Notes to Consolidated Financial Statements
September 30, 2017
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. The company has started to hire a salesforce and sign distribution agreements in anticipation
of future sales.
In July 2016, Medifirst, in response to its Premarket Notification
510(k) submission for “The Time Machine” Series Laser, received clearance from the U.S. Food and Drug Administration
(“FDA”) to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device. The Company is actively
putting together a sales and distribution team to offer our lasers in the US and foreign markets.
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 consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments
(consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial
position of the Company as of September 30, 2017, the consolidated results of its operations for the three-month and nine-month
periods ended September 30, 2017 and 2016 and the consolidated cash flows for the nine-month periods ended September 30, 2017 and
2016. The results of operations for the nine-month period ended September 30, 2017 are not necessarily indicative of the operating
results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements
and related disclosures for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for the
year then ended.
Some items in the prior year financial statements were reclassified
to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.
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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
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. The Company has not recorded an allowance for doubtful accounts as of September
30, 2017 or December 31, 2016.
Inventory
Inventory consists of finished goods and is stated at the lower
of cost (first-in, first-out) or market value. Finished goods inventory includes hand held laser devices, their carrying cases
and goggles.
Notes receivable (Investor)
In May 2017 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 eight (8) convertible
8% notes payable to the investor in the amounts of $131,250, $131,250, $125,000, $125,000, $125,000, $125,000, $125,000 and $125,000.
Four (4) of these notes will close with cash funding subsequent to September 30, 2017 and are secured by fully collateralized promissory
notes issued by the Investor to the Company in the amounts of $131,250, $125,000, $125,000, and $125,000 (also known as the “back-end
notes”). These back-end notes bear interest at the rate of 8% per annum. The accrued interest income and interest receivable
on these back end notes in the amount of $11,441 is reported as other income on the statement of operations and as a current asset
on the balance sheet.
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 2015.
Intangible Asset- Licensing Agreement
On March 8th 2016 (with an effective date of October 1, 2015),
the company, through its sole wholly-owned subsidiary (“Licensee”), entered into a Product and Know-How License Agreement
(“Agreement”) with a Florida Corporation (“Licensor”) which 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; and
- prepare, or have prepared on its behalf, modifications, enhancements
and/or derivative works of the Technology.
In connection with the license granted, Licensor hereby grants
to Licensee a license to the Licensed Patents, whether now existing or hereafter acquired.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
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. During the quarter-ended June 30, 2017, the $150,000 promissory note was erroneously removed from the books but
has now been restored for the quarter ended September 30, 2017. The transaction of $18,986 in accrued interest was satisfied through
the issuance of 17,272,727 shares of the Company’s common stock. This transaction was erroneously recorded as the satisfaction
of the entire $150,000 note during the quarter ended June 30, 2017. This error was detected during quarter ended September 30,
2017 and the principal amount of $150,000 was restored and is included in Convertible Notes Payable at September 30, 2017. On September
15, 2017 the Note was amended to include provisions to allow conversion of the Note into common stock of the Company. On September
25, 2017, $16,250 in principal on this note was satisfied by the conversion into 25,000,000 shares of the Company’s common
stock.
The last part of the consideration in this license agreement
is the royalty payments which have not taken effect yet since they are based on sales for which the company has had only minimum
thus far. The licensing agreement is for a ten year period effective from October 1, 2015. The cost of the licensing agreement
is being amortized over its ten-year period and charged to income on a straight-line basis.
Debt Issue 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 are immediately
expensed. Beginning in 2015, the Company 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 table included in Note 5 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.
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 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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
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.
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 September 30, 2017, 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 September 30, 2017, the Company had $417,175 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 to annual reporting
periods beginning after December 15, 2017 (that is, a public organization is required to apply the new revenue standard beginning
in the first interim period within the year of adoption). Additionally, the Board decided to permit public organizations to adopt
the new revenue standard early, but not before the original public organization effective date (that is, annual periods beginning
after December 15, 2016). A public organization should apply the new revenue standard to all interim reporting periods within the
year of adoption. The Company has evaluated the impact of this ASU on the consolidated financial statements and has determined,
at this time, the ASU’s implementation would not have a material impact on revenue recognition. See below - Accounting Standards
Update 2016-10 - Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing.
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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
In April 2016, the FASB issued Accounting Standards Update 2016-10
- Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. The core principle of the
guidance in Topic 606 is that an entity should 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.
To achieve that core principle, an entity should apply the following steps: 1. Identify the contract(s) with a customer. 2. Identify
the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the performance
obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. The amendments in
this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following
two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related
principles for those areas. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.
Note 2. PROPERTY, PLANT AND EQUIPMENT (NET)
Equipment is recorded at cost and consisted of the following
at September 30, 2017 and December 31, 2016:
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Computer equipment
|
|
$
|
8,956
|
|
|
$
|
8,956
|
|
Less: accumulated depreciation
|
|
|
(7,565
|
)
|
|
|
(7,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,392
|
|
|
$
|
1,871
|
|
Depreciation expense was $480 and $770, for the nine months
ended September 30, 2017 and 2016 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 September 30, 2017 and December 31, 2016, respectively. The loan bears no interest and is payable on
demand. See Note 10 for additional related party transactions.
Note 4. LOANS PAYABLE - STOCKHOLDERS
During the periods ended September 30, 2017 and 2016 a stockholder
of the Company advanced the Company $-0- and $-0- respectively. The loan has a balance of $16,074 at September 30, 2017 and a balance
of $8,955 as of December 31, 2016. The loan bears no interest and is payable on demand.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
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 September 30, 2017 and December 31, 2016, the loan had balance was $100 and $100, respectively.
At September 30, 2017 and December 31, 2016, the Company was
indebted to a stockholder in the amount of $1,000 and $1,500, respectively. The loan has an interest rate of 26.7%. In February
2017 the note was sold to another investor and that noteholder converted $500 in principal into 5,000,000 shares of common stock.
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. On September 6, 2016 the note holder converted the
entire principal balance and accrued interest into common stock and therefore at September 30, 2017 there is no principal balance
remaining on the note.
Note 5. CONVERTIBLE NOTES PAYABLE
Note Payable-BS
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.
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
|
|
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
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
outstanding at September 30, 2017.
Note Payable-SF
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 September 30, 2017 and December 31 2016,
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 70,296,142 shares at September 30, 2017 and 22,562,213 shares at December 31,
2016.
Note Payable-RK
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:
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 (See
Note Payable-NW
below).
Note Payable-NW
After receiving the transfer of the principal balance of $9,690
in July 2013 in the private transaction noted in
Note Payable-RK
above, in August 2013, in a private transaction, the new
note holder of the aforementioned note 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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
In October 2014, the note holder converted $1,100 of note principal
into 1,100,000 of the Company’s common stock. 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 70,296,142 shares at September
30, 2017 and 22,562,213 shares at December 31, 2016.
In August 2016, the note holder converted $3,000 of note principal
into 3,000,000 shares of the Company’s common stock. At September 30, 2017 and December 31, 2016, the remaining principal balance
on this portion of the note is $715 and $715 respectively.
Note Payable-MC #1
In August 2013, the note holder/stockholder who received the
$4,475 in principal from the aforementioned noteholder, 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. In January 2017 the remaining $2,075 principal balance
on this note was transferred to another investor who during the same period converted the entire remaining principal balance into
4,190,480 common shares.
Note Payable-MC #2
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. During January 2017, the current noteholder converted $1,100 in principal balance into
11,000,000 shares of common stock. During the same period, the current noteholder transferred $600 of the remaining principal balance
to another investor who then converted the entire principal balance he received into 6,000,000 shares of common stock. During April
2017, the current noteholder converted $410 of remaining principal into 6,000,000 shares of common stock. There remains $890 in
principal balance at September 30, 2017 with the current noteholder and $3,000 in principal balance with the original noteholder
at December 31, 2016.
Convertible Note Payable-VV to LG (8%)#1
In July 2015, the Company issued a convertible note payable
in the principal amount of $59,000. The note matured 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. Through a series of conversions during 2016, the note holder converted all of the entire note principal
and accrued interest into common stock thereby leaving no principal balance remaining on the note at September 30, 2017 and December
31,2016.
Convertible Note Payable-VV (8%) #2
In August 2015, the Company issued a convertible note payable
in the principal amount of $38,000. The note matured 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. Through a series of conversions during 2016, the note holder converted all of the entire note principal
and accrued interest into common stock thereby leaving no principal balance remaining on the note at September 30, 2017 and December
31,2016.
Convertible Note Payable-LGC(8%)
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. Through a series of conversions during 2016, the note holder converted all of the entire note principal
and accrued interest into common stock thereby leaving no principal balance remaining on the note at September 30, 2017 and December
31,2016.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
Debenture Payable - (5%) B (Original $100K)
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. The remaining principal balance on the note at June 30, 2016 was $40,000 after a private
sale of $60,000 in principal and deemed accrued interest on May 2, 2016 to another investor and the issuance of a replacement note
by the Company - see below-
Convertible Note Payable-SO-B (8%) (Original $60k)
.
On September 27, 2016 the remaining $40,000 in principal balance
and accrued interest on the note was sold in a private transaction to another investor and the Company issued a replacement note
in the amount of $50,000. Both of the above noted transactions which took place on May 2, 2016 and September 27, 2016 respectively,
resulted in a loss on the extinguishment of the original debt in the amount of $4,733 from deeming accrued interest in excess of
actual accruals. This loss is reported in the statement of operations for the year ended December 31, 2016. Through a series of
conversions during 2016, the note holder converted all of the entire note principal and accrued interest into common stock thereby
leaving no principal balance remaining on the note at September 30, 2017 and December 31, 2016.
As a result of the aforementioned transactions and conversions,
there is no principal balance remaining on the original $100,000 note as of September 30, 2017 and December 31, 2016.
Convertible Note Payable-SO-B (8%) (Original $60k)
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. Any unamortized
original issue discount and deferred financing costs from the original note was expensed upon replacement. The derivative discount
and liability on the original note was appropriately accounted for upon replacement and a new derivative discount and liability
for the replacement note appropriately recorded. Through a series of conversions during 2016, the note holder converted all of
the entire note principal and accrued interest into common stock thereby leaving no principal balance remaining on the note at
December 31, 2016.
Convertible Note Payable-CB (5%) (Original $35k)
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.
During the months of May, June and July 2016, the holder of
the above $35,000 Note converted all of the principal to common stock thereby leaving no principal balance payable on the note
as of September 30, 2017 and December 31, 2016.
Convertible Note Payable-LGC (8%)
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 conducted additional closings 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 (see
Convertible Notes Payable-LGC (8%) BEN
below). During the quarter ended March 31, 2017 the noteholder
converted the entire principal balance into 62,067,838 shares of common stock and therefore there is no principle balance outstanding
at September 30, 2017. At December 31, 2016 the entire principal balance of $105,000 was outstanding.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
Convertible Notes Payable-LGC (8%) BEN
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.
In accordance with the terms of the Purchase Agreement, the
investor and the Company closed on the two outstanding notes ($50,000 and $46,803) in May and June 2016 when the Company received
the cash funding. During April 2017 the noteholder converted the entire principal balance of the $50,000 note into common stock
of the Company. During June 2017 the noteholder converted $16,000 of the remaining principal of the $46,803 note into common stock
of the Company. In July and September 2017 the noteholder converted the remaining $30,803 of the note’s principal balance into
common stock. As a result, there is no principal balance remaining on either note as of September 30, 2017. As of December 31,
2016 the entire principal balances of $50,000 and $46,803 were outstanding.
Convertible Notes Payable-SO (8%)
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. During the quarter ended March 31, 2017 the noteholder converted $32,298 of the principle balance into
23,489,690 shares of common stock thereby leaving a principal balance of $25,452 on the note at September 30, 2017. The entire
principal balance in the amount of $57,750 was outstanding on the note at December 31, 2016.
Convertible Notes Payable-LG (9%)
On October 11, 2016, the Company issued to an Investor a replacement
convertible note in the principal amount of $50,000 (“the Replacement Note”). The Note, which matures on March 27, 2018,
pays interest at the rate of 9% per annum. This Replacement Note partially replaces a note originally issued on June 12, 2015 in
the principal amount of $100,000. During the quarter ended December 31, 2016 the noteholder converted the entire principal balance
into shares of common stock thereby leaving $-0- principal balance remaining on the note as of September 30, 2017 and December
31, 2016.
Convertible Notes Payable-BBCG (9%)
On October 11, 2016, the Company issued to an Investor a convertible
note in the principal amount of $157,895 (“the Note”). The Note, which matures on March 27, 2018, pays interest at the
rate of 9% per annum. The note contains an original issue discount in the amount of $7,895. 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 57.5% of the lowest trading price for the twenty prior trading
days including the date of conversion. During April and June of 2017, the noteholder converted the entire remaining principal balance
of the note into common stock of the Company. There is no principal balance remaining on the note as of September 30, 2017. The
entire $157,895 principal balance was outstanding on the note as of December 31, 2016.
Convertible Notes Payable - Funding (8%)
On May 1 2017, the Company entered into a Securities Purchase
Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale of 8 convertible
redeemable notes in aggregate principal amount of $1,012,500. On May 1st, 2017 and June 2, 2017, the Company and the Investor conducted
the first two closings under the Purchase Agreement, pursuant to which the Company issued to the Investor (i) a convertible redeemable
note in principal amount of $131,250 (the “$131K Note”) ; and (ii) a convertible redeemable note in principal amount
of $125,000 (the “$125K Note”). On July 10, 2017 and August 7, 2017, the Company and the Investor conducted the second
two closings under the Purchase Agreement, pursuant to which the Company issued to the Investor two convertible redeemable notes
each in the principal amount of $125,000; Under the Purchase Agreement, on January 1, 2018, February 2, 2018, March 10 ,2018 and
April 7, 2018 the Company and the Investor expect to conduct additional closings for the sale and purchase of additional notes
having the same terms as the Notes in principal amounts equal to $131,250, $125,000, $125,000 and $125,000 respectively.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
In consideration for the issuance of the $131K Note and the
$125K Note, on May 1, 2017 and June 2, 2017 and for the two $125k Notes on July 10, 2017 and August 7, 2017, the Company received
net proceeds (after deducting $25,000 in legal fees) in the amount of $481,250. In consideration for the issuance of the $131K
and the three $125k Notes, the Investor issued to the Company a $131,250 fully-collateralized secured promissory note and three
$125,000 fully-collateralized secured promissory notes (the “Investor Notes”), pursuant to which the Investor agreed
to pay the Company $131,250 and $375,000 on or before January 1, 2018, February 2, 2018, March 10, 2018 and April 7, 2018 respectively.
These Notes (often referred to as “back-end Notes”), bear interest at the rate of 8% per annum.
Convertible Notes Payable - JR (5%)
On August 2, 2017 the Company issued a convertible note payable
(promissory note) to an investor in the principal amount of $50,000. The note matures on August 2, 2018 and bears interest at 5%.
The note holder has the right at any time on or after the day that is six months from August 2, 2018 to convert any part or
all of the outstanding unpaid principal balance into shares of the Company’s common stock at a fixed price of .003 per share. The
entire principal balance of $50,000 is outstanding as of September 30, 2017.
Convertible Notes Payable - MLM (10%)
As more fully described in Note 1 to the financial statements,
on March 8th 2016 (with an effective date of October 1, 2015), the company, through its sole wholly-owned subsidiary ("Licensee"),
entered into a Product and Know-How License Agreement ("Agreement") with a Florida Corporation ("Licensor")
which is owned by a related party - the son of the Company's CEO. 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. During the quarter-ended June 30, 2017, the $150,000 promissory note was erroneously removed from the books but
has now been restored for the quarter ended September 30, 2017. The transaction of $18,986 in accrued interest was satisfied through
the issuance of 17,272,727 shares of the Company's common stock. This transaction was erroneously recorded as the satisfaction
of the entire $150,000 note during the quarter ended June 30, 2017. This error was detected during quarter ended September 30,
2017 and the principal amount of $150,000 was restored and is now included in Convertible Notes Payable at September 30,2017.
On September 15, 2017 the Note was amended to include provisions to allow conversion of the Note into common stock of the Company.
At such time the Note was valued with its embedded derivative and discount. On September 25, 2017, $16,250 in principal on this
note was satisfied by the conversion into 25,000,000 shares of the Company's common stock.
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 September 30, 2017 as follows:
9/30/2017
|
|
Remaining
|
|
|
Original
|
|
|
|
|
|
Deferred
|
|
|
Total
Convertible
|
|
|
|
|
|
|
Principal
|
|
|
Issue
|
|
|
Derivative
|
|
|
Financing
|
|
|
Notes
|
|
|
Derivative
|
|
Debt
|
|
Amount
|
|
|
Discount
|
|
|
Discount
|
|
|
Costs
|
|
|
Payable
|
|
|
Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable - BS
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
Note Payable - SF
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
Note Payable - SD
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
Note Payable - NW
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
715
|
|
|
|
|
|
Note Payable - MC #2
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890
|
|
|
|
|
|
Convertible Note Payable - JR (5%)
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
Convertible Note Payable - CB (5%)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
865
|
|
Convertible Notes Payable - SO (8%)
|
|
|
25,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,452
|
|
|
|
25,735
|
|
Convertible Note Payable - LGC (8%) 1
|
|
|
131,250
|
|
|
|
|
|
|
|
|
|
|
|
(3,647
|
)
|
|
|
127,603
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) BEN 1
|
|
|
131,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,250
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) 2
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
(3,647
|
)
|
|
|
121,353
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) BEN 2
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) 3
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
(4,846
|
)
|
|
|
120,154
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) BEN 3
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) 4
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
(5,326
|
)
|
|
|
119,674
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) BEN 4
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
Convertible Note Payable - MLM (10%)
|
|
|
133,750
|
|
|
|
|
|
|
|
(134,595
|
)
|
|
|
|
|
|
|
(845
|
)
|
|
|
152,479
|
|
|
|
$
|
1,238,492
|
|
|
$
|
-
|
|
|
$
|
(134,595
|
)
|
|
$
|
(17,466
|
)
|
|
$
|
1,086,431
|
|
|
$
|
179,079
|
|
As of September 30, 2017, the convertible notes payable can
be converted into approximately 1,069,732,088 shares of common stock.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
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 for the 8% Convertible Notes Payable issued January 7, 2016 and March 7, 2016 and the 9% Convertible Note payable
issued October 1, 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 “Change in Fair Value - derivatives.”
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 unobservable 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.
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 and May 1, 2017 and June 2, 2017 and the 9% Convertible Note
payable issued October 1, 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 September 30, 2017. The primary assumptions include: projected annual volatility of 146%-171%; the follow-on securities purchase
option; the conversion feature as a percentage of Market; automatic/conditional conversions; market price trigger events.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
As of September 30, 2017, the Company’s derivative financial
instruments included:
Embedded derivatives associated with certain of the Company’s
unsecured convertible notes payable. The Company’s 5% convertible notes payable, 8% convertible notes payable, 9% convertible
note payable and 10% note payable issued to 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, 8% Convertible Notes Payable,
9% convertible note payable and the 10% note payable are valued at September 30, 2017. The following assumptions were used for
the valuation of the embedded derivative:
- The stock price of $0.0022 decreased to $0.0015 in this period
(basis for the 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 $537,419 as of 9/30/2017 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 46.10% to 50.71%;
- 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:
6/30/2017
|
|
|
171
|
%
|
7/11/2017
|
|
|
171
|
%
|
9/5/2017
|
|
|
151
|
%
|
9/15/2017
|
|
|
159
|
%
|
9/22/2017
|
|
|
161
|
%
|
9/30/2017
|
|
|
146
|
%
|
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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
The Company’s derivative liabilities on convertible notes
payable are presented at market value in the financial statements at September 30, 2017 as follows:
9/30/2017
Convertible Note
|
|
Derivative Treatment Date
|
|
Maturity Date
|
|
Principal Note Amount
|
|
|
Original Derivative Valuation
|
|
|
Derivative Valuation
December 31,
2016
|
|
|
Quarter Ended
March 31,
2017
Issuances
|
|
|
Quarter Ended
March 31,
2017
Conversions
|
|
|
Quarter Ended
March 31,
2017
Mark-to- Market
|
|
|
Derivative Valuation
March 31,
2017
|
|
|
Quarter Ended
June 30,
2017
Conversions
|
|
|
Quarter Ended
June 30,
2017
Issuances
|
|
|
Quarter Ended
June 30,
2017
Mark-to- Market
|
|
|
Derivative Valuation
June 30,
2017
|
|
|
Quarter Ended
September 30,
2017
Conversions
|
|
|
Quarter Ended
September 30,
2017
Issuances
|
|
|
Quarter Ended
September 30,
2017
Mark-to- Market
|
|
|
Derivative Valuation
September 30,
2017
|
|
8% Convertible Note Payable- issued 5/2/2016
|
|
10/1/2016
|
|
5/2/2017
|
|
$
|
57,750
|
|
|
$
|
58,355
|
|
|
$
|
58,355
|
|
|
|
|
|
|
$
|
(34,680
|
)
|
|
$
|
17,806
|
|
|
$
|
41,481
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
(14,925
|
)
|
|
$
|
26,556
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(821
|
)
|
|
$
|
25,735
|
|
5 % Convertible Note- Payable - issued 6/12/2015
|
|
4/12/2016
|
|
1/7/2017
|
|
|
35,863
|
|
|
|
37,827
|
|
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
440
|
|
|
$
|
1,358
|
|
|
|
|
|
|
|
-
|
|
|
|
(475
|
)
|
|
|
883
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
865
|
|
9% Convertible Notes Payable- issued 10/01/2016
|
|
3/26/2017
|
|
3/27/2018
|
|
|
157,895
|
|
|
|
56,956
|
|
|
|
|
|
|
|
162,463
|
|
|
|
|
|
|
|
58,370
|
|
|
$
|
220,833
|
|
|
|
(194,820
|
)
|
|
|
-
|
|
|
|
(26,013
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
8% Convertible Notes Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
105,000
|
|
|
|
87,287
|
|
|
|
21,395
|
|
|
|
|
|
|
|
(136,759
|
)
|
|
|
115,364
|
|
|
$
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
8% Convertible Notes Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
50,000
|
|
|
|
15,803
|
|
|
|
15,803
|
|
|
|
|
|
|
|
|
|
|
|
66,985
|
|
|
$
|
82,788
|
|
|
|
(85,228
|
)
|
|
|
-
|
|
|
|
2,440
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
8% Convertible Notes Payable- issued March 7, 2016
|
|
3/7/2016
|
|
3/7/2017
|
|
|
50,000
|
|
|
|
87,538
|
|
|
|
36,449
|
|
|
|
|
|
|
|
|
|
|
|
45,348
|
|
|
$
|
81,797
|
|
|
|
(74,602
|
)
|
|
|
-
|
|
|
|
(7,195
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
8% Convertible Notes Payable- issued March 7, 2016
|
|
3/7/2016
|
|
1/7/2017
|
|
|
46,803
|
|
|
|
82,115
|
|
|
|
15,894
|
|
|
|
|
|
|
|
|
|
|
|
60,672
|
|
|
$
|
76,566
|
|
|
|
(17,111
|
)
|
|
|
-
|
|
|
|
(26,546
|
)
|
|
|
32,909
|
|
|
|
(31,741
|
)
|
|
|
|
|
|
|
(1,168
|
)
|
|
|
-
|
|
10% Convertible Notes Payable- issued March
8, 2016
|
|
3/8/2016
|
|
9/8/2018
|
|
|
150,000
|
|
|
|
167,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,805
|
)
|
|
|
167,164
|
|
|
|
3,120
|
|
|
|
152,479
|
|
|
|
|
|
|
|
$
|
653,311
|
|
|
$
|
593,045
|
|
|
$
|
148,814
|
|
|
$
|
162,463
|
|
|
$
|
(171,439
|
)
|
|
$
|
364,985
|
|
|
$
|
504,823
|
|
|
$
|
(371,761
|
)
|
|
$
|
-
|
|
|
$
|
(72,714
|
)
|
|
$
|
60,348
|
|
|
$
|
(49,546
|
)
|
|
$
|
167,164
|
|
|
$
|
1,113
|
|
|
$
|
179,079
|
|
The Company’s total mark-to-market fair value adjustment
((income)/expense) for the nine months ended September 30, 2017 amounted to $293,384.
Note 7. STOCKHOLDERS’ EQUITY
The Company has authorized 4,000,000,000 shares of common stock
with a par value of $0.0001 per share. Effective September 19, 2017, the Company amended its Articles of Incorporation to increase
its authorized Common Stock to 4,000,000,000 shares. There were 703,665,083 and 225,847,976 shares of common stock issued and outstanding
at September 30, 2017 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 September 30, 2017 and December 31, 2016, there were 500,000 shares and 50,000
shares of Series A preferred stock were issued and outstanding respectively. The preferred stock has preferential voting rights
of 2,000 votes per outstanding share.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
The Company has authorized 50,000 shares of Series B convertible
preferred stock with a par value of $0.0001 per share. At December 31, 2016 there were 39,000 shares issued of which 12,900 shares
of Series B preferred were converted into common stock in accordance with the terms of the Series B Preferred stock. Therefore;
there were 26,100 shares outstanding at December 31, 2016. The Series B preferred stock has no voting rights. During the quarter
ended March 31, 2017, 18,100 shares of Series B preferred shares were converted into common stock in accordance with the terms
of the Series B preferred stock. As of result there were 8,000 shares of Series B preferred shares outstanding at September 30,
2017. 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, 2016, the Company issued
an aggregate 4,787,129 shares of common stock at prices ranging from $0.00275 to $0.003355 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.
During the quarter ended June 30, 2016, the Company issued an
aggregate 10,683,804 shares of common stock at prices ranging from $0.0028 to $0.0044 per share as partial conversion of notes.
During the quarter ended June 30, 2016 the Company amended a
Convertible Debenture originally issued June 12, 2015. 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.
During the quarter ended June 30, 2016, the Company issued 1,950,000
shares of common stock upon conversion of 3,900 shares of Series B preferred stock.
During the quarter ended June 30, 2016, the Company issued 1,100,000
shares of common stock upon conversion of 2,200 shares of Series B preferred stock.
During the quarter ended June 30, 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 June 30, 2016, the Company issued 4,000
shares of Series B Preferred stock in settlement of the $20,000 liability to a related party for the purchase of a trademark.
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.
During the quarter ended June 30, 2016 pursuant to the Business
Consulting Agreement, the Company issued 500,000 shares of common stock at $0.01 per share for services provided to the Company.
During the quarter ended September 30, 2016, the Company issued
an aggregate 39,043,730 shares of common stock at prices ranging from $0.0001 to $0.0092 per share as partial conversion of notes.
During the quarter ended September 30, 2016, the Company issued
4,000,000 shares of common stock at $0.0092 per share for services provided to the Company.
During the quarter ended September 30, 2016, the Company issued
an aggregate 13,500,000 shares of common stock at prices ranging from $0.0001 to $0.0092 per share for services provided to the
Company.
During the quarter ended December 31, 2016, the Company issued
an aggregate 78,581,563 shares of common stock at prices ranging from $0.0012 to $0.0054 per share as partial conversion of notes.
During the quarter ended December 31, 2016, the Company issued
an aggregate 36,900,000 shares of common stock at prices ranging from $0.0012 to $0.0054 per share for services provided to the
Company.
During the quarter ended March 31, 2017, the Company issued
an aggregate 43,000,000 shares of common stock at prices ranging from $0.0028 to $0.0094 per share for services provided to the
Company.
During the quarter ended March 31, 2017, the Company issued
an aggregate 112,497,708 shares of common stock at prices ranging from $0.0001 to $0.0028 per share as partial conversion of notes.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
During the quarter ended March 31, 2017, the Company issued
an aggregate 9,050,000 shares of common stock for conversion of 18,100 shares of Preferred Series B stock.
During the quarter ended June 30, 2017, the Company issued an
aggregate 33,000,000 shares of common stock at prices ranging from $0.0022 to $0.0028 per share for services provided to the Company.
During the quarter ended June 30, 2017, the Company issued an
aggregate 177,072,945 shares of common stock at prices ranging from $0.0001 to $0.0028 per share as partial conversion of notes
and accrued interest.
During the quarter ended June 30, 2017, the Company issued an
aggregate 450,000 shares of Preferred Series A stock at par of $.0001.
During the quarter ended September 30, 2017, the Company issued
an aggregate 41,000,000 shares of common stock at prices ranging from $0.0002 to $0.0021 per share for services provided to the
Company.
During the quarter ended September 30, 2017, the Company issued
an aggregate 62,196,454 shares of common stock at prices ranging from $0.00065 to $0.00099 per share as partial conversion of notes
and accrued interest.
Note 8. COMMITMENTS AND CONTINGENCIES
The Company currently has three office locations. It rents offices
on a month-to-month basis from the Company’s President and stockholder for $525 per month which amounted to $4,725 for the
nine months ended September 30, 2017. 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 nine-months ended September 30,
2017 was $891. On September 12th 2016 the Company entered into a commercial lease agreement for office premises at an original
cost of $650 per month for a one-year term with the option to renew for one extended term of three years. In July 2017 the Company
leased additional space at this location thereby increasing the monthly rent to $1,450. The cost of this space for the nine-months
ended September 30, 2017 was $8,250.
Total rent expense for the nine-months ended September 30, 2017,
and 2016, totaled $13,866 and $6,039.
The Company has agreements with consultants for ongoing services
to be rendered with the following commitments:
|
|
Commitment
|
|
Term
|
|
|
|
|
|
Consultant - FDA requirements and compliance
|
|
$2,000 per month
|
|
12 Months
|
|
|
|
|
|
Consultant - capital formation and market services
|
|
Various equity percentage issuances of restricted stock for fundings
|
|
6 Months
|
|
|
|
|
|
Consultant - tradeshow attendance, strategy and collaboration, coordination regarding FDA compliance, manufacturing operations, sales and marketing, other related services
|
|
$10,000 per month (payable quarterly in cash or common stock from the 2016/2017 Equity Incentive Plan)
|
|
12 Months
|
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,
2016
|
|
|
December 31,
2015
|
|
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
|
%
|
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
As of December 31, 2016, the Company has a net operating loss
carryforward of approximately $1,125,667 to reduce future federal taxable income which begins to expire in the year 2030. The Company
is also subject to corporate taxes in the State of New Jersey which has similar net operating loss carryover provisions which start
to expire in the year 2030.
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 $0.001 per share. All intercompany transactions were eliminated during consolidation.
As more fully described in Note 3 to the Consolidated Financial
Statements, the Company owed the following amounts to related parties as of the following:
|
|
September
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Due to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
Due to officer/stockholder
|
|
|
10,021
|
|
|
|
10,555
|
|
Due to other stockholders
|
|
|
6,790
|
|
|
|
5,975
|
|
Total Related Party Obligations
|
|
$
|
25,732
|
|
|
$
|
25,451
|
|
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. In mid-year 2016 the Company commenced
payroll and is paying the CEO for current wages in this manner. During the year ended December 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 the quarter ended
September 30, 2017, $45 in accrued CEO compensation was converted to Series A Preferred shares. During the quarter ended September
30, 2017, $25,500 in accrued compensation was paid to the CEO. Effective October 1, 2017, the employment agreement between the
Company and its CEO was amended to increase the annual salary to $150,000.
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. During the quarter ended June 30, 2016, the Company
issued 3,400 shares of Preferred Series B stock as settlement on this liability. 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 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 inventory consisted of 20 hand-held laser
devices. 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 8th 2016 (with an effective date of October 1, 2015) 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. During the quarter ended March 31, 2017, 18,100
shares of Series B preferred stock was converted into 9,050,000 shares of common stock in accordance with the terms of the Series
B Preferred stock.
As more fully described in Note 1 and Note 5 to the financial
statements, $18,986 in accrued interest on the $150,000 note was satisfied through the issuance of 17,272,727 shares of the Company's
common stock. On September 15, 2017 the Note was amended to include provisions to allow conversion of the Note into common stock
of the Company. At such time the Note was valued with its embedded derivative and discount. On September 25, 2017, $16,250 in principal
on this note was satisfied by the conversion into 25,000,000 shares of the Company's common 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
September 30, 2017
The Company has incurred losses from inception of approximately
$3,483,354 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 to receive additional financing and to commence sales of its flagship product and create revenue. The
accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue
as a going concern. Management believes the Company’s present cash and cash equivalents will enable it to meet its obligations
for twelve months from the date these financial statements are available to be issued.
Note 12. STOCK COMPENSATION - EQUITY INCENTIVE PLAN
In July 2016, the Company adopted the Medifirst Solutions, Inc.
2016 Equity Incentive Plan (the “Plan”) pursuant to which the Company may grant stock options, restricted stock purchase
offers and other equity-based awards up to an aggregate of 20,000,000 shares of common stock. The Plan is designed to retain directors,
executives and selected employees and consultants and reward them for making contributions to the success of the Company. These
objectives are accomplished by making long-term incentive awards under the Plan thereby providing Participants with a proprietary
interest in the growth and performance of the Company.
On December 6th, 2016 the company amended the terms of the Plan
and filed an S-8 Registration Statement with the Securities and Exchange Commission (“SEC”) increasing the number of
shares permitted to be issued under the Plan to 32,000,000.
During the quarter ended March 31, 2017, the Company issued
from the Plan a total of 27,100,000 shares of common stock to non-employees for services rendered. As of March 31, 2017 there is
a balance of -0- shares available for future issuance under the Medifirst Solutions, Inc. 2016 Equity Incentive Plan.
In May 2017, the Company adopted the Medifirst Solutions, Inc.
2017 Equity Incentive Plan (the “Plan”) pursuant to which the Company may grant stock options, restricted stock purchase
offers and other equity-based awards up to an aggregate of 125,000,000 shares of common stock. The Plan is designed to retain directors,
executives and selected employees and consultants and reward them for making contributions to the success of the Company. These
objectives are accomplished by making long-term incentive awards under the Plan thereby providing Participants with a proprietary
interest in the growth and performance of the Company. During the nine months ended September 30, 2017, the Company issued from
the Plan 71,000,000 shares to non-employees for services rendered. As of September 30, 2017 there is a balance of 54,000,000 shares
available for future issuance under the Medifirst Solutions, Inc. 2017 Equity Incentive Plan.
Note 13. SUBSEQUENT EVENTS
Subsequent to the quarter ended September 30, 2017, the Company
issued an aggregate of 29,000,000 shares of Common Stock for services rendered by consultants and professionals.
Subsequent to the quarter ended September 30, 2017, the Company
issued an aggregate 35,058,103 shares of Common Stock upon conversions of an aggregate principal amount equal to $21,500 outstanding
convertible promissory notes and $867 in accrued interest.