Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain "forward-looking
statements." The terms "believe," "anticipate," "intend," "goal," "expect,"
and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's current
expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in the forward-looking statements, including customer
acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. In light of
the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should
not be regarded as a representation that the strategy, objectives or other plans of the Company will be achieved. The Company
wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date
made. Except as may be required under applicable securities laws, we undertake no duty to update this information.
OVERVIEW
Organizational
History
On
November 1, 2005, Bio-Solutions International, Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the
"Agreement") with OmniMed Acquisition Corp., (the "Acquirer), a Nevada corporation and a wholly owned subsidiary
of Bio-Solutions, OmniMed International, Inc., a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the
"OmniMed Shareholders"). Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed
from the OmniMed Shareholders.
As
a result of the Agreement, the OmniMed Shareholders assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions
changed its name to OmniMed International, Inc. Effective January 17, 2006, OmniMed changed its name to MedeFile International,
Inc. ("MedeFile" or the "Company").
Overview
of Business
MedeFile
International, Inc., through its MedeFile, Inc. subsidiary, has developed and globally markets a proprietary, patient-centric,
Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s
actual medical records. Our goal is to revolutionize the medical industry by bringing patient-centric digital technology to the
business of medicine. We intend to accomplish our objective by providing individuals with a simple and secure way to access their
lifetime of actual medical records in an efficient and cost-effective manner. Our products and services are designed to provide
healthcare providers with the ability to reference their patient's actual past medical records, thereby ensuring the most accurate
treatment and services possible while simultaneously reducing redundant procedures.
Interoperable
with most electronic medical record systems utilized by physician practices, clinics, hospitals and other care providers, the
highly secure, feature-rich MedeFileiPHR solution has been designed to gather all of its members’ actual medical records
on behalf of each member, and create a single, comprehensive Electronic Health Record (EHR). The member can access
his/her records 24-hours a day, seven days a week – or authorize a third party user – on any web-enabled device (PC,
cell phone, PDA, e-reader, et al), as well as the portable MedeFile flash drive/keychain or branded UBS-bracelet.
By
subscribing to the MedeFile system, members can empower themselves to take control of their own health and well-being, as well
as empower their healthcare providers to make sound and lifesaving decisions with the most accurate, up-to-date medical information
available. In addition, with MedeFile, members enjoy the peace of mind that comes from knowing that their medical records
are protected from fire, natural disaster, document misplacement or the closing of a medical or dental practice.
We
believe we enjoy a number of direct, competitive advantages over others in the medical records marketplace, including that:
|
●
|
we have developed products and services geared to the patient, which also have the depth and breadth of information required by treating physicians and medical personnel
|
|
|
|
|
●
|
we do all the work of collecting and updating medical information on an ongoing basis; our products’ dependence on the patient taking action is minimal – particularly when compared to patient action required to support competing solutions.
|
|
|
|
|
●
|
we provide a complete medical record. Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), which are by no means complete or necessarily accurate records
|
|
|
|
|
●
|
we provide a coherent mix of services and products that are intended to improve the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.
|
RESULTS
OF OPERATIONS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2016 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2015
Revenues
Revenues
for the three months ended September 30, 2016 totaled $9,608 compared to revenues of $10,869 during the three months ended September
30, 2015. The decrease in membership revenue is primarily related to amount of members and medical record reimbursement
revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’
doctors for sending updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative
expense. Revenues received from memberships are recognized through the period of the membership, and, therefore, revenue
recognized represents a fraction of the membership in the quarter being reported.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the three months ended September 30, 2016 totaled $106,041, a decrease of $16,804 or approximately
13.7% compared to selling, general and administrative expenses of $122,845 for the three months ended September 30, 2015. The
decrease was due mainly to decreased payroll, legal expense, and consulting fees.
Amortization
Expense
Amortization
expense for the three months ended September 30, 2016 was $0, compared to $22,148 the three months ended September 30, 2015.
Amortization expense in 2015 is the expensing of the website development. Website costs were impaired in the previous year
and the Company incurred an impairment expense of $182,195
Interest
Expense
Interest
expense on convertible debentures for the three months ended September 30, 2016 and 2015, was $5,021 and $370 respectively. The
Company entered into two secured convertible debentures during the third quarter of 2013. The notes have a one year
term at a 10% interest rate. The Company entered into additional 7% promissory notes in 2016 (see Note 2 and 3 to the accompanying
financial statements).
Other
Expense
Gain
on change in fair value of derivate liabilities for the three months ended September 30, 2016 was $7,460 compared to a gain of
$1,072 for the three months ended September 30, 2015.
Net
Loss
For
the reasons stated above, our net loss for the three months ended September 30, 2016 was $93,994, or $0.00 per share, a decrease
of $39,708, compared to net loss of $133,702, or $0.00 per share, for the three months ended September 30, 2015. The significant
change is primarily related to adjustments in the fair value of our derivative liability and a decrease in our general and administrative
and compensation expenses.
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2015
Revenues
Revenues
for the nine months ended September 30, 2016 totaled $25,101 compared to revenues of $36,199 during the nine months ended September
30, 2015. The decrease in membership revenue is primarily related to amount of members and medical record reimbursement
revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’
doctors for sending updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative
expense. Revenues received from memberships are recognized through the period of the membership, and, therefore, revenue
recognized represents a fraction of the membership in the quarter being reported.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the nine months ended September 30, 2016 totaled $342,236, a decrease of $220,333 or approximately
39.2% compared to selling, general and administrative expenses of $562,569 for the nine months ended September 30, 2015. The decrease
was due mainly to decreased payroll, legal expense, and consulting fees.
Amortization
Expense
Amortization
expense for the nine months ended September 30, 2016 was $0, compared to $66,447 the nine months ended September 30, 2015. Amortization
expense in 2015 is the expensing of the website development. Website costs were impaired in the previous year and the Company
incurred an impairment expense of $182,195
Interest
Expense
Interest
expense for the nine months ended September 30, 2016 and 2015, was $8,519 and $2,763 respectively. The Company
entered into two secured convertible debentures during the third quarter of 2013. The notes have a one year term at
a 10% interest rate. The Company entered into 7% promissory notes in 2016 (see Note 2 and 3 to the accompanying financial statements).
Other
Expense
Change
in fair value of derivate liabilities for the nine months ended September 30, 2016 was a gain of $7,405 compared to a loss of
$1,958 for the nine months ended September 30, 2015.
Net
Loss
For
the reasons stated above, our net loss for the nine months ended September 30, 2016 was $318,249, or $0.01 per share, a decrease
of $280,113, compared to net loss of $598,362, or $0.03 per share, for the nine months ended September 30, 2015. The significant
change is primarily related to adjustments in the fair value of our derivative liability and a decrease in our general and administrative
and compensation expenses.
FINANCIAL
CONDITION
Liquidity
and Capital Resources
As
of September 30, 2016, we had cash and cash equivalents of $2,584, and merchant services reserve of $2,938. Net
cash used in operating activities for the nine months ended September 30, 2016 was approximately $310,787. Our current liabilities
as of September 30, 2016 of $327,541 consisted of: $16,525 for accounts payable and accrued liabilities, deferred revenues of
$154, convertible debenture of $16,868, note payable – related party of $282,332, and derivative liability of $11,662. We
have negative working capital of $322,019 as of September 30, 2016.
The
accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company
has reported a net loss of $318,249 for the nine months ended September 30, 2016 and had an accumulated deficit of $28,829,648
as of September 30, 2016.
The
Company currently estimates that it will require approximately $420,000 to continue its operations for the next twelve months. Additional
investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions
may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the
trading price of our common stock and conditions in the U.S. stock and debt markets could make it more difficult to obtain financing
through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could
incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements
that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may
experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing
holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to
curtail our operations
Off-Balance
Sheet Arrangements
We
do not have any off balance sheet arrangements as of September 30, 2016 or as of the date of this report.
Critical
Accounting Policies
The
preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in
the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses,
and the disclosure of contingent assets and liabilities.
We
base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the
circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number
of significant accounting policies affecting our condensed consolidated financial statements, we believe the following critical
accounting policies involve the most complex, difficult and subjective estimates and judgments:
Revenue
Recognition
The
Company generates revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare
information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria
which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred;
(3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and
(4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
Stock-based
Compensation
The
Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued
to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of
the related agreement.