements) if we fail to cure acts or omissions constituting good reason within 30 days. If Mr. Lorsch's
employment is terminated by us for cause or voluntarily by Mr. Lorsch without good reason, he will not be entitled to receive any severance payments or benefits under the employment
agreement. If Mr. Lorsch's employment is terminated by us without cause or voluntarily by Mr. Lorsch for good reason, Mr. Lorsch will be entitled to one year of salary at his then current rate
of pay, including all monthly benefits, and the pro rata portion of the annual bonus otherwise due Mr. Lorsch. In the event of his disability, Mr. Lorsch would be entitled to receive
compensation equal to 60% of his base salary as then in effect. Mr. Lorsch's employment agreement includes provisions that prohibit Mr. Lorsch from disclosing our confidential information
and trade secrets and competing with us during the term of his employment agreement or soliciting our employees for 12 months following termination of employment.
We also have entered into a consulting agreement with The RHL Group, Inc., which is wholly-owned by Mr. Lorsch that provides for a monthly fee of $25,000 plus reimbursement of
expenses including medical insurance. The RHL Group provides consulting, operational and technical services to the Company, which we refer to as the RHL Services. As part of the RHL
Services, The RHL Group provides the Company with unrestricted access to its internal business and relationship contact database of more than 10,000 persons and entities, which includes
clients of the RHL Group and other individuals which may hold value to the Company. The RHL Group also provides infrastructure support to the Company, including allowing the Company
unlimited access to its facilities, equipment, and data, information management and server systems. The RHL Group has also consented to allow the Company to utilize the full-time services
of Mr. Lorsch as the Company's President, Chairman and Chief Executive Officer, which requires substantial time and energy away from his required duties as The RHL Group's Chairman
and Chief Executive Officer. In addition, The RHL Group has made its President, Kira Reed, available as the Company's spokesperson. Ms. Reed, who is Mr. Lorsch's spouse, also manages
the Company's social networking activities.
On January 26, 2010, we entered into an employment agreement with Ingrid Safranek as our Vice President, Chief Financial Officer and Secretary. Under the employment agreement,
Ms. Safranek receives a base salary, subject to annual increases as determined by the Board of Directors, certain benefits as set forth in the employment agreement, and an annual bonus at
the discretion of the board of directors. Ms. Safranek's employment agreement was effective until June 15, 2010, but was extended until June 15, 2011. On December 10, 2010, the Board
approved Ms. Safranek's employment agreement to be amended to extend the term for an additional one year commencing on January 1, 2011. On December 28, 2011, the Board extended
the current employment agreement for an additional two years term and approved an increase in her base salary with the understanding that, from time to time, it could be necessary to defer
certain payments or benefits into future periods. Furthermore, on December 31, 2013, the Board elected to renew Ms. Safranek's agreement for an additional two year term under the same
terms as before.
F-14
The current term of Ms. Safranek's employment agreement was effective until December 31, 2015 and automatically renewed for successive 12 month periods unless terminated at least
30 days prior to the end of the term. On July 27, 2015, Ms. Safranek submitted her resignation to the Board of Directors. The resignation became effective immediately. In recognition of her
six years of service to our company, the Board of Directors determined by unanimous written consent on July 27, 2015 that, notwithstanding Ms. .Safranek's voluntary resignation, the
Company will pay her the remaining balance due her through December 31, 2015 pursuant to the terms of her existing employment agreement which is on file with the SEC. Ms. Safranek's
employment agreement includes provisions that prohibit her from disclosing our confidential information and trade secrets and competing with us during the term of his employment
agreement or soliciting our employees for 12 months following termination of employment.
Litigation Matters
From time to time, we are involved in various legal proceedings generally incidental to our business. While the result of any litigation contains an element of uncertainty, our management
presently believes that the outcome of any known, pending or threatened legal proceeding or claim, individually or combined, will not have a material adverse effect on our financial
statements.
On December 9, 2011, MyMedicalRecords, Inc. entered into a Non-Exclusive Settlement and Patent License Agreement with Surgery Center Management LLC ("SCM"). In consideration
for the rights granted under that Agreement and in consideration of a settlement and release agreement, SCM contracted to pay MyMedicalRecords, Inc. an initial payment of $5 million
payable on December 23, 2011, and additional payments of $5 million per year for five consecutive years. After unsuccessful attempts to collect the past due amount of $5 million, on January
19, 2012, MyMedicalRecords, Inc. filed a lawsuit in the Superior Court of the State of California for the County of Los Angeles for breach of contract. At this time, MMR believes that SCM
owes the Company $30 million plus interest, and on August 4, 2015, the Court granted MMR leave to amend its complaint to seek damages of $30 million (plus interest) from SCM since the
end of 2011, and SCM filed an answer to MMR's amended complaint. On February 13, 2014, SCM filed a cross-complaint alleging claims for breach of that contract, among other things. On
July 10, 2014, the court granted SCM's motion for summary adjudication on the claim for breach of contract in the complaint and its counterclaim for declaratory relief. On July 30, 2014, SCM
filed its second amended cross-complaint, alleging substantially the same claims against the same parties. On December 5, 2014, the Court of Appeal issued an Alternative Writ of Mandate,
finding the trial court erred in granting SCM's motion for summary adjudication. Pursuant to the Court of Appeal's Alternative Writ, on January 7, 2015, the trial court vacated its order granting
SCM's motion for summary adjudication. On April 24, 2015, the trial court held a new hearing on that motion, and it entered an order denying SCM's motion in its entirety. The case is
scheduled for trial on November 1, 2016. MyMedicalRecords, Inc. will continue to pursue its claim and defenses, but the Company cannot predict the chances of either a favorable or
unfavorable outcome, nor does the Company have sufficient information regarding its ability to collect any judgment MyMedicalRecords, Inc. may obtain.
On April 10, 2013, MMR filed a complaint for patent infringement against Quest Diagnostics Inc. ("Quest") in the United States District Court for the Central District of California, alleging
that Quest Diagnostics Inc. is infringing U.S. Patent No. 8,301,466. On October 11, 2013, MMR filed an unopposed motion to add a claim of infringement of U.S. Patent 8,498,883 to its
complaint against Quest, which was granted on October 29, 2013. On December 22 and 23, 2014, the Court entered orders finding that the eight claims asserted (of the 42 total claims
present) under the two asserted MMR patents were invalid. On January 9, 2015, as previously reported by the Company, the case was closed. Defendants filed a motion with the District
Court to recover a portion of their fees incurred in defense of the matter, which has been denied by the Court in favor of MMR.
On February 11, 2013, MMR filed a complaint for patent infringement against WebMD Health Corp. and its wholly owned subsidiary WebMD Health Services Group, Inc. (collectively,
"WebMD"), titled MyMedicalRecords, Inc. v. WebMD Health Corp et al., United States District Court, Central District of California. That complaint alleged that WebMD is infringing MMR's
Personal Health Records patent U.S. Patent No. 8,301,466. On October 2, 2013, MMR filed a new complaint against WebMD in the United States District Court for the Central District of
California, alleging infringement of U.S. Patent Nos. 8,301,466 and 8,498,883. On December 22 and 23, 2014, the Court entered orders finding that the eight claims asserted (of the 42 total
claims present) under the two asserted MMR patents were invalid. On January 9, 2015, as previously reported by the Company, the case was closed. Defendants filed a motion with the
District Court to recover a portion of their fees incurred in defense of the matter, which has been denied by the Court in favor of MMR.
On May 17, 2013, MMR filed a complaint for patent infringement against Jardogs, LLC (the "Jardogs Complaint") in the United States District Court for the Central District of California,
alleging that Jardogs, LLC infringes U.S. Patent No. 8,301,466. On September 23, 2013, MMR filed a separate complaint for patent infringement against Allscripts Healthcare Solutions Inc.
("Allscripts") titled MyMedicalRecords, Inc. v. Allscripts Healthcare Solutions Inc., United States District Court, Central District of California (the "Separate Allscripts Complaint"). The Separate
Allscripts Complaint alleged that Allscripts is infringing U.S. Patent Nos. 8,301,466 and 8,498,883. On October 4, 2013, MMR filed a motion to amend the Jardogs Complaint to add Allscripts
as a party defendant and to allege that Allscripts is infringing U.S. Patent Nos. 8,301,466 and 8,498,883. The Court granted that motion on November 1, 2013. Thereafter, MMR dismissed the
Separate Allscripts Complaint. On December 22 and 23, 2014, the Court entered orders finding that the eight claims asserted (of the 42 total claims present) under the two asserted MMR
patents were invalid. On January 9, 2015, as previously reported by the Company, the case was closed. Defendants filed a motion with the District Court to recover a portion of their fees
incurred in defense of the matter, which has been denied by the Court in favor of MMR.
Allscripts also filed a Covered Business Method ("CBM") petition on November 3, 2014, before the Patent Trial and Appeal Board ("PTAB') alleging that claims 8-12 of U.S. Patent No.
8,301,466 are invalid. MMR filed a preliminary response on February 20, 2015. On May 5th the PTAB decided to implement the CBM. On January 15, 2015, MMR filed a notice of appeal in
the Federal Circuit. Subsequently, MMR filed for voluntary dismissal of the appeal which was granted on July 7, 2015. On July 30, 2015, MMR informed the PTAB of the voluntary dismissal of
the appeal, and on August 26, 2015, the PTAB entered a Final Written Decision consistent with the Court's prior rulings.
The decisions handed down in the cases of Quest Diagnostics, WebMD and Jardogs LLC and Allscripts above did not affect MMR's portfolio of other patents, including U.S. Patent Nos.:
8,117,045 ("Method and System for Providing Online Medical Records"); 8,117,646 ("Method and System for Providing Online Records"); 8,121,855 ("Method and System for Providing
Online Medical Records"); 8,321,240 ("Method and System for Providing Online Medical Records"); 8,352,287 ("Method for Proving a User with a Service for Accessing and Collecting
Personal Health Records"); 8,352,288 ("Method for Providing a User with a Web-Based Service for Accessing and Collecting Records"); 8,626,532 ("Method for Providing a User with a Web-Based Service
for Accessing and Collecting Health Records"); 8,645,161 ("Method and System for Providing Online Records"); 8,725,537 ("Method and System for Providing Online
Records"); 8,768,725 ("Method and System for Providing Online Medical Records"); 8,775,212 ("Electronic Health Records in Clinical Trials"); as well as 12 foreign patents including two in
Australia, three in Mexico, three in South Korea, with others in New Zealand, Singapore, Japan and Canada.
On April 2, 2015, the Company and Stradling Yocca Carlson & Rauth, P.C. ("SYCR"), were notified of the determination of an
arbitrator in regards to disputes over amounts of monies due SYCR regarding prior services rendered. SYCR and the Company
has previously agreed to a non-binding arbitration of the matter. The Company received an award in favor of SYCR in the amount
of $285,000 which the Company disputes, notwithstanding, that it represents a reduction of SYCR's original $571,000 claim or $286,000
in favor of the Company. Since the arbitration award is non-binding the Company has
filed an appeal of the remaining award. The Company cannot predict the chances of either a favorable or unfavorable
outcome of the appeal.
On August 14, 2013, Gemini Master Fund, Ltd. purchased a convertible note from the Company. On or about February 23, 2015, Gemini filed an action against the Company for breach
of contract seeking damages allegedly owed pursuant to the convertible note in the amount of $210,000 in the United States District Court for the Southern District of New York. The case has
since been settled and dismissed.
F-15
10. STOCKHOLDERS' DEFICIT
Preferred Stock
The Company has 5,000,000 shares of preferred stock authorized. As of December 31, 2015, and 2014, there were no shares of preferred stock issued and outstanding.
Common Stock
As of December 31, 2015, we are authorized to issue 1,250,000,000 shares of common stock.
On May 24, 2012, the Company filed a Form S-1 related to the offer and resale of up to 20,000,000 shares of our common stock by Granite. Granite agreed to purchase all 20,000,000
shares pursuant to the Investment Agreement, and an additional 200,000 shares were issued to Granite as partial consideration for the preparation of the documents for its investment in the
Company. Subject to the terms and conditions of the Investment Agreement, the Company has the right to put up to $75 million in shares of our common stock to Granite. As of December 31,
2015, the amount available under the equity line facility was $0.
As of December 31, 2015, the total shares of our common stock issued and outstanding amounted to 211,851,177.
On February 2, 2016, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the
"Certificate of Amendment") with the Secretary of State of the State of Delaware effecting a five for one reverse stock split of the
Company's common stock (the "Reverse Stock Split") which became effective in the marketplace on February 8, 2016. The number of
shares and per share amounts have been retroactively restated to reflect this reverse stock split.
11. EQUITY TRANSACTIONS
Stock Option Activity
On January 21, 2010, our Board of Directors approved an increase to the number of shares authorized for issuance under our 2001 Equity Incentive Plan (the "Plan") from 12,000,000 to
27,000,000 shares as we determined that the number of shares remaining under the Plan was inadequate to retain our key directors, executives and managers. Our stockholders approved
the increase to the Plan on June 15, 2010.The Plan expired on June 5, 2011 and no options were issued under the Plan since that date. On September 1, 2011, our Board of Directors
approved the adoption of a new plan to replace the Plan under the same general terms. On June 20, 2012, the shareholder voted and approved the 2011 Equity Incentive Plan at the 2012
Annual Shareholder Meeting.
As of December 31, 2015, total unrecognized stock-based compensation expense related to non-vested stock options was $9,106, which is expected to be recognized during 2016.
A summary of option activity for the years ended December 31, 2014 and 2015 is presented below. Options granted by MMR Inc. prior to the date of the Merger of January 27, 2009 have
been retroactively restated to reflect the conversion ratio of MMR Inc. to MMR shares.
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
Weighted-
|
|
Remaining
|
|
|
|
|
|
|
|
|
Average
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
|
|
Exercise
|
|
Life
|
|
|
Intrinsic
|
|
|
Options
|
|
|
Price
|
|
(Years)
|
|
|
Value
|
Outstanding at December 31, 2014
|
|
7,508,345
|
|
$
|
0.50
|
|
5.08
|
|
$
|
-
|
Granted
|
|
-
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
|
|
|
Cancelled
|
|
(20,000)
|
|
$
|
0.40
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
7,488,345
|
|
$
|
0.50
|
|
3.62
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
|
|
|
|
|
|
|
|
|
|
|
at December 31, 2015
|
|
7,488,345
|
|
$
|
0.50
|
|
3.62
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2015
|
|
7,368,345
|
|
$
|
0.50
|
|
3.60
|
|
$
|
-
|
The aggregate intrinsic value in the table above is before applicable income taxes and is calculated based on the difference between the exercise price of the options and the quoted price
of the common stock as of the reporting date. Total stock option expenses recorded during the years ended December 31, 2015 and 2014 were $22,426 and $157,283, respectively, and is
reflected in operating expenses in the accompanying consolidated statements of operations. During the year ended December 31, 2014, the Company modified the terms of certain stock
options and warrants held by the Company's CEO and its board of directors to extend the expiration date between 3 and 12 months.
The Company recognized $185,476 of incremental cost associated with this modification, which is recorded as a part of stock-based compensation.
The following table summarizes information about stock options outstanding and exercisable at December 31, 2015.
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
Average
|
|
|
Average
|
|
Exercise
|
|
Number
|
|
|
Remaining
|
|
|
Exercise
|
|
Number
|
|
Remaining
|
|
|
Exercise
|
|
Price
|
|
of Shares
|
|
|
Life (Years)
|
|
|
Price
|
|
of Shares
|
|
Life (Years)
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.25 - 0.45
|
|
2,560,000
|
|
|
5.81
|
|
$
|
0.35
|
|
2,420,000
|
|
5.81
|
|
$
|
0.30
|
$
|
0.50 - 0.75
|
|
4,602,292
|
|
|
2.44
|
|
$
|
0.55
|
|
4,602,292
|
|
2.44
|
|
$
|
0.55
|
$
|
> 0.75
|
|
326,053
|
|
|
2.64
|
|
$
|
0.90
|
|
326,053
|
|
2.64
|
|
$
|
0.90
|
|
|
|
7,488,345
|
|
|
|
|
|
|
|
7,348,345
|
|
|
|
|
|
F-16
Warrants
On March 4, 2014, we granted an unrelated third party a warrant to purchase 500,000 shares of our common stock. This warrant vests immediately and has an exercise price of $0.06 per
share, and an expiration date of February 28, 2015.
On March 4, 2014, we granted an unrelated third party a warrant to purchase 500,000 shares of our common stock. This warrant vests upon three successful Hospital Sign up of MMR
Patient View Portal and has an exercise price of $0.10 per share, and an expiration date of February 28, 2015.
On March 4, 2014, we granted an unrelated third party a warrant to purchase 250,000 shares of our common stock. This warrant vests in six months and has an exercise price of $0.06
per share, and an expiration date of March 4, 2016.
On March 27, 2014, we granted an unrelated third party a warrant to purchase 250,000 shares of our common stock. This warrant vests in one year and has an exercise price of $0.06
per share, and an expiration date of March 27, 2019.
On April 8, 2014, we granted and unrelated third-party a warrant to acquire 250,000 shares of common stock in consideration for services. The warrant vests equally over three years, has
an exercise price of $0.06 per share, and an expiration date of April 8, 2019.
On April 30, 2014, we granted and unrelated third-party a warrant to acquire 250,000 shares of common stock in consideration for services. The warrant vests equally over three years,
has an exercise price of $0.06 per share, and an expiration date of April 30, 2019.
On May 29, 2014, we granted an unrelated third party a warrant to purchase 500,000 shares of our common stock as part of a warrant exchange program. This warrant vests immediately
and has an exercise price of $0.024 per share, and an expiration date of May 29, 2015.
On May 29, 2014, we granted an unrelated third party a warrant to purchase 500,000 shares of our common stock in consideration for services. This warrant vests in one year and has an
exercise price of $0.06 per share, and an expiration date of May 29, 2015.
On July 10, 2014, we granted The RHL Group a warrant to purchase 2,781,561 shares of our common stock in connection with the renewal of the line of credit through the Ninth Amended Note.
This warrant has an exercise price of $0.035 per share, with an expiration date of June 4, 2019, and vests at commencement.
On May 19, 2015, we granted the RHL Group, Inc. a warrant to purchase 352,928 shares of common stock in connection with the renewal of the line of credit through the Tenth Amended Note.
This warrant has an exercise price of $0.015 per share, with an expiration date of May 19, 2020, and vests at commencement.
A summary of the activity of the Company's warrants for the year ended December 31, 2015 is presented below.
|
|
|
|
Weighted Avg
|
|
Shares
|
|
|
Exercise Price
|
Outstanding at December 31, 2014
|
14,005,682
|
|
$
|
0.30
|
Granted
|
352,928
|
|
|
0.02
|
Exercised
|
-
|
|
|
0.00
|
Cancelled
|
(2,930,000)
|
|
|
0.36
|
Outstanding at December 31, 2015
|
11,428,610
|
|
$
|
0.30
|
|
|
|
|
|
Exercisable at December 31, 2015
|
10,470,960
|
|
$
|
0.31
|
The following summarizes the total warrants outstanding and exercisable as of December 31, 2015.
|
|
Warrants Outstanding
|
|
Warrants Exercisable
|
|
|
Warrants
|
|
Weighted Avg
|
|
|
Weighted Avg
|
|
Warrants
|
|
Weighted Avg
|
|
|
Weighted Avg
|
Ranges
|
|
Outstanding
|
|
Remaining Life
|
|
|
Exercise Price
|
|
Exercisable
|
|
Remaining Life
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.02 - $0.30
|
|
8,182,798
|
|
1.92
|
|
$
|
0.15
|
|
7,625,147
|
|
1.92
|
|
$
|
0.20
|
$0.30 - $0.50
|
|
805,000
|
|
0.57
|
|
|
0.50
|
|
605,000
|
|
0.25
|
|
|
0.45
|
Greater $0.50
|
|
2,440,812
|
|
0.95
|
|
|
0.75
|
|
2,240,813
|
|
1.01
|
|
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,428,610
|
|
|
|
|
|
|
10,470,960
|
|
|
|
|
|
Shares Issued for Services or Reduction to Liabilities
During the year ended December 31, 2015, we issued 25,557,562 shares of common stock with a value of $399,944 and charged to the appropriate accounts for the following reasons:
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
Purpose
|
|
Shares
|
|
|
Value
|
|
|
|
|
|
|
Services provided
|
|
400,000
|
|
$
|
38,200
|
Reduction of payables
|
|
25,157,562
|
|
$
|
361,744
|
Totals
|
|
25,557,562
|
|
$
|
399,944
|
The 25,557,562 shares were not contractually restricted, however as they have not been registered under the Act, they are restricted from sale until they are registered under the
Securities Act of 1933, as amended (the "Act"), or qualify for resale under the rules promulgated under the Act. All such shares were issued at the trading closing price on the date of issuance
and the corresponding values were calculated therefrom.
F-17
Restricted Stock Program
Under the Restricted Stock Program, a restricted stock award is an offer by the Company to sell to an eligible person shares that are subject to restrictions relating to the sale or transfer
of the shares. A committee appointed by the Board to administer the program or the Board itself shall determine to whom an offer will be made, the number of shares the person may
purchase, the price to be paid and the restriction to which the shares shall be subject. The offer must be accepted by the eligible person within thirty days from the date of the offer evidenced
by the Restricted Stock Purchase Agreement. The purchase price of shares shall not be less than 85% of the fair market value of such shares on the issue date, with the provision that the
purchase price for a 10% stockholder shall not be less than 110% of such fair market value. Shares are either fully and immediately vested upon issuance, or may vest in installments upon
attainment of specified performance objectives.
During the year ended December 31, 2015 and 2014, the Company issued 25,557,562 and 3,708,506, respectively, shares of common stock in consideration for goods and services from
both employees and non-employees valued at $399,944 and $604,395, respectively.
Stock Bonus Program
Under the Stock Bonus Program, shares are issued as a bonus for services rendered pursuant to the Stock Bonus Agreement. Stock bonuses may be awarded upon satisfaction of
specified performance goals pursuant to the Performance Stock Bonus Agreement. Total stock bonus expenses recorded during the years ended December 31, 2015 and 2014 was approximately $0 and
$308,375, respectively, and is reflected in operating expenses in the accompanying consolidated statements of operations.
On December 31, 2013, we issued a total of 7,000,000 shares of our common stock at $0.05 per share as an incentive to our board members and members of our management team
under the Stock Bonus Program. All shares vested on January 1, 2015 were forfeitable before such time.
12. NOTES PAYABLE
The Notes payable consisted of the following:
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|
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December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
Promissory notes payable due to the former officers of MMRGlobal as part of severance
packages, due in full on August 31, 2009 with no stated interest
|
|
$
|
76,783
|
|
$
|
76,783
|
|
|
|
|
|
|
|
Promissory notes payable due to the former officers of MMRGlobal pursuant to the
Resignation and Post-Merger Employment Arrangement, due in full on August 31, 2009
with no stated interest
|
|
|
25,444
|
|
|
25,444
|
|
|
|
|
|
|
|
Promissory notes payable due to vendors relating to settlement of certain outstanding
accounts payable, payable in 18 equal monthly installments commencing on July 27, 2009
and ending on January 27, 2011, with no stated interest
|
|
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223,116
|
|
|
223,116
|
|
|
|
|
|
|
|
Short-term loan due to a third-party with 6% interest
|
|
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44,070
|
|
|
35,000
|
|
|
|
369,413
|
|
|
360,343
|
Less: current portion
|
|
|
(369,413)
|
|
|
(360,343)
|
Notes payable, less current portion
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
Short term loan due to a related-party, payable in full on January 2, 2014 with 12% interest
|
|
$
|
41,561
|
|
$
|
203,664
|
|
|
|
|
|
|
|
Short term loan due to a related-party, payable in full on May 31, 2014 with 12% interest
|
|
|
50,000
|
|
|
50,000
|
|
|
|
|
|
|
|
Notes payable related party, current portion
|
|
|
91,561
|
|
|
253,664
|
|
|
|
|
|
|
|
Less: current portion
|
|
|
(91,561)
|
|
|
(253,664)
|
Notes payable related party, less current portion
|
|
$
|
-
|
|
$
|
-
|
13. CONVERTIBLE PROMISSORY NOTES
From time to time, we issue Convertible Promissory Notes. As of December 31, 2015, a total of $323,749 in convertible notes remained outstanding. As of December 31, 2015, $198,749 of
these Notes have matured, however, the Company and the remaining Holder(s) have agreed to keep the balance as a Note Payable and the note holders have elected not to convert their
note balances into shares of our common stock as of December 31, 2015.
Each Note contains the following general terms and provisions:
The principal amount owed under each note becomes due and payable one year or less from the investment date provided that, upon ten (10) days' prior written notice to the holder, we
may, in our sole discretion, extend the maturity date for an additional six month term. The Notes can be further extended upon mutual agreement.
These notes bear interest at a rate of 6% per annum payable in cash or shares of common stock or a combination of cash and shares of common stock at our option.
During the first quarter of 2015, we did not enter into any Convertible Promissory Notes.
During the second quarter of 2015, we did not enter into any Convertible Promissory Notes, however, the Company still has one Convertible Promissory Note with one unrelated third-party
for a principal amount of $198,749. This note has the option to be converted into a total of 6,779,661 shares of our common stock. As of December 31, 2015, this note has not been
converted.
During the third quarter of 2015, we did not enter into any Convertible Promissory Notes.
During the fourth quarter of 2015, we did not enter into any new Convertible Promissory Notes.
F-18
We recognized the intrinsic value of the embedded beneficial conversion feature as additional paid in capital and an equivalent discount that reduced the carrying value of the convertible
notes in the amount of $33,000 and $124,120, for the years ended December 31, 2015 and 2014, respectively.
The related discount for the beneficial conversion outstanding was $0 and $45,560 as of December 31, 2015 and 2014 respectively.
Shares issuable upon conversion for convertible notes payable was 1,355,932 and 16,879,041 as of December 31, 2015 and 2014, respectively.
The total interest expense attributed to the Beneficial Conversion Feature of the Notes and related warrants for the year ended December 31, 2015 and 2014 was $78,560 and
$214,953, respectively.
14. RESTRUCTURING ACTIVITIES
From May 29, 2008 to November 7, 2008, Favrille, Inc. had provided notices under the federal Worker Adjustment and Retraining Notification Act to 142 employees, including six
members of senior management, that it planned to conduct a workforce reduction at its facility in San Diego, California and that their employment was expected to end on various dates
between June 6, 2008 to November 7, 2008. Immediately prior to the date of the Merger on January 27, 2009, the total severance liability relating to former Favrille employees amounted to
$1,682,416. On January 27, 2009, immediately prior to the Merger, as part of the 9,999,992 warrants issued to creditors, the Company issued warrants as settlement of $985,020 of these
amounts. In addition, the Company signed promissory notes with certain former executives totaling $76,783.
As of December 31, 2015, the total remaining severance liabilities amounted to $620,613, which is reflected as severance liability on the accompanying consolidated balance sheets. No
payments were made during the years ended December 31, 2015 or 2014 on these severance liabilities.
During the period from January 27, 2009 through June 30, 2009, the Company entered into a series of settlement agreements with certain vendors of Favrille pursuant to the Creditor
Plan, in which the Company settled $302,982 of its outstanding accounts payable for an aggregate settlement amount of $214,402, including promissory notes of $139,355.
15. RELATED PARTY TRANSACTIONS
Our Chairman and Chief Executive Officer, Robert H. Lorsch, is also the Chief Executive Officer of The RHL Group, Inc. and has full voting power over all of the capital stock of The RHL
Group, Inc. Mr. Lorsch directly and indirectly through The RHL Group, Inc., beneficially owns approximately 21.8% of our total outstanding voting stock. The RHL Group, Inc. has loaned us money
pursuant to the Tenth Amended Note and any predecessor notes. See Note 3 - Related Party Note Payable above.
The RHL Group is an investment holding company which provides consulting, operational and technical services to the Company, which we refer to as the RHL Services. As part of the
RHL Services, the RHL Group provides the Company with unrestricted access to its internal business and relationship contact database of more than 10,000 persons and entities, which
includes clients of the RHL Group and other individuals which may hold value to the Company. The RHL Group also provides infrastructure support to us, including allowing us unlimited
access to its facilities, equipment, and data, information management and server systems. In addition to allowing us the use of its office support personnel, the RHL Group has also consented
to allow us to utilize the full-time services of Mr. Lorsch as the Company's President, Chairman and Chief Executive Officer, which requires substantial time and energy away from his required
duties as The RHL Group's Chairman and Chief Executive Officer. In addition, The RHL Group has made its President, Kira Reed, available as the Company's spokesperson. Ms. Reed, who
is Mr. Lorsch's spouse, also manages our social networking activities.
On March 28, 2016, the Board approved the issuance of the following securities, which shall be issued no later than April 19, 2016:
-
5-year Stock Options totaling 14,000,000 shares of Common Stock at $0.02 per share to our Directors (10,000,000 to Robert H. Lorsch, and 1,000,000 to each of the other directors.
-
An option for the RHL Group to convert up to $100,000 of principal on the Amended and Restated Note into 5,000,000 shares of Common Stock at a price of $0.02 per share
in addition to any conversion rights in the existing note.
In consideration for the above, The RHL Group, Inc. has a consulting arrangement with MMR. A copy of the consulting agreement is filed as an Exhibit in our current report on Form 8-K
filed with the SEC on May 4, 2009 and is hereby incorporated by reference.
We incurred $50,000 each year during the years ended December 31, 2015 and 2014, toward marketing consulting services from Bernard Stolar, a director. We included $206,272 and
174,273 in related party payables as of December 31, 2015, and 2014, respectively, in connection with these services.
We contract with a significant vendor for the development and maintenance of the software applications necessary to run our MyMedicalRecords PHR, MyEsafeDepositBox and
MyMedicalRecords Pro products. Our outside developer supports our software development needs through a team of software engineers, programmers, quality control personnel and testers,
who work with our internal product development team on all aspects of application development, design, integration and support of our products. This vendor is also a stockholder. For the
year ended December 31, 2015 and 2014, the total expenses relating to this stockholder amounted to $120,000 and $120,000, respectively.
As of December 31, 2015 and 2014, the total amounts due to the stockholder and included in related party payables amounted to
$130,000 and $10,000, respectively.
On September 15, 2009, we entered into a five year agreement with E-Mail Frequency, LLC and David Loftus, Managing Partner of E-Mail Frequency, LLC, a significant stockholder of
the Company. Under the Agreement the Company acquired the rights to license an existing 80 million person direct marketing database (the "Database") of street addresses, cellular phone
numbers, e-mail addresses and other comprehensive data with E-Mail Frequency. The agreement allows us to market, through the use of the Database, our MyMedicalRecords PHR,
MyEsafeDepositBox virtual vault, and MMRPro document management system to physicians and their patients. Under the terms of the Agreement, we paid $250,000 to David Loftus as a
one-time consulting fee in the form of 555,556 shares of our common stock. We recorded the $250,000 one-time licensee fee as a prepaid consulting fee. Amortization expense for the years
ended December 31, 2014 and 2013 was $50,000 per year. In addition, we incurred a total of $0 and $15,020 during the years ended December 31, 2014 and 2013, respectively, toward
convertible notes interest to Mr. Loftus. We included in related party payables at December 31, 2014 and December 31, 2013 of $64,615 and $64,615, respectively, in respect to these
services. Furthermore, Mr. Loftus is a value-added-reseller of MMRPro systems. We recognized $0 and $ 0 in revenue from E-Mail Frequency for the sale of MMRPro systems, during 2015
and 2014, respectively. On July 19, 2012, we entered into a 6% Convertible Promissory Note with Mr. Loftus for a principal amount of $157,422 and warrants to purchase our common stock.
Effective September 1, 2011, we signed an Amendment to the Agreement dated September 15, 2009 to provide licensor a non- exclusive right to target, market and exploit the Employee
Benefits market.
On October 19, 2015 Mr. Loftus Converted the Promissory Notes into 5,588,651 shares of the Company's Common Stock.
F-19
16. SUBSEQUENT EVENTS
On February 2, 2016, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the "Certificate of Amendment") with the Secretary of State
of the State of Delaware effecting a five for one reverse stock split of the Company's common stock (the "Reverse Stock Split"). The Reverse Stock Split became effective in the marketplace
on February 8, 2016 at which time every five (5) shares of the Company's issued and outstanding common stock were automatically converted into one (1) issued and outstanding share of
the Company's common stock, without any change in the par value per share. The Certificate of Amendment provides that no fractional shares will be issued. Instead, the Company will issue
to the Stockholders one additional share of Common Stock for each fractional share. The new CUSIP number for the Company's common stock following the Reverse Stock Split is 55314U207.
On March 28, 2016, the Board approved the issuance of the following securities, which shall be issued no later than April 19, 2016:
-
5-year Stock Options totaling 14,000,000 shares of Common Stock at $0.02 per share to our Directors (10,000,000 to Robert H. Lorsch, and 1,000,000 to each of the other directors.
-
An option for the RHL Group to convert up to $100,000 of principal on the Amended and Restated Note into 5,000,000 shares of Common Stock at a price of $0.02 per share
in addition to any conversion rights in the existing note.
-
3-year Stock Options and/or Warrants totaling 10,000,000 shares of Common Stock to certain employees, legal counsel, and consultants at a strike price of $0.02 per share
on terms consistent with the Company's existing option and warrant agreements.
F-20