Item
1. Financial Statements.
MedeFile International, Inc.
Consolidated Balance Sheets
(Unaudited)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
44,323
|
|
|
$
|
38,371
|
|
Accounts receivable
|
|
|
-
|
|
|
|
4,965
|
|
Merchant services reserve
|
|
|
2,938
|
|
|
|
2,938
|
|
Total
assets
|
|
$
|
47,261
|
|
|
$
|
46,274
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
20,052
|
|
|
$
|
14,857
|
|
Note payable - related party
|
|
|
100,508
|
|
|
|
-
|
|
Convertible debenture - related party
|
|
|
16,065
|
|
|
|
15,681
|
|
Deferred revenues
|
|
|
560
|
|
|
|
439
|
|
Derivative liability convertible note
|
|
|
13,613
|
|
|
|
19,067
|
|
Total
current liabilities
|
|
|
150,798
|
|
|
|
50,044
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.0001 par
value: 10,000,000 authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.0001 par value: 700,000,000 authorized; 28,756,010 and 28,756,010 shares issued and outstanding on March 31, 2016 and December 31, 2015, respectively
|
|
|
2,875
|
|
|
|
2,875
|
|
Additional paid-in capital
|
|
|
28,504,754
|
|
|
|
28,504,754
|
|
Accumulated deficit
|
|
|
(28,611,166
|
)
|
|
|
(28,511,399
|
)
|
Total
stockholders' equity
|
|
|
(103,537
|
)
|
|
|
(3,770
|
)
|
Total
liabilities and stockholders' equity
|
|
$
|
47,261
|
|
|
$
|
46,274
|
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
MedeFile International, Inc.
Consolidated Statements
of Operations
(Unaudited)
|
|
For the
|
|
|
For the
|
|
|
|
three months
|
|
|
three months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
|
$
|
4,995
|
|
|
$
|
13,100
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
-
|
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
4,995
|
|
|
|
12,784
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
109,323
|
|
|
|
165,275
|
|
Depreciation and amortization expenses
|
|
|
-
|
|
|
|
22,149
|
|
Total operating expenses
|
|
|
109,323
|
|
|
|
187,424
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(104,328
|
)
|
|
|
(174,640
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Interest expense - convertible note - related party
|
|
|
(893
|
)
|
|
|
(2,048
|
)
|
Change in fair value of derivative liabilities
|
|
|
5,454
|
|
|
|
(33,192
|
)
|
Total other income (expense)
|
|
|
4,561
|
|
|
|
(35,240
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(99,767
|
)
|
|
$
|
(209,880
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share: basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average share outstanding: basic and diluted
|
|
|
26,793,559
|
|
|
|
664,743
|
|
The accompanying
notes are an integral part of these unaudited consolidated financial statements.
MedeFile International, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the
|
|
|
For the
|
|
|
|
three months
|
|
|
three months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(99,767
|
)
|
|
$
|
(209,880
|
)
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
-
|
|
|
|
22,149
|
|
Change in fair value of derivative liabilities
|
|
|
(5,454
|
)
|
|
|
33,192
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
4,965
|
|
|
|
487
|
|
Inventory
|
|
|
-
|
|
|
|
316
|
|
Prepaid expense
|
|
|
-
|
|
|
|
5,709
|
|
Accounts payable and accrued liabilities
|
|
|
5,195
|
|
|
|
2,189
|
|
Accrued interest - convertible debenture
|
|
|
384
|
|
|
|
2,048
|
|
Accrued interest - note payable
|
|
|
508
|
|
|
|
-
|
|
Deferred revenue
|
|
|
121
|
|
|
|
334
|
|
Net cash used in operating activities
|
|
|
(94,048
|
)
|
|
|
(143,456
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from note payable - related party
|
|
|
100,000
|
|
|
|
-
|
|
Proceeds from common stock subscriptions
|
|
|
-
|
|
|
|
620,000
|
|
Net cash provided by financing activities
|
|
|
100,000
|
|
|
|
620,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
5,952
|
|
|
|
476,544
|
|
Cash and cash equivalents at beginning of period
|
|
|
38,371
|
|
|
|
36,170
|
|
Cash and cash equivalents at end of period
|
|
$
|
44,323
|
|
|
$
|
512,714
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities
|
|
|
|
|
|
|
|
|
Stock issued for conversion of debt
|
|
$
|
-
|
|
|
$
|
40,000
|
|
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
Medefile
International, Inc.
Notes
to Unaudited Consolidated Financial Statements
1.
BASIS OF PRESENTATION AND GOING CONCERN
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of MedeFile International Inc., a Nevada corporation (the "Company"),
have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These
unaudited consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-K for the
fiscal year ended December 31, 2015. In the opinion of management, these unaudited consolidated financial statements reflect all
adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company
as of March 31, 2016, and the results of operations and cash flows for the three months ended March 31, 2016 and 2015. The results
of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for
the entire fiscal year.
Going
Concern
The
accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. However,
the Company has reported a net loss of $99,767 for the three months ended March 31, 2016 and has negative working capital of $103,537
as of March 31, 2016.
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. The operating losses
and working capital deficit raise substantial doubt about the Company's ability to continue as a going concern. The Company's
ability to obtain additional financing depends on the success of its growth strategy and its future performance, each of which
is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond the Company's control.
We
will need additional investments in order to continue operations. Additional investments are being sought, but we cannot guarantee
that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities,
obtaining credit facilities, or other financing mechanisms.
However,
the trading price of our common stock could make it more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, we may incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if
we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may
have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not
available or is not available on acceptable terms, we will have to curtail our operations.
Fair
Value of Financial Instruments
Cash
and Equivalents, Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Accounts Payable, Accrued Salaries and Wages
and Other Current Liabilities
The
carrying amounts of these items approximated fair value.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting
Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).
Level 1
—Valuations
based on quoted prices for identical assets and liabilities in active markets.
Level 2
—Valuations
based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs
that are observable or can be corroborated by observable market data.
Level 3
—Valuations
based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market
participants. These valuations require significant judgment.
The
application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities as of March 31,
2016 and December 31, 2015 are described below:
|
|
Fair
Value Measurements
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,613
|
|
|
$
|
13,613
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,613
|
|
|
$
|
13,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,067
|
|
|
$
|
19,067
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,067
|
|
|
$
|
19,067
|
|
Derivative
liability as of March 31, 2016 is $13,613, compared to $19,067 as of December 31, 2015.
2.
NOTE PAYABLE – RELATED PARTY
During
the three months ended March 31, 2016, the Company entered into two unsecured 7% Promissory Notes with a significant shareholder.
The notes have a six month tem and are in the amount of $50,000 each.
The
changes in notes payable to related party consisted of the following during the three months ended March 31, 2016:
|
|
Three
Months Ended March 31,
2016
|
|
Notes payable –
related party at beginning of period
|
|
$
|
-
|
|
Borrowings
on notes payable – related party
|
|
|
100,000
|
|
Accumulated
interest
|
|
|
508
|
|
Notes
payable – related party at end of period
|
|
$
|
100,508
|
|
3.
CONVERTIBLE DEBENTURE – RELATED PARTY
The
Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November
4, 2013 and $60,000 on December 17, 2013. The debentures carry a one year term. Both debentures have a conversion feature at a
share price of the lower of $1.00 or 80% of the previous day’s closing price. During the year ended December 31, 2015, the
lender converted $40,000 of the note principal and the Company made a payment of $70,000.
The
outstanding notes payable to related party consisted of the following as of March 31, 2016 and December 31, 2015:
|
|
Three
Months Ended
March 31, 2016
|
|
Convertible
debenture – related party at beginning of period
|
|
$
|
15,681
|
|
Conversion
|
|
|
-
|
|
Repayment
|
|
|
-
|
|
Accumulated
interest
|
|
|
384
|
|
Convertible
debenture – related party at end of period
|
|
$
|
16,065
|
|
4.
DERIVATIVE LIABILITIES
In
connection with certain securities purchase agreements entered into during the third quarter of 2011 and the second quarter of
2012, the Company granted warrants with ratchet provisions. The warrants contain an expiration date of four years from the date
of grant. During the first two years of grant, if the Company issues any additional shares of common stock at a price per share
less than the exercise price in effect, the exercise price will be adjusted to equal the average price per share received by the
Company for the additional shares issued. After the first two years following the issuance date, if the Company issues any additional
shares of common stock at a price per share less than the exercise price in effect, the exercise price will be adjusted using
a formula based on the existing exercise price, the outstanding shares before and after the issuance of such shares, and the average
price during the issuance of such shares. In addition to the exercise price adjustment, the number of shares upon exercise of
the warrants is also subject to adjustment.
Upon
grant, the Company assesses the fair value of the warrants using the Black Scholes pricing model and records a warrant liability
for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases
or decreases the warrant liability to the new value, and records a corresponding gain or loss (see below for variables used in
assessing the fair value).
Due
to the ratchet provisions, the Company treats the warrants as a derivative liability in accordance with the provisions of ASC
815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features
that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s
own common stock.
Transactions
involving warrants with ratchet provisions during the three months ended March 31, 2016 are as follows:
|
|
Number
of Warrants
|
|
|
Weighted-Average
Price Per Share
|
|
Outstanding
at December 31, 2015
|
|
|
60,000
|
|
|
$
|
10
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
|
|
|
|
10
|
|
Addition
due to ratchet trigger
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at March 31, 2016
|
|
|
60,000
|
|
|
$
|
10
|
|
The
fair value of the warrant derivative liabilities was estimated using the Black-Scholes Option Pricing Model and the following
assumptions as of March 31, 2016:
|
|
March
31, 2016
|
|
Risk-free
interest rate
|
|
|
0.18
|
%
|
Expected stock price
volatility
|
|
|
269
|
%
|
Expected dividend
payout
|
|
|
-
|
|
Expected option
in life-years
|
|
|
.05
|
|
The
change in fair value of the warrant derivative liability consisted of the following during the three months ended March 31, 2016:
|
|
March
31, 2016
|
|
Warrant
liability (beginning fair value)
|
|
$
|
1,271
|
|
Additional liability
due to new grants
|
|
|
-
|
|
Loss
(gain) on changes in fair market value of warrant liability
|
|
|
(1,271
|
)
|
Warrant
liability (ending fair value)
|
|
$
|
-
|
|
Change
in fair market value of warrant liability resulted in a gain of $1,271 for the three months ended March 31, 2016.
The
Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November
4, 2013 and $60,000 on December 17, 2013. The debentures carry a one year term. Debentures have a conversion feature at a share
price of the lower of $1.00 or 80% of the previous day’s closing price.
The
Company assesses the fair value of the convertible debenture using the Black Scholes pricing model and records a derivative liability
for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases
or decreases the liability to the new value, and records a corresponding gain or loss (see below for variables used in assessing
the fair value).
Due
to the variable conversion rates, the Company treats the convertible debenture as a derivative liability in accordance with the
provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments
or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially
settle in an entity’s own common stock. The fair value of the conversion options was determined using the Black-Scholes
Option Pricing Model and the following significant assumptions during the three months ended March 31, 2016:
|
|
March
31, 2016
|
|
Risk-free
interest rate
|
|
|
.08
|
%
|
Expected stock price
volatility
|
|
|
258
|
%
|
Expected dividend
payout
|
|
|
-
|
|
Expected option
in life-years
|
|
|
.50
|
|
The
change in fair value of the conversion option derivative liability consisted of the following during the three months ended March
31, 2016:
|
|
March
31, 2016
|
|
Conversion
option liability (beginning fair value)
|
|
$
|
17,796
|
|
Additional liability
due to new grants
|
|
|
-
|
|
Loss
(gain) on changes in fair market value of warrant liability
|
|
|
(4,183
|
)
|
Conversion
option liability (ending fair value)
|
|
$
|
13,613
|
|
Change
in fair market value of conversion option liability resulted in a gain of $4,183 for the three months ended March 31, 2016.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain "forward-looking
statements." The terms "believe," "anticipate," "intend," "goal," "expect,"
and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's current
expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in the forward-looking statements, including customer
acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. In light of
the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should
not be regarded as a representation that the strategy, objectives or other plans of the Company will be achieved. The Company
wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date
made. Except as may be required under applicable securities laws, we undertake no duty to update this information.
OVERVIEW
Organizational
History
On
November 1, 2005, Bio-Solutions International, Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the
"Agreement") with OmniMed Acquisition Corp., (the "Acquirer), a Nevada corporation and a wholly owned subsidiary
of Bio-Solutions, OmniMed International, Inc., a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the
"OmniMed Shareholders"). Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed
from the OmniMed Shareholders.
As
a result of the Agreement, the OmniMed Shareholders assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions
changed its name to OmniMed International, Inc. Effective January 17, 2006, OmniMed changed its name to MedeFile International,
Inc. ("MedeFile" or the "Company").
Overview
of Business
MedeFile
International, Inc., through its MedeFile, Inc. subsidiary, has developed and globally markets a proprietary, patient-centric,
Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s
actual medical records. Our goal is to revolutionize the medical industry by bringing patient-centric digital technology to the
business of medicine. We intend to accomplish our objective by providing individuals with a simple and secure way to access their
lifetime of actual medical records in an efficient and cost-effective manner. Our products and services are designed to provide
healthcare providers with the ability to reference their patient's actual past medical records, thereby ensuring the most accurate
treatment and services possible while simultaneously reducing redundant procedures.
Interoperable
with most electronic medical record systems utilized by physician practices, clinics, hospitals and other care providers, the
highly secure, feature-rich MedeFileiPHR solution has been designed to gather all of its members’ actual medical records
on behalf of each member, and create a single, comprehensive Electronic Health Record (EHR). The member can access
his/her records 24-hours a day, seven days a week – or authorize a third party user – on any web-enabled device (PC,
cell phone, PDA, e-reader, et al), as well as the portable MedeFile flash drive/keychain or branded UBS-bracelet.
By
subscribing to the MedeFile system, members can empower themselves to take control of their own health and well-being, as well
as empower their healthcare providers to make sound and lifesaving decisions with the most accurate, up-to-date medical information
available. In addition, with MedeFile, members enjoy the peace of mind that comes from knowing that their medical records
are protected from fire, natural disaster, document misplacement or the closing of a medical or dental practice.
We believe
we enjoy a number of direct, competitive advantages over others in the medical records marketplace, including that:
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We
have developed products and services geared to the patient, which also have the depth
and breadth of information required by treating physicians and medical personnel
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We
do all the work of collecting and updating medical information on an ongoing basis; our
products’ dependence on the patient taking action is minimal – particularly
when compared to patient action required to support competing solutions.
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We
provide a complete medical record. Other companies claim complete longitudinal
records, but in reality only provide histories (usually completed by the member/patient),
which are by no means complete or necessarily accurate records
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We
provide a coherent mix of services and products that are intended to improve the quality
of healthcare by enabling the patient to manage and access the information normally retained
by doctors and other care providers.
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RESULTS
OF OPERATIONS
FOR
THE THREE MONTHS ENDED March 31, 2016 COMPARED TO THE THREE MONTHS ENDED March 31, 2015
Revenues
Revenues
for the three months ended March 31, 2016 totaled $4,995 compared to revenues of $13,100 during the three months ended March 31,
2015. The decrease in membership revenue is primarily related to amount of members and medical record reimbursement
revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’
doctors for sending updated medical records to MedeFile. The off-setting expense is charged to selling, general and administrative
expense. Revenues received from memberships are recognized through the period of the membership, and, therefore, revenue
recognized represents a fraction of the membership in the quarter being reported.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the three months ended March 31, 2016 totaled $109,323, a decrease of $55,952 or approximately
33.9% compared to selling, general and administrative expenses of $165,275 for the three months ended March 31, 2015. The decrease
was due mainly to decreased payroll, legal expense, and consulting fees.
Amortization
Expense
Amortization
expense for the three months ended March 31, 2016 was $0, compared to $22,149 the three months ended March 31, 2015. Amortization
expense in 2015 is the expensing of the website development. Website costs were impaired in the previous year and the Company
incurred an impairment expense of $182,195
Interest
Expense
Interest
expense on convertible debentures for the three months ended March 31, 2016 and 2015, was $893 and $2,043 respectively. The
Company entered into two secured convertible debentures during the third quarter of 2013. The notes have a one year
term at a 10% interest rate.
Other
Expense
Gain
on change in fair value of derivate liabilities for the three months ended March 31, 2016 was $5,454 compared to a loss of $33,243
for the three months ended March 31, 2015
Net
Loss
For
the reasons stated above, our net loss for the three months ended March 31, 2016 was $99,767, or $0.00 per share, a decrease of
$110,113, compared to net loss of $209,880, or $0.02 per share, for the three months ended March 31, 2015. The significant change
is directly related to adjustments in the fair value of our derivative liability and a decrease in our selling, general and administrative
expenses.
FINANCIAL
CONDITION
Liquidity
and Capital Resources
As
of March 31, 2016, we had cash and cash equivalents of $44,323, and merchant services reserve of $2,938. Net cash
used in operating activities for the three months ended March 31, 2016 was approximately $94,048. Our current liabilities as of
March 31, 2016 of $150,798 consisted of: $20,052 for accounts payable and accrued liabilities, deferred revenues of $560, convertible
debenture of $16,065, note payable of $100,508, and derivative liability of $13,613. We have a net working capital deficit of
$103,537 as of March 31, 2016.
The
accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company
has reported a net loss of $99,767 for the three months ended March 31, 2016 and had an accumulated deficit of $28,611,166
as of March 31, 2016.
The
Company currently estimates that it will require approximately $420,000 to continue its operations for the next twelve months. Additional
investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions
may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the
trading price of our common stock and conditions in the U.S. stock and debt markets could make it more difficult to obtain financing
through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could
incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements
that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may
experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing
holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to
curtail our operations.
Off-Balance
Sheet Arrangements
We
do not have any off balance sheet arrangements as of March 31, 2016 or as of the date of this report.
Critical
Accounting Policies
The
preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in
the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses,
and the disclosure of contingent assets and liabilities.
We
base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the
circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number
of significant accounting policies affecting our condensed consolidated financial statements, we believe the following critical
accounting policies involve the most complex, difficult and subjective estimates and judgments:
Revenue
Recognition
The
Company generates revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare
information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria
which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred;
(3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and
(4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
Stock-based
Compensation
The
Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued
to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of
the related agreement.