Notes
to Consolidated Financial Statements
March
31, 2016
Note
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
Medifirst
Solutions, Inc. ("MSI" or the "Company") was incorporated in Nevada in November 2010. The Company has not
generated significant sales to date. The Company intends to have a diverse product line of consumer products. Since inception,
the Company has been engaged in business planning activities, including researching the industry, identifying target markets for
the Company's products, developing the Company's models and financial forecasts, performing due diligence regarding potential
geographic locations most suitable for establishing the Company's offices and identifying future sources of capital. At the present
time, the Company is building products and affiliations in and related to the cosmetic healthcare industry.
Pursuant
to a sale and purchase agreement dated August 19, 2015 between the Company and the Company's president, the Company acquired 100%
of the equity interests in Medical Lasers Manufacturer, Inc. ("MLM") with the total purchase price of 20,000 shares
of the Company's common stock at $0.001 per share (or $20). The fair value of the acquired entity was $20.
The
transaction was considered as a business acquisition and accordingly the acquisition method of accounting has been applied. MLM
had no assets at the date of the business combination.
The
Consolidated financial statements include the accounts of MSI and its only wholly owned subsidiary, MLM. All material intercompany
balances and transactions have been eliminated in consolidation.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding
to operationalize the Company’s current technology.
Basis
of Presentation
The
accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles
for interim financial information. Certain information and footnote disclosures normally included in annual financial statements
prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such principles
and regulations of the Securities and Exchange Commission for Form 10-Q. All adjustments, consisting of normal recurring adjustments,
have been made which, in the opinion of management, are necessary for a fair presentation of the results of interim periods. The
results of operations for such interim periods are not necessarily indicative of the results that may be expected for a full year
because of, among other things, seasonality factors in the retail business. The unaudited financial statements contained herein
should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2015.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The
following policies reflect specific criteria for the various revenues streams of the Company:
Revenue
is recognized at the time the product is delivered or services are performed. Provision for sales returns are estimated based
on the Company's historical return experience. Revenue is presented net of returns.
Notes
receivable (Investor)
In January 2016 the company
entered into a securities purchase agreement with an investor (as more fully described in Note 5 below). As part of that agreement,
the company issued convertible 8% notes payable to the investor in the amounts of $105,000, $50,000, $50,000 and $46,803. Two
of these notes will close subsequent to March 31, 2016 and are secured by fully collateralized promissory notes issued by the
Investor to the Company in the total amount of $96,803 ($50,000 and $46,803 - also known as the "back-end notes") and
are reported in the balance sheet at $93,130 net of legal fees in the amount of $4,840 plus accrued interest of $1,167. These
notes bear interest at the rate of 8% per annum. Interest income in the amount of $1,167 has been accrued for the quarter ended
March 31, 2016 on these back-end notes.
Accounts
Receivable
The
Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers,
maintaining an allowance for potential credit losses. Accounts receivable is reported net of the allowance for doubtful accounts.
The allowance is based on management's estimate of the amount of receivables that will actually be collected.
Inventory
Inventory
consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value.
Equipment
Equipment,
consisting of computer equipment, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, of five years.
Long-Lived
Assets
The
Company reviews long-lived assets, such as equipment, for impairment whenever events or changes in circumstances indicate the
carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of
an asset exceeds the estimated future cash flows, an impairment loss will be recorded by the amount the carrying value exceeds
the fair value of the asset.
In
August 2015, the Company's wholly-owned subsidiary MLM, acquired a trademark for $20,000. Due to the uncertainty of future cash
flows from the trademark, management has deemed it to be impaired and recorded an impairment expense of $20,000 in September 2015.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Intangible
Asset- Licensing Agreement
On March 8th 2016, the
company, through its sole wholly-owned subsidiary ("Licensee"), entered into a Product and Know-How License Agreement
("Agreement") with a Florida Corporation ("Licensor"). This Florida Corporation is owned by a related party
– the son of the Company’s CEO. The license provides with respect to the Technology, Licensor hereby grants to Licensee
an irrevocable, nontransferable, royalty-bearing license, with a right of sublicense (the “License”), throughout the
Territory in the Field of Use, whether or not under the Licensed Patent, to:
●
|
use
or submit or deliver the Technology and/or any Product to any regulatory body throughout the Territory for purposes of obtaining
approval to make, Sell, offer for Sale, import, export and distribute the Technology or Products; and
|
|
●
|
use or copy the Technology and/or any Product; and
|
|
●
|
market,
make, have made, Sell, offer for Sale, import and distribute Products; and
|
|
●
|
sublicense
the Technology as set forth in Article 4 below; and
|
|
●
|
prepare,
or have prepared on its behalf, modifications, enhancements and/or derivative works of the Technology.
|
In
connection with the license granted under Section 2.1 above, Licensor hereby grants to Licensee a license to the Licensed Patents,
whether now existing or hereafter acquired.
The
consideration for the licensing agreement consisted of the issuance of 25,000 Series B Preferred stock shares to the Licensor
(at par) plus a $150,000 promissory note issued by the Company to the licensor. The last part of the consideration in this license
agreement is the royalty payments which have not taken effect yet as they are based on sales for which the company has none. Both
the stock issuance and promissory notes have "claw-back" provisions should certain events fail to occur.
The licensing agreement
is for a ten year period effective from March 8th 2016. The cost of the licensing agreement is being amortized over its ten-year
period and charged to income on a straight-line basis.
Debt
Issues Costs and Debt Discount
The Company may pay debt
issue costs, and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs
are amortized over the life of the debt to interest expense. If a conversion of the underlying debt occurs, a proportionate share
of the unamortized amounts is immediately expensed. For March 31, 2016 and retroactively, the Company has early-adopted ASU 2015-03:
Simplifying the Presentation of Debt Issuance Costs and has reflected the deferred financing costs as a direct reduction of the
related debt (See Note 7 to Consolidated Financial Statements).
Original
Issue Discount
For
certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount
is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Derivative
Liabilities
Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. The Company assessed its securities for purposes of
determining the proper accounting treatment and valuation as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37
Fair Value in Financial Instruments
; Statement of Financial Accounting Standard ASC 815
Accounting for Derivative Instruments
and Hedging Activities
; and Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05.
In
assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible
debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional
convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once
the derivative liabilities are determined, they are adjusted to reflect fair value at each reporting period end, with any increase
or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated balance sheets and
the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Financial
Instruments
The
carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and other accrued liabilities
approximate their fair values.
Segment
Information
The
Company follows Accounting Standards Codification ("ASC") 280, "Segment Reporting". The Company currently
operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Net
Income (Loss) Per Common Share
The
Company calculates net income (loss) per share based on the authoritative guidance. Basic earnings (loss) per share is calculated
by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss)
per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock
equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered,
as their effect would be anti-dilutive.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Income
Taxes
The
Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities
are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities,
and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance
against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.
The
Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a
tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold,
the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority.
For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and
penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits
as of March 31, 2016, and does not expect this to change significantly over the next 12 months.
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC
718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the
issuance date.
Equity
instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the
fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument
is satisfied or there is a significant disincentive for non-performance.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At March
31, 2016, the Company had $203,353 in cash equivalents.
Recent
Pronouncements
In May 2014, FASB and
IASB issued a new joint revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition. The core
principle of the standard is that revenue recognition should depict the transfer of goods and services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard
is effective for the Company for the fiscal year beginning after December 15, 2017. The Company is currently evaluating the impact
of this ASU on the consolidated financial statements.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
On
January 05, 2016, the FASB completed its Classification and Measurement of Financial Instruments project by issuing ASU No. 2016-01, Financial
Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new
guidance improves certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For
public business entities, the new guidance is effective for fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years. The Company does not believe the impact of its pending adoption of this ASU on the Company’s
consolidated financial statements will be material.
In February 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842),
which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement
date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified
asset for the lease term. The revised guidance must be applied on a modified retrospective transition approach for leases existing
at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The revised
guidance is effective for the Company beginning in the quarter ending March 31, 2019. The Company is currently evaluating the impact
of this ASU on the consolidated financial statements.
In April 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-10, “Revenue from Contracts with
Customers” (Topic 606), which requires entities to identify performance obligations and recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. The ASU also includes implementation guidance on determining whether an entity’s
promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied
at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments
in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which
is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective
date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09
by one year. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.
The Company acknowledges the recent accounting
pronouncements issued during the quarter-ended March 31, 2016 by the FASB in the form of Accounting Standards Updates (“ASUs”)
numbered ASU 2016-08, 09, 11 and ASU 2016-12 providing guidance and related to revenue clarifications. The Company believes these
pronouncements, when effective, will not have a material impact on the financial statements.
Note 2. PROPERTY, PLANT AND EQUIPMENT (NET)
Equipment is recorded at cost and consisted
of the following at March 31, 2016 and December 31, 2015:
|
|
|
|
|
|
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|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
Computer equipment
|
|
$
|
8,314
|
|
|
$
|
8,314
|
|
|
Less: accumulated depreciation
|
|
|
(6,501
|
)
|
|
|
(6,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,814
|
|
|
$
|
2,159
|
|
Depreciation expense was $346 and $416 for the
three-month period ended March 31, 2016 and 2015, respectively.
Note 3. DUE TO RELATED PARTY
The Company was indebted to a related party through common management in the amount of $8,921 at March 31,
2016 and December 31, 2015, respectively. The loan bears no interest and is payable on demand.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Note
4. LOANS PAYABLE - STOCKHOLDERS
During the periods ended
March 31, 2016 and 2015 a stockholder of the Company advanced the Company $-0- and $20,670 respectively. The loan has a balance
of $10,680 at March 31, 2016. The loan bears no interest and is payable on demand.
At
March 31, 2016 and March 31, 2015, the Company was indebted to a stockholder in the amount of $1,200 and $4,600, respectively.
The loan has an interest rate of 20%. Principal and accrued interest were due and payable on July 2, 2012.
In December 2012, the
Company issued a promissory note to a stockholder in the amount of $5,000 with interest at 10% per annum. Principal and interest
were due and payable on June 2, 2013. In April 2014, the note was amended to provide the note holder with the option to convert
the note to the Company's common stock at $0.0001 per share. Subsequently, in 2014, in a private transaction, the note holder
transferred $2,500 of note principal to third parties and the new holders converted their holdings into 2,500,000 shares of the
Company's common stock. During 2015, the original note holder transferred an additional $2,400 of note principal to third parties
who converted their holdings into 2,400,000 shares of the Company's common stock. At March 31, 2016 and March 31, 2015, the loan
had balance was $100 and $500, respectively.
At
March 31, 2016 and March 31, 2015, the Company was indebted to a stockholder in the amount of $1,500 and $1,500, respectively.
The loan has an interest rate of 26.7%. Principal and accrued interest were due and payable on January 1, 2014.
In
February 2016, the Company issued a promissory note to a stockholder in the amount of $7,000 with interest at the rate of 6% per
annum. The note matures on February 4th 2017. At March 31, 2016 the full $7,000 note is outstanding.
Note
5. CONVERTIBLE NOTES PAYABLE
In
March 2011, the Company issued $800 aggregate principal amount of 6% convertible notes due in January 2012. Interest on the notes
accrue at the rate of 6% per annum and are payable when the notes mature. The notes matured prior to conversion but have not been
repaid. Interest continues to accrue at the rate of 6% per annum.
The
holder of one of the notes converted $110 of note principal into 1,100,000 shares of common stock as follows:
|
Date
of Conversion
|
|
Principal
Amount Converted
|
|
|
Conversion
Rate
|
|
|
Shares
Received
|
|
|
June
2013
|
|
$
|
70
|
|
|
$
|
0.0001
|
|
|
|
700,000
|
|
|
August
2013
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
|
|
In
August 2013, in a private transaction, the same note holder transferred $330 of the remaining note principal plus $55 in accrued
interest to a third party.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
In
August 2013, in a private transaction, the new note holder transferred $5 of the remaining note principal to a third party who
then converted the note into 50,000 shares of common stock.
In
September 2013, the new note holder converted $100 of note principal into 1,000,000 shares of common stock.
In
September 2013, in a private transaction, the new note holder transferred $35 of the remaining note principal to a third party
who then converted the note into 350,000 shares of common stock.
In
November and December 2013, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock
as follows:
|
Date
of Conversion
|
|
Principal
Amount Converted
|
|
|
Conversion
Rate
|
|
|
Shares
Received
|
|
|
November
2013
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
|
|
|
December
2013
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500,000
|
|
In
March and April 2014, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock as
follows:
|
Date
of Conversion
|
|
Principal
Amount Converted
|
|
|
Conversion
Rate
|
|
|
Shares
Received
|
|
|
March
2014
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500,000
|
|
|
April
2014
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
|
|
Subsequent
to these conversions there remains $125 in note principal.
In
July 2013, the holder of the second note converted $240 of note principal into 400,000 shares of the Company's common stock at
$0.0006 per share. At December 31, 2015 and 2014, the note had a remaining principal balance of $60 and $60, respectively.
At
any time on or after the maturity date, the holders of the notes, have the option of converting any of the unpaid principal and
interest into the Company's common stock. The notes plus any accrued but unpaid interest are convertible at the rate of $0.0001
per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 3,506,665 shares
at December 31, 2015.
In
May 2012, the Company issued a $25,000 6% per annum note that matured in November 2012. In December 2012 the note was amended
to be a convertible note. Interest on the note accrues interest at 6% per annum and is payable when the note matures.
The
holder of the $25,000 note had the option of converting it at any time prior to maturity. The note plus any accrued but unpaid
interest were convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued
and outstanding common stock. The holder of the note converted $1,010 of note principal into 1,010,000 shares of common stock
as follows:
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
The
holder of the note converted $1,010 of note principal into 1,010,000 shares of common stock as follows:
|
Date
of Conversion
|
|
Principal
Amount Converted
|
|
|
Conversion
Rate
|
|
|
Shares
Received
|
|
|
December
2012
|
|
$
|
150
|
|
|
$
|
0.001
|
|
|
$
|
150,000
|
|
|
January
2013
|
|
$
|
660
|
|
|
$
|
0.001
|
|
|
$
|
660,000
|
|
|
March 2013
|
|
$
|
200
|
|
|
$
|
0.001
|
|
|
$
|
200,000
|
|
In
July 2013, the Company retired $14,000 of note principal in payment for consulting services provided to the note holder.
In
July 2013, the note holder converted $300 of note principal into 300,000 shares of the Company's common stock.
In
July 2013, in a private transaction, the note holder transferred the remaining note principal balance of $9,690 to a third party.
In
August 2013, in a private transaction, the new note holder transferred $4,475 of principal to a stockholder of the company.
In
October 2013, the note holder converted $400 of note principal into 400,000 shares of the Company's common stock at $0.001 per
share.
In
October 2014, the note holder converted $1,100 of note principal into 1,100,000 of the Company's common stock. At December 31,
2015, the remaining principal on this portion of the note is $3,715. The note holder has the option of converting the balance
at any time with the approval of the Board of Directors. The note plus any accrued but unpaid interest are convertible at the
rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or
4,154,729 shares at March 31, 2016.
In August 2013, the note
holder/stockholder converted $700 of note principal into 700,000 shares of the Company's common stock at $0.001 per share. In
October 2013, in a private transaction, this note holder transferred $1,000 of note principal to a third party of which $700 was
converted into 700,000 shares in June 2014. The remaining principal balance on this portion of the note at March 31, 2016 is $2,075.
The note holder has the option of converting the balance at any time with the approval of the Board of Directors. The note plus
any accrued but unpaid interest are convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99%
of the then issued and outstanding common stock, or 4,154,729 shares at March 31, 2016.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
In
April 2015, the Company issued a $3,000 8% per annum note that matures in October 2015. The holder of the note has the right to
convert the principal into shares of the Company's common stock at any time 180 days after the closing date at $0.0001 per share.
Interest on the note accrues interest at 8% per annum and is payable when the note matures.
In
July 2015, the Company issued a convertible note payable in the principal amount of $59,000. The note matures in March 2016 and
bears interest at 8%. Beginning 180 days following the closing date the note holder shall have the right to convert any or all
of the outranking principal balance into shares of the Company's common stock at the discounted rate of 55% of the average of
the three lowest market trading prices during the 10 days immediately preceding the conversion date.
In
August 2015, the Company issued a convertible note payable in the principal amount of $38,000. The note matures in March 2016
and bears interest at 8%. Beginning 180 days following the closing date the note holder shall have the right to convert any or
all of the outranking principal balance into shares of the Company's common stock at the discounted rate of 55% of the average
of the three lowest market trading prices during the 10 days immediately preceding the conversion date.
On October 8, 2015, the Company issued a convertible
note payable in the principal amount of $31,000 with an Original Issue Discount of $1,500. The note matures on October 8, 2016
and bears interest at 8%. The note holder has the right at any time to convert any part or all of the outstanding unpaid principal
balance into shares of the Company's common stock at the discounted rate of 58% of the lowest market trading price during the
20 days prior to and including the conversion date.
In
June 2015, the Company issued a convertible note payable in the principal amount of $100,000. The note matures in December 2015
and bears interest at 5%. Beginning 180 days following the closing date the note holder shall have the right to convert any or
all of the outranking principal balance into shares of the Company's common stock at the discounted rate of 50% of the average
of the three lowest market trading prices during the 3 days immediately preceding the conversion date.
On
October 15, 2015 the Company issued a convertible note payable in the principal amount of $35,000 with an Original Issue Discount
of $5,000. The note matures on October 15, 2016 and bears interest at 5%. The note holder has the right at any time on or
after the day that is six months from October 15, 2015 to convert any part or all of the outstanding unpaid principal balance
into shares of the Company's common stock at the discounted rate of 55% of the lowest market trading prices during the 20 days
prior to the conversion date.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
On
January 7 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an
accredited investor (the “Investor”) for the sale of convertible redeemable notes in aggregate principal amount
of $251,803. On January 7, 2016, the Company and the Investor conducted the first closing under the Purchase Agreement,
pursuant to which the Company issued to the Investor (i) a convertible redeemable note in principal amount of $105,000
containing an original issue discount of $20,000 (the “$105K Note”); and (ii) a convertible redeemable note in
principal amount of $50,000 (the “$50K Note” and together with the $105K Note, the “Notes”). Under
the Purchase Agreement, on March 15, 2016 and June 15, 2016, the Company and the Investor expect to conduct additional
closing for the sale and purchase of additional notes having the same terms as the Notes in principal amounts equal to
$50,000 and $46, 803, respectively.
In
consideration for the issuance of the $105K Note, on January 13, 2016, the Company received net proceeds (after deducting the
original issue discount and legal fees) in the amount of $75,697. In consideration for the issuance of the $50K Note, the Investor
issued to the Company a $50,000 fully-collateralized secured promissory note (the “Investor Note”), pursuant to which
the Investor agreed to pay the Company $50,000 on or before April 30, 2016. The Notes, which are due on January 7, 2017, bear
interest at the rate of 8% per annum. Subject to a beneficial ownership limitation equal to 9.99%, principal and interest on the
Notes is convertible into shares of the Company’s common stock (“Common Stock”) at a conversion price equal
to 55% of the lowest trading price of Common Stock during the 20 trading day period prior to conversion.
The
Company’s convertible notes payable and the related derivative liabilities, derivative discount, deferred financing costs
and original-issue discount are presented in the financial statements at March 31, 2016 as follows:
|
Debt
|
|
Face
Amount
|
|
|
Original
Issue Discount
|
|
|
Derivative
Discount
|
|
|
Deferred
Financing Costs
|
|
|
Total
Convertible Notes Payable
|
|
|
Derivative
Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
Payable - BS
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
|
Note
Payable - SF
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
Note
Payable - MC #1
|
|
|
2,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,075
|
|
|
|
|
|
|
Note
Payable - NW
|
|
|
3,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,715
|
|
|
|
|
|
|
Note
Payable - MC #2
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
Debenture
Payable (5%) - B
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
32,293
|
|
|
Convertible
Note Payable - LGC (8%)
|
|
|
105,000
|
|
|
|
(15,397
|
)
|
|
|
(78,310
|
)
|
|
|
(7,162
|
)
|
|
|
4,130
|
|
|
|
123,003
|
|
|
Convertible
Note Payable - LGC (8%)
|
|
|
50,000
|
|
|
|
|
|
|
|
(44,708
|
)
|
|
|
(1,925
|
)
|
|
|
3,367
|
|
|
|
89,897
|
|
|
Convertible
Note Payable - LGC (8%)
|
|
|
50,000
|
|
|
|
|
|
|
|
(46,712
|
)
|
|
|
(2,336
|
)
|
|
|
952
|
|
|
|
88,709
|
|
|
Convertible
Note Payable - LGC (8%)
|
|
|
46,803
|
|
|
|
|
|
|
|
(43,146
|
)
|
|
|
(2,186
|
)
|
|
|
1,471
|
|
|
|
83,216
|
|
|
Convertible
Note Payable - CB (5%)
|
|
|
35,000
|
|
|
|
(2,699
|
)
|
|
|
|
|
|
|
(540
|
)
|
|
|
31,762
|
|
|
|
|
|
|
Convertible
Note Payable - LGC (8%)
|
|
|
31,000
|
|
|
|
(781
|
)
|
|
|
(22,861
|
)
|
|
|
(2,473
|
)
|
|
|
4,886
|
|
|
|
56,366
|
|
|
Convertible
Notes Payable- VVtoLG (8%)
|
|
|
49,491
|
|
|
|
|
|
|
|
1,358
|
|
|
|
|
|
|
|
50,849
|
|
|
|
59,209
|
|
|
Convertible
Notes Payable- VV (8%) #2
|
|
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
(680
|
)
|
|
|
37,320
|
|
|
|
|
|
|
|
|
$
|
514,269
|
|
|
$
|
(18,877
|
)
|
|
$
|
(234,379
|
)
|
|
$
|
(17,301
|
)
|
|
$
|
243,713
|
|
|
$
|
532,693
|
|
As
of March 31, 2016, the convertible notes payable can be converted into approximately 136,333,000 shares of common stock.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Note
6. DERIVATIVES AND FAIR VALUE INSTRUMENTS
The
Company applied paragraph 815-10-05-4 of the FASB Accounting Standards Codification to the 5% Convertible Notes Payable issued
June 12th 2015 and the 8% Convertible Note payable issued June 25th 2015 and also to the 8% convertible notes issued January 7,
2016 and March 7, 2016. Based on the guidance in paragraph 815-10-05-4 of the FASB Accounting Standards Codification the Company
concluded these instruments were required to be accounted for as derivatives on issuance date. The Company records the fair value
of the Convertible Notes Payable and certain warrants that are classified as derivatives on issuance date and the fair value changes
on each reporting date reflected in the consolidated statements of operations as “Gain (loss) on derivative liabilities.”
These derivative instruments are not designated as hedging instruments under paragraph 815-10-05-4 of the FASB Accounting Standards
Codification and are disclosed on the balance sheet under Derivative Liabilities.
The
Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for
disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value
in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level
2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
Level
3 Pricing inputs that are generally observable inputs and not corroborated by market data.
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepayments and other current assets,
accounts payable, and accrued expenses, approximate their fair values because of the short maturity of these instruments.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
The
Company’s Level 3 financial liabilities consist of the 5% Convertible Notes Payable issued June 12th 2015 and the 8% Convertible
Note payable issued June 25th 2015 and for the 8% Convertible Notes Payable issued January 7, 2016 and March 7, 2016, for which
there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.
We have valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering
provisions using a lattice model, with the assistance of a valuation consultant, for which management understands the methodologies.
These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well
as assumptions about future financings, volatility, and holder behavior as of issuance and March 31, 2016. The primary assumptions
include: projected annual volatility of 151.4%-252%; the follow-on securities purchase option; the conversion feature as a percentage
of Market; automatic/conditional conversions; market price trigger events.
As
of March 31, 2016 the Company’s derivative financial instruments included:
1)
Embedded derivatives associated with certain of the Company’s unsecured convertible notes payable. The Company’s 5
% convertible notes payable and 8% convertible notes payable issued to two unrelated investors is a hybrid instrument, which warrants
separate accounting as a derivative instrument. The embedded derivative feature has been bifurcated from the debt host contract,
referred to as the Derivative Liability, which resulted in a reduction of the initial carrying amount (as unamortized discount)
of the Convertible Notes Payable. The unamortized discount is amortized to interest expense using the effective interest method
over the life of the Notes. The embedded derivative feature includes the conversion feature within the notes and an early redemption
option. The compound embedded derivatives within the convertible notes have been recorded at fair value at the date of issuance;
and are marked-to-market each reporting period with changes in fair value recorded to the Company’s statement of operations
as Change in fair value of derivative liabilities.
The
5% Convertible Note Payable and the 8% Convertible Notes Payable are valued at March 31. 2016. The following assumptions were
used for the valuation of the embedded derivative:
|
●
|
The
stock price of $0.010 to $0.0073 in this period (variable conversion price) would fluctuate with the Company projected volatility;
|
|
●
|
An
event of default for the Convertible Note would occur 0% of the time, increasing 1.00% per month to a maximum of 5.0%;
|
|
●
|
Alternative
financing for the Convertible Note would be initially available to redeem the note 0% of the time and increase monthly by
1% to a maximum of 10%;
|
|
●
|
Capital
raising events (a single financing at 1 month from the valuation date) are a factor for the VV to LG Convertible Note. The
full reset events projected to occur based on future stock issuance (single event) resulting in a reset exercise price.
|
|
●
|
The
monthly trading volume would average $211,113 and would increase at 5% per month;ownership limits conversion across LG’s
6 notes based on 4.99% with shares outstanding increasing monthly by 1%.
|
|
●
|
The
variable conversion price of 50% to 58% over 3 to 20 trading days would have effective rates of 50.55% to 36.13%;
|
|
●
|
The
Note Holders would automatically convert the notes early (and not hold to maturity) with variable conversion prices and full
ratchet resets if the registration was effective and not in default;
|
|
●
|
The
projected annual volatility for each valuation period was based on the historical volatility of the company:
|
|
12/31/2015
|
|
|
151
|
%
|
|
1/7/2016
|
|
|
222
|
%
|
|
1/12/2016
|
|
|
226
|
%
|
|
2/23/2016
|
|
|
234
|
%
|
|
3/7/2016
|
|
|
227
|
%
|
|
3/11/2016
|
|
|
245
|
%
|
|
3/31/2016
|
|
|
252
|
%
|
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
The
foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the
probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuation.
The
Company’s convertible notes payable and the related derivative liabilities, derivative discount and original-issue discount
are presented in the financial statements at March 31, 2016 as follows:
|
Convertible
Note
|
|
Derivative
Treatment Date
|
|
|
Maturity
Date
|
|
|
Principal
Note Amount
|
|
|
Original
Derivative Valuation
|
|
|
Derivative
Valuation December 31, 2015
|
|
|
Conversions
|
|
|
Mark
to Market
|
|
|
Derivative
Valuation March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible
Note Payable- issued 10/8/2015
|
|
|
10/8/2015
|
|
|
|
10/8/2015
|
|
|
$
|
31,000
|
|
|
$
|
58,779
|
|
|
$
|
56,366
|
|
|
|
|
|
|
$
|
(4,203
|
)
|
|
$
|
52,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 % Convertible Note-
Payable - issued 6/12/2015
|
|
|
12/9/2015
|
|
|
|
12/12/2015
|
|
|
|
100,000
|
|
|
|
37,827
|
|
|
|
35,176.00
|
|
|
|
|
|
|
|
(2,883
|
)
|
|
|
32,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued 6/25/2015
|
|
|
12/22/2015
|
|
|
|
1/7/2017
|
|
|
|
59,000
|
|
|
|
56,956
|
|
|
|
66,075.00
|
|
|
|
(10,151.00
|
)
|
|
|
3,285
|
|
|
|
59,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued January 7, 2016
|
|
|
1/7/2016
|
|
|
|
1/7/2017
|
|
|
|
105,000
|
|
|
|
87,287
|
|
|
|
-
|
|
|
|
|
|
|
|
39,919
|
|
|
|
127,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued January 7, 2016
|
|
|
1/7/2016
|
|
|
|
1/7/2017
|
|
|
|
50,000
|
|
|
|
68,124
|
|
|
|
-
|
|
|
|
|
|
|
|
21,773
|
|
|
|
89,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued March 7, 2016
|
|
|
3/7/2016
|
|
|
|
3/7/2017
|
|
|
|
50,000
|
|
|
|
87,538
|
|
|
|
-
|
|
|
|
|
|
|
|
1,171
|
|
|
|
88,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued March 7, 2016
|
|
|
3/7/2016
|
|
|
|
1/7/2017
|
|
|
|
46,803
|
|
|
|
82,115
|
|
|
|
-
|
|
|
|
|
|
|
|
1,101
|
|
|
|
83,216
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441,803
|
|
|
$
|
478,626
|
|
|
$
|
157,617
|
|
|
$
|
(10,151
|
)
|
|
$
|
60,163
|
|
|
$
|
532,693
|
|
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
Note
7. STOCKHOLDERS' EQUITY
The Company has authorized
1,500,000,000 shares of common stock with a par value of $0.0001 per share. There were 41,588,879 and 35,101,750 shares of common
stock issued and outstanding at March 31, 2016 and December 31, 2015, respectively.
The
Company has authorized 1,000,000 shares of Series A preferred stock with a par value of $0.0001 per share. At March 31, 2016 and
December 31, 2015, 50,000 shares of Series A preferred stock were issued and outstanding. The preferred stock has preferential
voting rights of 100 votes per outstanding share.
The Company has authorized 50,000 shares
of Series B convertible preferred stock with a par value of $0.0001 per share. At March 31, 2016 there were 35,000 issued of which
3,400 shares of Series B preferred were converted into common stock in accordance with the terms of the Series B Preferred stock.
Therefore; there were 31,400 shares outstanding at March 31, 2016. The Series B preferred stock has no voting rights. The holders
of the Series B convertible preferred stock have the right to convert the same into Common Stock of the Corporation at the ratio
of one (1) share of Series B Convertible Preferred for five hundred (500) shares of Common Stock.
During
the quarter ended March 31, 2015, the Company issued 2,000,000 shares of common stock at $0.001 per share as partial conversion
of notes.
During
the quarter ended March 31, 2015, the Company issued 800,000 shares of common stock at $0.0005 per share as partial conversion
of notes.
During
the quarter ended March 31, 2015, a stockholder of the Company returned 500,000 shares of common stock to the Company.
During
the quarter ended June 30, 2015, the Company issued 2,300,000 shares of common stock at $0.0005 per share as partial conversion
of notes.
During
the quarter ended September 30, 2015, the Company issued 3,800,000 shares of common stock at $0.0005 per share as partial conversion
of notes.
During
the quarter ended September 30, 2015, the Company issued 20,000 shares of common stock at $0.015 per share as to acquire 100%
of the outstanding shares of the Company's subsidiary.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
During the quarter ended September 30,
2015, the Company issued 3,000,000 shares of common stock at $0.01 per share as Officer's compensation.
During the quarter ended September 30,
2015, the Company issued 500,000 shares of common stock at $0.01 per share for services provided to the Company.
During the quarter ended December 31,
2015, the Company issued 500,000 shares of common stock at $0.01 per share for services provided to the Company.
During the quarter ended December 31,
2015, the Company issued 200,000 shares of common stock at $0.01 per share to an investor.
During the quarter ended March 31, 2016,
the Company issued 1,095,036 shares of common stock at $0.00275 per share as partial conversion of notes.
During the quarter ended March 31, 2016,
the Company issued 1,285,560 shares of common stock at $0.00275 per share as partial conversion of notes.
During the quarter ended March 31, 2016,
the Company issued 906,533 shares of common stock at $0.003355 per share as partial conversion of notes.
During the quarter ended March 31, 2016,
the Company issued 1,500,000 shares of common stock at $0.00275 per share as partial conversion of notes.
During the quarter ended March 31, 2016,
the Company issued 1,700,000 shares of common stock upon conversion of 3,400 shares of Series B preferred stock.
During the quarter ended March 31, 2016,
the Company issued 10,000 shares of Series B Preferred stock in settlement of the $50,000 liability to a related party for the
purchase of inventory.
Note
8. COMMITMENTS AND CONTINGENCIES
The Company currently rents its offices on a
month to month basis from the Company's President and stockholder for $525 per month which amounted to $1,725 for the quarter-ended
March 31, 2016. The Company also has ready-to-go office space available to be used for meetings etc. at a nominal cost of approximately
$100 per month with no commitment. The cost of this space for the quarter-ended March 31, 2016 was $346.
Total rent expense for
the quarter ended March 31, 2016 and 2015, totaled $2,071 and $-0-, respectively.
Note
9. INCOME TAXES
The
Company's deferred tax asset consists primarily of carryforward net operating losses (NOLs). The Company believes that, at this
time, it is more likely than not that the benefit of the NOLs will not be realized and has therefore recorded a full valuation
allowance.
The
income tax benefit differs from the amount computed by applying the statutory federal and state income tax rates to the loss before
income taxes. The sources and tax effects of the differences are as follows:
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
Statutory
federal income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
|
State
income taxes, net of federal taxes
|
|
|
9
|
%
|
|
|
9
|
%
|
|
Valuation
allowance
|
|
|
(43
|
)%
|
|
|
(43
|
)%
|
|
Effective
income tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
As
of March 31, 2016, the Company has a net operating loss carryforward of approximately $976,000 to reduce future federal and state
taxable income through 2035.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
The
Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since
its inception. All of the Company's open tax years beginning in tax year 2013 are subject to federal and state tax examinations.
Note
10. RELATED PARTY TRANSACTIONS
In
August 2015, the Company acquired 100% of the issued and outstanding common stock of Medical Lasers Manufacturer, Inc. ("MLM")
from a stockholder and officer of the Company for 20,000 common shares which were valued at $0.015 per share. All intercompany
transactions were eliminated during consolidation.
As
more fully described in Note 4 to the Consolidated Financial Statements, the Company owed the following amounts to related parties
as of March 31:
|
|
|
2016
|
|
|
2015
|
|
|
Due
to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
|
Due
to Officer/Stockholder
|
|
|
8,446
|
|
|
|
8,446
|
|
|
Due
to other Stockholders
|
|
|
3,113
|
|
|
|
55,199
|
|
|
Total
Related Party Obligations
|
|
$
|
20,480
|
|
|
$
|
72,566
|
|
The company has entered into an employment
agreement with its Chief Executive Officer (CEO) for the five year period beginning January 1, 2012. The agreement provides for
base compensation, annual bonus, benefits, vacation and reimbursements. Under this agreement, the base compensation of the Company's
CEO is $100,000 per annum which has been accrued for the years ended December 13, 2015 and 2014 and $25,000 has been accrued for
the quarter ended March 31, 2016. For the quarter ended March 31, 2016, $18,974 in accrued compensation was paid. Accrued compensation
in the amount of $30,000 was converted to shares of common stock during 2015.
In August 2015, MLM acquired a trademark
from the son of the Company’s President for $20,000 due 90 days from the date of acquisition. As of March 31, 2016, no payment
has been made on this liability. The $20,000 liability is included in the balance sheet under “Accounts payable and accrued
expenses” at March 31, 2016 and December 31, 2015. Due to the uncertainty of future cash flows from the trademark management
has deemed it to be impaired and has recorded an impairment expense of $20,000 at September 30, 2015
In August 2015, subsequent to the date
the Company acquired MLM, MLM purchased $50,000 in inventory from the son of the Company's President. The $50,000 liability is
included in the balance sheet under “Accounts payable and accrued expenses” at December 31, 2015. During the quarter-ended
March 31, 2016, 10,000 shares of Series B Preferred stock were issued in settlement of this liability.
As more fully described in Note 1-Intangible
Asset-Licensing Agreement, on March 8
th
2016 the Company entered into a Licensing Agreement with a Florida Corporation
(Licensor) that is owned by a related party. The Company issued 25,000 shares of Series B Preferred stock to the Licensor as partial
consideration for the Licensing agreement plus a $150,000 promissory note to the Licensor for the balance of the consideration.
During the quarter-ended March 31, 2016, 3,400 shares of Series B Preferred stock were converted into 1,700,000 shares of common
stock in accordance with the terms of the Series B Preferred stock.
Note 11. BASIS OF REPORTING - GOING CONCERN
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction
of liabilities in the normal course of business.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
March
31, 2016
The
Company has incurred losses from inception of approximately $1,304,222, which, among other factors, raises substantial doubt about
the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon
management's plans to raise additional capital from the sale of stock and receive additional loans from related parties. The accompanying
financial statements do not include any adjustments that might be required should the Company be unable to continue as a going
concern.
Note
12. SUBSEQUENT EVENTS
On
April 15, 2016 the Company entered into a Business Consulting Agreement with a Michigan limited liability company ("Consultant").
The agreement provides for the Company retaining the Consultant for 125 days for general business and product development services.
The Consultant shall be paid $750 per month in cash and 500,000 shares of common stock of the Company valued at $5,000 as of the
effective date and another 500,000 common shares upon determination of the Company in its sole and absolute discretion.
On
April 5, 2016 a noteholder elected to partially convert $3,000 of an outstanding convertible note (originally $59,000) payable
into 783,062 shares of common stock. The principal balance due remaining under the note payable after the conversion is $49,000.
On May 5, 2016 a noteholder elected to partially convert $2,800 of an outstanding convertible note payable into 768,026 shares
of common stock. The principal balance due under the note payable after the conversion is $46,200.
On April 18, 2016 the company issued 1,100,000 shares of common
stock in conversion of 2,200 shares of Preferred Series B stock.
On May 2, 2016, the Company issued to an Investor
a convertible redeemable note in the principal amount of $57,750 ("the Note"). The Note, which matures on May 2, 2017,
pays interest at the rate of 8% per annum. The note contains a 10% original issue discount. The holder of the note is entitled,
at its option beginning on the 6-month anniversary, to convert all or any of the principal face amount of the Note then outstanding
into shares of the Company's common stock at the price equal to 55% of the lowest trading price for the twenty prior trading days
including the date of conversion.
On May 2, 2016, the Company issued to an Investor a replacement redeemable convertible note in
the principal amount of $60,000 ("the Replacement Note"). The Note, which matures on May 2, 2017, pays interest at the
rate of 8% per annum. This Replacement Note partially replaces a note originally issued on June 12, 2015 in the principal amount
of $100,000 The holder of the note is entitled, at its option beginning on the 6-month anniversary, to convert all or any of the
principal face amount of the Note then outstanding into shares of the Company's common stock at the price equal to 55% of the
lowest trading price for the twenty prior trading days including the date of conversion. On May 10, 2016 a noteholder elected
to partially convert $7,241 of an outstanding convertible note payable into 2,194,200 shares of common stock. The principal balance
due under the note payable after the conversion is $52,759.
On May 4, 2016 a noteholder elected to partially
convert $8,800 of an outstanding convertible note payable into 2,000,000 shares of common stock. The principal balance due remaining
under the note payable after the conversion is $26,200.
On May 11, 2016 the Company amended a Convertible
Debenture originally issued June 12, 2015 in remaining unassigned principal amount of $45,000. The Company issued 300,000 shares
to the debenture holder for the main purpose of extending the maturity date to one year from the date of the amendment.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking
Statements
The
information in this report contains forward-looking statements. All statements other than statements of historical fact made in
this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations
or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such
as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations
or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved.
Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may
differ significantly from management’s expectations.
The
following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion
should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion
reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best
present assessment of our management.
Plan
of Operation
Medifirst
Solutions, Inc. was incorporated in Nevada in November 2010. The Company began as a development stage company focused on developing
products within the healthcare market for both consumer and professional applications. In 2013, Medifirst began to developing
its own line of disposable electronic cigarettes (“e-cigs”) but the e-cig industry subsequently encountered significant
government push-back to try to heavily regulate their use and production, including a ban on e-cigs. In order to avoid the uncertainties
and costs of the regulated e-cig industry, Medifirst entered into an agreement with Panacea Photonics Corporation that allowed
Medifirst to exclusively market and distribute a series of Botanical LED Light Therapy Systems, including skin care and pain relief
products. Under the terms of the marketing and distribution agreement, Medifirst became the exclusive distributor of the light
therapy products in both New York and New Jersey. In 2014, in addition to the LED light therapy division, the Company became a
dealer for Atmospheric Water Solutions, a Florida based company that sells water generators that makes drinking water from air.
In 2015, the Company made a strategic decision to add laser technology to its health and wellness division and discontinue its
efforts with its light therapy and water generator products. The Company entered into an exclusive manufacturing agreement to
produce what is now its hand-held mobile laser system known as “The Time Machine Program” for which the Company purchased
the registered trademark. Furthermore, the Company purchased 20 TTM Series laser units from the developer of the lasers.
Additionally,
Medifirst, through its wholly-owned subsidiary Medical Laser Manufacturer, Inc., entered into a Product and Know-How License Agreement
with Laser Lab Corp to license the use of various intellectual property in connection with seeking regulatory approval for and
marketing, distributing and selling The Time Machine Series Lasers (“TTM Series”). The License Agreement grants a
license to the Company to use various intellectual property for the development, manufacture and sale of lasers in the TTM Series
for which the Company previously filed a Premarket Notification 510(k) submission with the FDA. In addition to the license granted
to the Company, the License Agreement provides for an option to license other fields of use of the infrared laser in the TTM Series,
as well as other wavelengths and colors, allowing the Company to develop a broader range of product offerings in the future. Although
the Company has not generated any revenues from it medical laser division, we believe that revenues can be generated shortly after
receiving 510(k) clearance from the FDA.
Our
auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue
as an on-going business for the next twelve (12) months. Our auditors’ opinion is based on the uncertainty of our ability
to establish profitable operations. The opinion results from the fact that we have not generated significant revenues. Accordingly,
we must raise cash from operations or from investments by others in the Company to continue our operations.
Our
sole officer and director is responsible for our managerial and organizational structure, which will include preparation of disclosure
and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, he will be responsible for
the administration of the controls. Should he not have sufficient experience, he may be incapable of creating and implementing
the controls which may cause us to be subject to sanctions and fines by the SEC which ultimately could cause you to lose your
investment.
Subject
to obtaining 510(k) clearance, our intended plan of operations is to generate revenue from the sale of our TTM Series lasers.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2016 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2015
Revenues
During the three months ended
March 31, 2016 and 2015, we generated $ -0- and $ -0-, respectively.
Expenses
For the three months ended March
31, 2016 and 2015, expenses were $83,803 and $46,559, respectively. All of the increase was due to increased Consulting and Professional
Fees.
Legal and Accounting
For the three months ended March
31, 2016 and 2015 professional fees were $24,560 and $775, respectively. The increase is due to legal fees associated with the
issuance of notes and legal fees in connection with the licensing agreement and consulting agreements signed during the quarter
as well as increased audit, accounting & bookkeeping and professional fees associated with derivative valuations.
Other Income/(Expense)
For the three months ended March
31, 2016 and 2015, other expenses were $251,978 and $336, respectively. The reason for the increase is primarily due to the recognition
of the fair-value adjustment on the carrying value of our derivative liabilities, the amortization of discount on the notes, and
amortization of deferred financing costs and the interest expense on notes payable.
Net Income/(Loss)
For the three months ended March
31, 2016 and 2015 the company had a net loss of $334,614 and $46,895. The increased net loss was due to the increased expenses
and increased other expenses as described above.
Liquidity and Capital Resources
Since incorporation, we have financed
our operations through the private placement of our common stock to selected investors and periodic borrowings from our stockholders.
At March 31, 2016 and December 31, 2015, our principal sources of liquidity included cash of $203,353 and $156,958, respectively.
As
of March 31, 2016, we did not have any significant commitments for capital expenditures.
If
we do not generate sufficient cash flow to support our operations over the next twelve (12) months, in order to continue as a
going concern we may need to raise additional capital by issuing capital stock in exchange for cash. There are no formal or informal
agreements to attain such financing. The Company’s ability to obtain additional capital on acceptable terms is subject to
a variety of uncertainties, including: investors’ perception of, and demand for, securities of companies in our industry;
conditions of the U.S. and other capital markets in which we may seek to raise funds; future results of operations, financial
condition and cash flow. Therefore, the Company’s management cannot assure that financing will be available in amounts or
on terms acceptable to the Company, or if at all. Any failure by the Company’s management to raise additional funds on terms
favorable to the Company could have a material adverse effect on the Company’s liquidity and financial condition.
Critical
Accounting Policies
Our
significant accounting policies are summarized in Note 1 of our consolidated financial statements. While all these significant
accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies
determined to be critical are those policies that have the most significant impact on our financial statements and require management
to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that
given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would
cause an effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
Off
Balance Sheet Arrangements
The
Company has no off-balance sheet arrangements.
Recently
Adopted Accounting Pronouncements
Please
see Note 2 of our consolidated financial statements that describe the impact, if any, from the adoption of Recent Accounting Pronouncements.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
The
Company is a smaller reporting company, as defined by Rule 229.10(f)(1) and is not required to provide the information required
by this Item.
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Our management
has evaluated, under the supervision and with the participation of our principal executive and principal financial officers, the
effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b)
under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our principal executive
and financial officers concluded that, as of the end of the period covered by this report, due to the inadequate recordation
of certain transactions and communication of those transactions to those integral to our disclosure procedures, our disclosure
controls and procedures were not effective in ensuring that information required to be disclosed in our Exchange Act reports is
(1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including
our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial reporting that occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There has been no progress toward remediation of previously disclosed material weaknesses.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings.
None
I
tem
2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent
Sales of Unregistered Securities
During the 3-month
period ended March 31, 2016, the Company issued an aggregate of 3,287,129 shares of Common Stock upon conversion of an aggregate
principal amount equal to $9,508.71 of an outstanding convertible promissory note.
During the 3-month
period ended March 31, 2016, the Company issued an aggregate of 1,700,000 shares of Common Stock upon conversion of an aggregate
of 3,400 shares of Series B Preferred.
On January 7, 2016,
the Company and the Investor conducted the first closing under the Purchase Agreement, pursuant to which the Company issued to
the Investor (i) a convertible redeemable note in principal amount of $105,000 containing an original issue discount of $20,000
(the “$105K Note”); and (ii) a convertible redeemable note in principal amount of $50,000 (the “$50K Note”
and together with the $105K Note, the “Notes”). In consideration for the issuance of the $105K Note, on January 13,
2016, the Company received net proceeds (after deducting the original issue discount and legal fees) in the amount of $75,696.69.
In consideration for the issuance of the $50K Note, the Investor issued to the Company a $50,000 fully-collateralized secured promissory
note (the “Investor Note”), pursuant to which the Investor agreed to pay the Company $50,000 on or before April 30,
2016. Under the Purchase Agreement, on March 15, 2016, the Company and the Investor conducted an additional closing for the sale
and purchase of additional notes having the same terms as the Notes in principal amounts equal to $50,000 and $46,803, respectively.
In consideration for the issuance of the $46,803 note, the Investor issued to the Company a $46,803 fully-collateralized secured
promissory note, pursuant to which the Investor agreed to pay the Company $46,803 on or before June 15, 2016. All notes issued
pursuant to the Purchase Agreement bear interest at the rate of 8% per annum. Subject to a beneficial ownership limitation equal
to 9.99%, principal and interest on all the notes issued pursuant to the Purchase Agreement convertible into shares of the Company’s
common stock at a conversion price equal to 55% of the lowest trading price of Common Stock during the 20 trading day period prior
to conversion.
On January 7, 2016,
the Company issued to the Investor a convertible redeemable replacement note in principal amount of $61,508.71 (the “$61K
Replacement Note”). The issuance of the $61K Replacement Note was made in connection with the Investor’s purchase of
a convertible promissory note in principal amount of $59,000 that was originally issued by the Company on June 25, 2015 (the “$61K
Original Note”). The $61,508.71 principal amount of the $61K Replacement Note reflected the principal and accrued interest
under the $61K Original Note. The $61K Replacement Note, which is due on January 7, 2017, may not be prepaid but otherwise contains
identical provisions to that of the Notes.
In
February 2016 the Company issued 10,000 shares of its Series B Preferred Stock in satisfaction of the obligation to issue such
shares to the seller of $50,000 of inventory the Company purchased in August 2015.
On
February 29, 2016, the Company issued to the Investor a convertible redeemable replacement note in principal amount of $39,557.48
(the “Replacement Note”). The issuance of the Replacement Note was made in connection with the Investor’s purchase
of a convertible promissory note in principal amount of $38,000 that was originally issued by the Company on August 31, 2015 (the
“Original Note”). The $39,557.48 principal amount of the Replacement Note reflected the principal and accrued interest
under the Original Note. The Replacement Note, which is due on February 28, 2017, may not be prepaid but otherwise contains identical
provisions to that of the Notes.
Subsequent to March
31, 2016 the Company issued 4,000 shares of its Series B Preferred Stock in satisfaction of the obligation to issue such shares
to the seller of a trademark to the Company purchased in August 2015.
On
March 8, 2016, the Company, through its wholly-owned subsidiary, Medical Laser Manufacturer, Inc., memorialized in a Product and
Know-How License Agreement (the “License Agreement”) with Medical Lasers Manufacturer, Inc., a Florida corporation
doing business as Laser Lab Corp. (“Laser Lab”), an agreement to license the use of various intellectual property
in connection with seeking regulatory approval for and marketing, distributing and selling The Time Machine Series Lasers (the
“TTM Series”). In connection with the Company’s agreement with Laser Lab, which agreement was memorialized in
the License Agreement, on September 24, 2015, the Company filed with the Secretary of State of the State of Nevada a Certificate
of Designation of Rights, Preferences and Privileges (the “Certificate of Designation”), of the Company’s Series
B Convertible Preferred Stock (“Series B Preferred”). Pursuant to the Certificate of Designation, the Company designated
50,000 shares of Series B Preferred. The Series B Preferred do not hold any rights to receive dividends or any rights to vote.
The Company, at its sole discretion, may redeem at any time, in whole or in part, outstanding shares of Series B Preferred for
a price per share equal to the consideration paid or deemed to have been paid for such shares. The Series B Preferred may be converted,
sixty days after their respective issuance, each share into the Company’s common stock (“Common Stock”) at a
conversion ratio equal to one (1) share of Series B Preferred for five hundred (500) shares of Common Stock.
Pursuant
to the License Agreement, the Company agreed to issue to Laser Lab 25,000 shares of Series B Preferred and a promissory note (the
“Promissory Note”) in principal amount of $150,000 and bearing interest at 10% per annum. The principal and interest
due under the Promissory Note is payable 18-months from the date of issuance. In the event, the Company does not receive, by December
31, 2016, a decision letter from the Food and Drug Administration informing the Company of the “cleared” 510(k), then
the amount of 10,000 shares of Series B Preferred will be clawed back and forfeited by Laser Lab and the principal amount of the
Promissory Note will automatically reduce to $75,000, as if originally issued in such denomination.
Each
of the foregoing transactions was exempt from the registrations requirements of the Securities Act of 1933, as amended, pursuant
to Section 4(a) (2) thereof. In the alternative, the common stock issued upon the exercise of conversion rights is an exempt security
pursuant to Section 3(a) (9) of the Securities Act of 1933, as amended.
On April 15, 2016 the
Company entered into a Business Consulting Agreement with a Michigan limited liability company ("Consultant"). The agreement
provides for the Company retaining the Consultant for 125 days for general business and product development services. The Consultant
shall be paid $750 per month in cash and 500,000 shares of common stock of the Company valued at $5,000 as of the effective date
and another 500,000 common shares upon determination of the Company in its sole and absolute discretion.
On April 5, 2016 a noteholder
elected to partially convert $3,000 of an outstanding convertible note (originally $59,000) payable into 783,062 shares of common
stock. The principal balance due under the note payable after the conversion is $49,000. On May 5, 2016 a noteholder elected to
partially convert $2,800 of an outstanding convertible note payable into 768,026 shares of common stock. The principal balance
due under the note payable after the conversion is $46,200.
On April 18, 2016 the
company issued 1,100,000 shares of common stock in conversion of 2,200 shares of Preferred Series B stock.
On May 2, 2016, the Company
issued to an Investor a convertible redeemable note in the principal amount of $57,750 ("the Note"). The Note, which
matures on May 2, 2017, pays interest at the rate of 8% per annum. The note contains a 10% original issue discount. The holder
of the note is entitled, at its option beginning on the 6-month anniversary, to convert all or any of the principal face amount
of the Note then outstanding into shares of the Company's common stock at the price equal to 55% of the lowest trading price for
the twenty prior trading days including the date of conversion.
On May 4, 2016 a noteholder
elected to partially convert $8,800 of an outstanding convertible note payable into 2,000,000 shares of common stock. The principal
balance due under the note payable after the conversion is $26,200.
On May 10, 2016 a noteholder elected to partially convert $7,241
of an outstanding $35,000 convertible note payable into 2,194,200 shares of common stock. The principal balance due under the
note payable after the conversion is $52,759.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
None
Item
3. Defaults Upon Senior Securities.
None
Item
4. Mine Safety Disclosures
Not
Applicable
Item
5. Other Information.
There
have been no material changes to the procedures by which our security holders may recommend nominees to the board of directors.
Item
6. Exhibits.
|
31.1.
|
Certification
of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
31.2.
|
Certification
of the Chief Executive Officer and Principal Executive Officer Pursuant to 13a-14 and 15d-14 of the Securities Exchange Act
of 1934.
|
|
|
|
|
32.1.
|
Certification
of the Chief Financial Officer and Principal Financial Officer Pursuant to 13a-14 and 15d-14 of the Securities Exchange Act
of 1934.
|