(The accompanying notes are an integral part of these unaudited consolidated financial statements)
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
(The accompanying notes are an integral part of these unaudited consolidated financial statements)
Notes to Condensed Consolidated Financial Statements
1. Description of Business and Reverse Acquisition
a)
Description of Business
DMH International, Inc. (the Company) was incorporated in the state of Florida on March 26, 2010.
b)
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the nine months ended September 30, 2016, the Company has a working capital deficit of $1,595,936 and accumulated deficit of $5,412,601. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Companys future operations. These factors raise substantial doubt regarding the Companys ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
c)
Reverse Acquisition
On December 11, 2012, the Company entered into a share exchange agreement with DMH International, Inc. (DMHI), a public shell company. Pursuant to the agreement, DMHI acquired all of the outstanding shares of common stock of the Company (100 common shares) by issuing 125,000,000 common shares, comprised of 100,000,000 common shares from the President and Director of the Company and 25,000,000 newly issued common shares. Furthermore, the President and Director of DMHI cancelled 100,000,000 common shares as part of the share exchange agreement. As a result of the share exchange, the former shareholders of the Company controlled approximately 78% of the issued and outstanding common shares of DMHI resulting in a change in control. The transaction was accounted for as a reverse recapitalization transaction, as DMHI qualifies as a non-operating public shell company given the fact that the Company held nominal net monetary assets, consisting of only cash at the time of merger transaction. As Touch Medical Solutions, Inc. is deemed to be the purchaser for accounting purposes under recapitalization accounting, the equity of the Company is presented as the equity of the combined company and the capital stock account of the Company is adjusted to reflect the part value of the outstanding and issued common stock of the legal acquirer (DMHI) after giving effect to the number of shares issued in the share exchange agreement. Shares retained by DMHI are reflected as an issuance as of the acquisition date for the historical amount of the net assets of the acquired entity, which in this case is zero.
d)
Merger
Effective July 22, 2014, the Company acquired all of the outstanding shares of Virtual Physicians Network through issuance of 10,000,000 shares of the Companys convertible preferred stock. Each share of our preferred stock is convertible into 20 shares of our common stock. Virtual Physicians Network was merged into the Company and became the Companys wholly owned subsidiary. As of September 30, 2016, 7,432,099 shares were issued, and the remaining shares have not been issued due to administrative delay. The remaining 2,567,901 shares of convertible preferred stocks were accrued in preferred stocks issuable with a fair value of $410,864. Each share of convertible preferred stock was valued at 20 times of closing price of common stock price of $0.008 on the date of merger.
2. Summary of Significant Accounting Policies
a)
Basis of Presentation and Principles of Consolidation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) and are expressed in U.S. dollars. All the intercompany accounts and transactions have been eliminated. The Companys fiscal year end is December 31.
7
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting
Policies
(continued)
b)
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and valuation of long-lived assets, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c)
Interim Financial Statements
These interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Companys financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
d)
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at September 30, 2016 and December 31, 2015, the Company had no cash equivalents.
e)
Property and Equipment
Property and equipment is comprised of computer equipment and is recorded at cost. The Company amortizes the cost of equipment on a straight-line basis over their estimated useful lives of three years. The Company reviews all property and equipment for impairment annually.
f)
Revenue Recognition
Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is assured. The Company is not exposed to any credit risks as amounts are prepaid prior to performance of services.
g)
Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As of September 30, 2016 and 2015, the Company has 129,102,489 and 88,593,908 shares convertible under note agreements that are anti-dilutive and not included in diluted loss per share.
8
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting
Policies
(continued)
h)
Financial Instruments
The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.
|
|
Level 1.
|
Observable inputs such as quoted prices in active markets;
|
Level 2.
|
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
Level 3.
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
The Companys financial instruments are cash, accounts payable, accrued liabilities and amounts due to related parties. The recorded values of cash, accounts payable, accrued liabilities and amounts due to related parties approximate their fair values based on their short-term nature.
The following table presents assets and liabilities that were measured and recognized at fair value as of September 30, 2016 and December 31, 2015 on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30, 2016
|
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Realized (Gain) Loss
|
Derivative Liability
|
$
|
-
|
$
|
-
|
$
|
81,237
|
$
|
(12,355)
|
Totals
|
$
|
-
|
$
|
-
|
$
|
81,237
|
$
|
(12,355)
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2015
|
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Realized Loss
|
Derivative Liability
|
$
|
-
|
$
|
-
|
$
|
132,287
|
$
|
28,172
|
Totals
|
$
|
-
|
$
|
-
|
$
|
132,287
|
$
|
28,172
|
i)
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740
Accounting for Income Taxes
as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
j)
Recent Accounting Pronouncements
In March, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-08Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)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 of Update 2014-09. Accounting Standards Update No. 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.
9
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting
Policies
(continued)
In January, 2016, the FASB issued ASU No. 2016-1, Financial InstrumentsOverall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
Early application of the following amendments in this Update are permitted for all entities upon issuance of this Update as of the beginning of the fiscal year of adoption:
1.
An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
2.
Entities that are not public business entities are not required to apply the fair value of financial instruments disclosure guidance in the General Subsection of Section 825-10-50.
Except for the early application guidance discussed above, early adoption of the amendments in this Update is not permitted.
In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) (ASU 2015-16). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same periods financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Companys consolidated financial statements.
In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.
In August, 2015, the FASB issued ASU No. 2015-13, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets (ASU 2015-13). Effective upon issuance and should be applied prospectively. Therefore, an entity will have the ability to designate on or after the date of issuance any qualifying contracts as normal purchases or normal sales.
In April 2015, the FASB issued ASU No. 2015-03, InterestImputation of Interest (Subtopic 835-30) (ASU 2015-03), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.
10
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
3. Related Party Transactions
a)
As of September 30, 2016 and December 31, 2015, the Company owes $89,216 to the director, former CFO of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand. Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $5,358 and $5,338 for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016 and December 31, 2015, $285,000 and $240,000 included in accounts payable is the management fees owed to the director, former CFO, respectively. At September 30, 2016 and December 31, 2015, $101,522 included in accounts payable and accrued liabilities is owed to a company formerly controlled by the director, former CFO of the Company. These amounts owing are unsecured, non-interest bearing, and due on demand. Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $21,414 and $17,750 for the nine months ended September 30, 2016 and 2015, respectively.
b)
As of September 30, 2016 and December 31, 2015, the Company owes $580,388 and $522,938, respectively to the CFO, former CEO and the companies controlled by him. The amounts owing are unsecured, non-interest bearing, and due on demand. The amount owing has an imputed interest at 8%. Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $32,243 and $27,541 for the nine months ended September 30, 2016 and 2015, respectively.
c)
As of September 30, 2016 and December 31, 2015, the Company owes $2,300 to a company controlled by a shareholder of the Company. On May 12, 2015, the 850,017 convertible preferred shares were issued to this shareholder of the Company pursuant to the merger agreement at the price of $0.16 per share.
d)
As of September 30, 2016 and December 31, 2015, the Company owes $47,500 to the CEO of the Company. The amount owing has an imputed interest at 8%. Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $2,853 and $2,227 for the nine months ended September 30, 2016 and 2015, respectively. On May 12, 2015, the 1,133,356 preferred shares were issued to the CEO of the Company pursuant to the merger agreement at the price of $0.16 per share.
4. Convertible Notes
On March 31, 2014, the Company issued a convertible redeemable Note in the amount of $50,000. The proceeds were received on April 2, 2014. The Note carries interest at 9% annum and matures on March 31, 2015. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of 55% the average two lowest closing bid price in the 20 trading days prior to the conversion date. In connection with the issuance of this convertible note, the Company encountered a day-one derivative loss of $13,171. The convertible note payable, at fair value, was recorded at $63,171 on the issuance date. In addition, the proceeds of $50,000 attributable to the value of the call option embedded in the note was recorded as a debt discount and amortized over the term of the note under the interest method. Amortization for the years ended December 31, 2015 and 2014 is $2,660 and $47,340, respectively. During the year ended December 31, 2014, the debt holder made four conversions of a total of 19,893,000 shares of the companys restricted stock satisfying $32,438 of the note with a fair value of $81,451, included in the fair value of debt balance of $81,451 was settlement of derivative liability of $49,013.The Company recorded a gain of $12,550 for less shares issued during the conversion than what was called for in the original agreement. During the year ended December 31, 2015, the debt holder made two conversions of a total of 19,962,450 shares of the companys restricted stock satisfying the remaining $17,562 of the note in full with a fair value of $46,450, included in the fair value of debt balance of $46,450 was settlement of derivative liability of $26,488. The Company recorded a gain of $10,468 for less shares issued during the conversion than what was called for in the original agreement (See Note 7).
On May 5, 2014, the Company issued a convertible redeemable Note in the amount of $50,000. The proceeds were received on May 7, 2014. The Note carries interest at 9% annum and matured on May 5, 2015. The Company continued to accrue the default interest rate at 16%. At September 30, 2016 and December 31, 2015, the accrued interest was $5,237 and $2,025, respectively. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of 55% the average two lowest closing bid price in the 20 trading days prior to the conversion date. In connection with the issuance of this convertible note, the Company encountered a day-one derivative loss of $14,892. The convertible note payable, at fair value, was recorded at $54,892 on the issuance date. In addition, the proceeds of $50,000 attributable to the value of the call option embedded in the note was recorded as a debt discount and amortized over the term of the note under the interest method. Amortization for the years ended December 31, 2015 and 2014 is $16,528 and $33,472, respectively. During the year ended December 31, 2015, the debt holder made a conversion of a total of 19,000,000 shares of the companys restricted stock satisfying $19,000 of the note with a fair value of $25,769, included in the fair value of debt balance of $25,769 was settlement of derivative liability of $25,769.The Company recorded a gain of $31,091 for less shares issued during the conversion than what was called for in the original agreement (See Note 7). During the nine months ended September 30, 2016, the debt holder made a conversion of a total of 20,000,000 shares of the companys restricted stock satisfying $20,000 of the note with a fair value of $38,695, included in the fair value of debt balance of $38,695 was settlement of derivative liability of $38,695.The Company recorded a gain of $73,818 for less shares issued during the conversion than what was called for in the original agreement (See Note 7). This Note is currently in default.
11
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
4. Convertible Notes
(continued)
On July 25, 2014, the Company issued a convertible redeemable Note in the amount of $250,000. $125,000 each of the proceeds was received on June 25, 2014 and July 25, 2014, respectively (Total $250,000). The Note carries interest at 8% annum and matured on January 25, 2015. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of the lower of $0.01 or 60% the average three lowest VWAP prices in the 15 trading days prior to the conversion date. The Holder shall not be entitled to convert the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Note would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the issued and outstanding shares of Common Stock of the Borrower on such Conversion Date. Also, the aggregate conversion by the Holder may not exceed 9.99% if a form 13d or equivalent is filed. In connection with the issuance of this convertible note, the Company encountered a day-one derivative gain of $68,597. The convertible note payable, at fair value, was recorded at $181,403 on the issuance date. In addition, the debt discount of $68,597 was amortized over the term of the note under the interest method. Amortization for the years ended December 31, 2015 and 2014 is $8,014 and $60,583, respectively. On January 28, 2015, the note was satisfied in full with 25,000,000 shares of common stocks per settlement agreement with a fair value of $269,471, included in the fair value of debt balance of $269,471 was accrued interest of $11,194 and settlement of derivative liability of $8,277. The Company recorded a loss of $11,105 for more shares issued during the conversion than what was called for in the original agreement.
On May 15, 2015, the Company issued a convertible redeemable Note in the amount of $50,000. The Note carries interest at 9% annum and matured on May 15, 2016. The Company continued to accrue the default interest rate at 24%. At September 30, 2016 and December 31, 2015, the accrued interest was $4,600 and $0, respectively. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of 55% the average two lowest closing bid price in the 20 trading days prior to the conversion date. In connection with the issuance of this convertible note, the Company encountered a day-one derivative loss of $6,021. The convertible note payable, at fair value, was recorded at $56,021 on the issuance date. In addition, the proceeds of $50,000 attributable to the value of the call option embedded in the note was recorded as a debt discount and amortized over the term of the note under the interest method. Amortization for the nine months ended September 30, 2016 and 2015 is $18,055 and $6,389, respectively. This Note is currently in default.
In the evaluation of the financing arrangements, the Company concluded that the conversion features did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company
elected to account for the hybrid contract under the guidance of ASC 815-15-25-4. The fair values of the Companys derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a binomial option pricing model. In connection with the issuance of these convertible notes payable, the Company encountered a day-one derivative loss of $41,902 related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received from the arrangement. Therefore, the Company was required to record a loss on the derivative financial instrument. In addition, the fair value will change in future periods, based upon changes in the Companys common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be recognized in changes in fair value of derivatives on the Companys statement of operations. At September 30, 2016 and December 31, 2015, the derivative, at fair value, was recorded at $81,237 and $132,287, respectively (See Note 5). Accordingly, the company recognized gain and loss of $12,355 and $18,661, in changes in fair value of derivative on the Companys statement of operations at September 30, 2016 and 2015, respectively.
In addition, the proceeds of $208,597 and $50,000 received as a result of the issuance of these convertible notes is attributable to the value of the call option embedded in the note as of December 31, 2014 and 2015, respectively, which was recorded as a debt discount and is amortized over the term of the note under the interest method. Amortization for the nine months ended September 30, 2016 and 2015 is $18,055 and $46,367, respectively.
5. Derivative Liabilities
As discussed in Note 4 under Convertible Notes, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The number of shares of common stock to be issued is based on the future price of the Companys common stock. The number of shares of common stock issuable upon conversion of the note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion shares to be issued were recorded as derivative liabilities on the issuance date. The fair values of the Companys derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a binomial option pricing model. The loss (gain) in fair value of derivatives was for ($12,355) and $18,661 on the Companys statement of operations as of September 30, 2016 and 2015, respectively.
12
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
5. Derivative Liabilities
(continued)
The following is a summary of changes in the fair market value of the derivative liability during the nine months ended September 30, 2016:
|
|
|
|
|
Derivative
Liability
Convertible
Debts Total
|
Balance, December 31, 2015
|
$
|
$132,287
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
-
|
Decrease in derivative value due to issuances of common stocks for conversions
|
|
(38,695)
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
(12,355)
|
Balance, September 30, 2016
|
$
|
81,237
|
6. Notes payable
During February through May, 2016, the Company issued four promissory notes to a non-related party in the amount of $60,000 ($15,000 each) bearing interest at 10% annually. The notes are due in one year from the execution and funding of the note. In the event of default, the noteholder will receive 500,000 shares of the Companys restricted common stock on the date that is 10 business days after the maturity date. The interest expense for the nine months ended September 30, 2016 is $2,895.
7. Common shares
Common stock issued for services
During May, 2015, the Company signed an agreement to pay the consultant for a monthly fee of $2,500 in cash and $5,000 in stock for a term of one year. The number of shares will be based on an average of the three lowest VWAPs for the last two weeks of that month started from May 2015. During year ended December 31, 2015, the total of 10,555,556 shares were granted with a fair value of $10,556. The shares were valued using April 21, 2015 closing value of shares on date of agreement. The number shares are calculated using an average of the three lowest VWAPs for the last two weeks of May and June 2015. On August 25, 2015, the agreement was terminated and the common stocks that have been granted were cancelled due to nonperformance.
Convertible preferred stock issued for merger
On July 22, 2014, the Company acquired all of the outstanding shares of Virtual Physicians Network through issuance of 10,000,000 shares of convertible preferred stock. Each share of convertible preferred stock has the voting rights of 20 shares of the Companys common stock. Upon the occurrence of a mandatory conversion event, which occurs immediately following the business day on which the Corporations shareholders have approved an amendment to the Corporations Articles of Incorporation which provide for a sufficient number of authorized common stock which will permit the holders of the convertible preferred stock to convert such shares into the Companys Common Stock, the outstanding shares of convertible preferred stock shall automatically be converted at a conversion rate of 20 shares of Common Stock for every 1 share of convertible preferred stock. As of September 30, 2016, the 7,432,099 shares were issued at the price of $0.16 per share, and the remaining shares have not been issued due to administrative delay. The remaining 2,567,901 shares of convertible preferred stocks were accrued in preferred stocks issuable with a fair value of $410,864. Each share of convertible preferred stock was valued at 20 times of closing price of common stock price of $0.008 on the date of merger.
Common Stock Issued for Debt Conversions
During the year ended December 31, 2015, the debt holder made the following two conversions of a total of 19,962,450 shares of the companys restricted stock satisfying the remaining $17,562 of the note in full with a fair value of $46,450, included in the fair value of debt balance of $46,450 was settlement of derivative liability of $26,488.The Company recorded a gain of $10,468 for less shares issued during the conversion than what was called for in the original agreement (See Note 4).
|
|
|
|
|
Date
|
|
Number of shares converted
|
|
Fair Value of Debt Converted
|
02/5/2015
|
|
14,400,000
|
|
$33,578
|
03/27/2015
|
|
5,562,450
|
|
$12,872
|
13
DMH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
7. Common shares
(continued)
On January 28, 2015, following the convertible note agreement in the amount of $250,000 on July 25, 2014, the note was satisfied in full with 25,000,000 shares of common stocks per settlement agreement with a fair value of $269,471, included in the fair value of debt balance of $269,471 was accrued interest of $11,194 and settlement of derivative liability of $8,277. The Company recorded a loss of $11,105 for more shares issued during the conversion than what was called for in the original agreement (See Note 4).
On April 1, 2015, following the convertible note agreement in the amount of $50,000 on May 5, 2014, the debt holder made a conversion of a total of 19,000,000 shares of the companys restricted stock satisfying $19,000 of the note with a fair value of $25,769, included in the fair value of debt balance of $25,769 was settlement of derivative liability of $25,769.The Company recorded a gain of $31,091 for less shares issued during the conversion than what was called for in the original agreement. On March 8, 2016, the debt holder made a conversion of a total of 20,000,000 shares of the companys restricted stock satisfying $20,000 of the note with a fair value of $38,695, included in the fair value of debt balance of $38,695 was settlement of derivative liability of $38,695(See Note 4).
|
|
|
|
|
Date
|
|
Number of shares converted
|
|
Fair Value of Debt Converted
|
04/01/2015
|
|
19,000,000
|
|
$19,000
|
03/08/2016
|
|
20,000,000
|
|
$20,000
|
8. Subsequent Events
We have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events.
14