ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
Company’s consolidated financial statements are stated in United States dollars and are prepared in accordance with United
States generally accepted accounting principles.
It
is the opinion of management that the audited consolidated financial statements for the calendar year ended December 31, 2018
include all adjustments necessary in order to ensure that the audited consolidated financial statements are not misleading.
MEDIFIRST
SOLUTIONS, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2018 and 2017
TABLE
OF CONTENTS
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of Medifirst Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Medifirst Solutions, Inc. (“the Company”) as of December 31, 2018 and 2017, and the related consolidated
statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December
31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results
of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with
accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 11 to the financial statements,
the Company has incurred significant, recurring losses since inception. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 11 of the
financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we
are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
We have served as the Company’s
auditor since 2015.
Spokane, Washington
April 12, 2019
Medifirst
Solutions, Inc.
Consolidated Balance
Sheets
December 31, 2018
and December 31, 2017
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
83,387
|
|
|
$
|
287,569
|
|
Inventory
|
|
|
32,677
|
|
|
|
33,435
|
|
Prepaid items
|
|
|
-
|
|
|
|
-
|
|
Total current assets
|
|
|
116,064
|
|
|
|
321,004
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, net
|
|
|
592
|
|
|
|
1,232
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Security Deposit
|
|
|
650
|
|
|
|
650
|
|
Intangible Asset -License Agreement, net
|
|
|
101,252
|
|
|
|
116,252
|
|
Total other assets
|
|
|
101,902
|
|
|
|
116,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
218,558
|
|
|
$
|
439,138
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
221,770
|
|
|
$
|
97,621
|
|
Accrued expenses - officer’s compensation
|
|
|
388,981
|
|
|
|
401,079
|
|
Due to related party
|
|
|
8,921
|
|
|
|
8,921
|
|
Loans payable - stockholders
|
|
|
8,375
|
|
|
|
14,499
|
|
Note Payable for license agreement
|
|
|
-
|
|
|
|
-
|
|
Convertible notes payable
|
|
|
522,446
|
|
|
|
280,351
|
|
Convertible notes payable - related party
|
|
|
51,005
|
|
|
|
133,750
|
|
Derivative Liabilities
|
|
|
263,468
|
|
|
|
251,886
|
|
Total current liabilities
|
|
|
1,464,966
|
|
|
|
1,188,107
|
|
|
|
|
|
|
|
|
|
|
Commitments & Contingencies (Note 8)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.0001 par value; 1,000,000
shares authorized, 500,000 and 500,000 shares issued and outstanding, respectively
|
|
|
50
|
|
|
|
50
|
|
Series B convertible preferred stock, $0.0001 par
value; 50,000 shares authorized, 8,000 and 8,000 shares issued and outstanding, respectively
|
|
|
1
|
|
|
|
1
|
|
Series C convertible preferred stock, $0.0001 par
value; 5,000 shares authorized, 177 and -0- shares issued and outstanding, respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value; 4,000,000,000 shares
authorized, 3,482,840 and 849,437 shares issued and outstanding, respectively
|
|
|
348
|
|
|
|
85
|
|
Additional paid in capital
|
|
|
3,486,856
|
|
|
|
2,916,024
|
|
Accumulated deficit
|
|
|
(4,733,663
|
)
|
|
|
(3,665,129
|
)
|
Total Stockholders’ Equity
|
|
|
(1,246,408
|
)
|
|
|
(748,969
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Stockholders’ Equity
|
|
$
|
218,558
|
|
|
$
|
439,138
|
|
Medifirst
Solutions, Inc.
Consolidated Statements
of Operations
For the Years Ended
December 31, 2018 and 2017
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Product sales, net
|
|
|
6,550
|
|
|
|
29,995
|
|
Consulting Income
|
|
|
22,625
|
|
|
|
-
|
|
|
|
|
29,175
|
|
|
|
29,995
|
|
Cost of goods sold
|
|
|
757
|
|
|
|
1,058
|
|
Gross income
|
|
|
28,418
|
|
|
|
28,937
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Officer’s compensation
|
|
|
150,000
|
|
|
|
112,500
|
|
Advertising and promotion
|
|
|
5,001
|
|
|
|
63,548
|
|
Computer and internet
|
|
|
3,357
|
|
|
|
4,130
|
|
Consulting fees
|
|
|
363,208
|
|
|
|
435,589
|
|
Professional fees
|
|
|
130,821
|
|
|
|
224,286
|
|
Rent
|
|
|
30,930
|
|
|
|
20,713
|
|
Travel
|
|
|
7,494
|
|
|
|
12,903
|
|
Lab testing
|
|
|
-
|
|
|
|
7,107
|
|
Dues and subscriptions
|
|
|
2,269
|
|
|
|
3,720
|
|
General and administrative
|
|
|
99,464
|
|
|
|
96,012
|
|
Total operating expenses
|
|
|
792,544
|
|
|
|
980,508
|
|
|
|
|
|
|
|
|
|
|
Net loss from Operations before other income, expenses
|
|
|
(764,126
|
)
|
|
|
(951,571
|
)
|
|
|
|
|
|
|
|
|
|
Other income and (expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(680,909
|
)
|
|
|
(405,144
|
)
|
Interest income
|
|
|
2
|
|
|
|
-
|
|
Gain on extinguishment of debt
|
|
|
34,235
|
|
|
|
-
|
|
Change in fair value -derivatives
|
|
|
342,264
|
|
|
|
(201,121
|
)
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income tax
|
|
$
|
(1,068,534
|
)
|
|
$
|
(1,557,836
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,068,534
|
)
|
|
$
|
(1,557,836
|
)
|
|
|
|
|
|
|
|
|
|
Loss per common share - Basic
and fully diluted
|
|
$
|
(0.61
|
)
|
|
$
|
(2.82
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding - Basic and fully diluted
|
|
|
1,763,061
|
|
|
|
551,556
|
|
Medifirst
Solutions, Inc.
Consolidated Statement
of Stockholders’ Equity
For the Years Ended
December 31, 2018 and 2017
|
|
Common Stock
|
|
|
Preferred Class A
|
|
|
Preferred Class B
|
|
|
Preferred Class C
|
|
|
Additional Paid in
|
|
|
Accumulated
|
|
|
Total Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance - January 1, 2017
|
|
|
225,848
|
|
|
|
23
|
|
|
|
50,000
|
|
|
|
5
|
|
|
|
26,100
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
1,232,996
|
|
|
|
(2,107,293
|
)
|
|
|
(874,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares upon conversions of notes payable
|
|
|
426,539
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
505,996
|
|
|
|
|
|
|
|
506,039
|
|
Issuance of common shares for services rendered
|
|
|
188,000
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474,180
|
|
|
|
|
|
|
|
474,199
|
|
Issuance of 450,000 shares of Series A Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
450,000
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
Issuance of common shares upon conversion of 18,100 shares of Series B Preferred Stock
|
|
|
9,050
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
(18,100
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Additional paid in capital from derivative liability on debt conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617,991
|
|
|
|
|
|
|
|
617,991
|
|
Adjustment for reverse stock split
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,861
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,557,836
|
)
|
|
|
(1,557,836
|
)
|
Balance - December 31, 2017
|
|
|
849,437
|
|
|
|
85
|
|
|
|
500,000
|
|
|
|
50
|
|
|
|
8,000
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,916,024
|
|
|
|
(3,665,129
|
)
|
|
|
(748,969
|
)
|
Issuance of common shares upon conversions of notes payable
|
|
|
1,913,850
|
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,769
|
|
|
|
|
|
|
|
131,960
|
|
Issuance of common shares for services rendered
|
|
|
719,553
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,062
|
|
|
|
|
|
|
|
82,134
|
|
Issuance of preferred shares for services rendered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177
|
|
|
|
-
|
|
|
|
204,182
|
|
|
|
|
|
|
|
204,182
|
|
Additional paid in capital from derivative liability on debt conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152,819
|
|
|
|
|
|
|
|
152,819
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,068,534
|
)
|
|
|
(1,068,534
|
)
|
Balance - December 31, 2018
|
|
|
3,482,840
|
|
|
|
348
|
|
|
|
500,000
|
|
|
|
50
|
|
|
|
8,000
|
|
|
|
1
|
|
|
|
177
|
|
|
|
-
|
|
|
|
3,486,856
|
|
|
|
(4,733,663
|
)
|
|
|
(1,246,408
|
)
|
Medifirst
Solutions, Inc.
Consolidated Statement
of Cash Flows
For the Years Ended
December 31, 2018 and 2017
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,068,534
|
)
|
|
$
|
(1,557,836
|
)
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation & amortization expense
|
|
|
15,640
|
|
|
|
21,890
|
|
Gain on debt settlement
|
|
|
(34,235
|
)
|
|
|
-
|
|
Stock Based Compensation
|
|
|
286,315
|
|
|
|
493,025
|
|
Change in assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
112,051
|
|
|
|
84,811
|
|
Change in fair value - derivatives
|
|
|
(342,264
|
)
|
|
|
201,121
|
|
Amortization of debt discount & other financing costs
|
|
|
610,511
|
|
|
|
321,983
|
|
Related party and stockholder’s loan
|
|
|
(6,124
|
)
|
|
|
-
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
15,720
|
|
Inventory
|
|
|
758
|
|
|
|
(19,412
|
)
|
Net cash used by operating activities
|
|
|
(425,882
|
)
|
|
|
(438,698
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
None
|
|
|
-
|
|
|
|
-
|
|
Net cash used by investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from stockholder loan
|
|
|
-
|
|
|
|
5,000
|
|
Principal payments on debt
|
|
|
(32,550
|
)
|
|
|
-
|
|
Proceeds from sale of Convertible notes payable
|
|
|
254,250
|
|
|
|
556,250
|
|
Net cash provided by financing activities
|
|
|
221,700
|
|
|
|
561,250
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(204,182
|
)
|
|
|
122,552
|
|
Cash at beginning of period
|
|
|
287,569
|
|
|
|
165,017
|
|
Cash at end of period
|
|
$
|
83,387
|
|
|
$
|
287,569
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
1,169
|
|
|
$
|
1,826
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Common stock issued for convertible debt-related
party
|
|
$
|
30,195
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for note interest and note conversions
|
|
$
|
-
|
|
|
$
|
5,230
|
|
|
|
|
|
|
|
|
|
|
Derivative liability extinguished upon conversion
|
|
$
|
152,820
|
|
|
$
|
617,990
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for convertible debt with derivatives
|
|
$
|
109,224
|
|
|
$
|
544,323
|
|
|
|
|
|
|
|
|
|
|
Preferred stock exchanged for common stock
|
|
$
|
-
|
|
|
$
|
905
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable exchanged for promissory note
|
|
$
|
-
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
New discounts associated with derivatives on convertible
debt
|
|
$
|
328,666
|
|
|
$
|
505,607
|
|
|
|
|
|
|
|
|
|
|
Related party note reclassified to promissory note
|
|
$
|
20,000
|
|
|
$
|
-
|
|
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
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.
On April 18, 2018, the Company incorporated
Concierge Concepts Rx (CCRx), in the State of New Jersey, to be an 80% majority-owned subsidiary. In consideration for his contribution
of know-how, CCRx’s co-founder, Walter Molokie, CCRx has agreed to issue a 20% minority interest in CCRx to Mr. Molokie
and/or his designees. On July 1, 2018 the Company acquired 100% of the equity interest in Concierge Concepts Rx, Inc. (“CCRx”)
with the total purchase price of $20. The fair value of the acquired entity was $20 since the entity was just recently formed
and had no identifiable assets or liabilities. The $20 cash payment is for the purchase of CCRx common stock upon acquisition.
Medifirst launched Concierge Concepts Rx, a new division focused on the pharmaceutical industry.CCRx that provides unique specialty
drug consulting and niche billing services to independent pharmacies and retail pharmacy chains. This division commenced operations
in the quarter ended September 30, 2018 with limited activity and is included in the accompanying consolidated financial statements.
The Consolidated financial statements
include the accounts of MSI and its wholly owned subsidiaries, MLM and CCRx and its majority owned subsidiary, USA Pharma Corporation.
All material intercompany balances and transactions have been eliminated in consolidation. There was no activity for USA Pharma
Corporation for the year ended December 31, 2018.
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 consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation of the consolidated financial
statements have been included. All such adjustments are of a normal recurring nature. The consolidated financial statements include
the accounts of Medifirst Solutions Inc. and its wholly owned subsidiaries (Medical Laser Manufactures, Inc. and Concierge Concepts
Rx) and its majority owned subsidiary (USA Pharma Corporation) (collectively referred to as the “Company”). All material
intercompany balances and transactions have been eliminated in consolidation. 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 December 31, 2018 and 2017, the consolidated results of its operations for the years ended
December 31, 2017 and 2018, and the consolidated cash flows for the years ended December 31, 2018 and 2017.
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.
Effective July 23, 2018, the Company effected
a 1-for-1,000 reverse stock split of its issued and outstanding common stock. The number of shares of common stock issued and
outstanding post- reverse stock split is 1,404,073. All fractional shares have been rounded up to the next whole share. There
is no reduction in the number of the Company’s shareholders of record. Unless otherwise noted, impacted amounts and
share information included in the financial statements and notes thereto have been retroactively adjusted for the reverse stock
split as if such reverse stock split occurred on the first day of the first period presented.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
Revenue Recognition
In general, the Company follows ASC 605
and 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.
The Company also derives consulting revenue
from its CCRx division. Such revenue is recognized at the time services are performed.
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 December 31, 2018 or 2017. There are no customer account receivables as of December 31, 2018 or 2017.
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.
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.
Intangible Asset- Licensing Agreement
On March 8th 2016 (with an effective date
of October 1, 2015), the company, through its 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 to license certain laser technology (the “Technology”). The license provides
an irrevocable, nontransferable, royalty-bearing license, with a right of sublicense with respect to the Technology (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 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
December 31, 2018
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. 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. During the quarter ended June 30, 2018, the original noteholder assigned
$20,000 in principal to an unrelated third-party. The principal balance on this note as of December 31, 2018 is $51,005 to the
original noteholder and $16,650 in principal balance to the new unrelated third-party noteholder. There were $32,550 in cash principal
paydowns to the original noteholder during the year ended December 31, 2018. There were an additional $33,345 in conversions to
common stock that took place on these two notes during the year ended December 31, 2018.
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 it’s ten-year period
and charged to income on a straight-line basis.
Product Warranty
We generally provide a one-year warranty
on our products. Currently no material evaluations or studies have been performed to obtain warranty data since there are so few
sold products outstanding. As sales increase, the Company will estimate future warranty costs from historical data and trends
of product reliability and costs of repairing and replacing defective products.
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
December 31, 2018
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.
As described in Note 5 to the financial statements, as of December 31, 2018, convertible debt can be converted into approximately
727,323 shares of common stock.
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 December 31, 2018, 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 December 31, 2018, the Company had $83,387
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
In June 2018, the FASB issued Accounting
Standards Update 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions
for acquiring goods and services from nonemployees. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments
used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to
customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). ASU 2018-07 is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.
The Company will adopt the provisions of ASU 2018-07 in the quarter beginning January 1, 2019. The adoption of ASU 2018-07 is
not expected to have any impact on the Company’s financial statement presentation or disclosures. The Company does not plan
to have any equity instruments that will need revaluation under this new standard.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
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.
In February 2018, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement - Reporting
Comprehensive Income (Topic 220)”. The objective of the ASU is to allow a reclassification from accumulated comprehensive
income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness
of information reported to financial statement users. This ASU is effective for interim and annual reporting periods beginning
after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on the consolidated
financial statements.
In February 2016, the FASB issued ASU
2016-02, “Leases” (Topic 842), in order to increase transparency and comparability among organizations by recognizing
lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU
2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal
years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach
and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019. A modified retrospective transition
approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose
to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements
as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also
apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative
period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company
will adopt the new standard on January 1, 2019 and use the effective date of initial application. Consequently, financial information
will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January
1, 2019. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the “package
of expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about
lease identification and initial direct costs. The Company does not expect to elect the use-of hindsight or the practical expedient
pertaining to land easements, the latter not being applicable to the Company. The new standard also provides practical expedients
for the Company’s ongoing accounting. The Company currently expects to elect the short-term lease recognition exemption
for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities,
and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.
The Company also expects to elect the practical expedient to not separate lease and non-lease components for all of its leases
other than leases of real estate. The Company expects the most significant change will be related to the recognition of right-of-use
assets and lease liabilities on the Company’s balance sheet for real estate operating leases. The Company is currently in
the process of evaluating the impact of ASU 2016-02 on the Company’s outstanding leases. The Company has not yet determined,
as a result of the adoption of this guidance, how much right-of-use assets and lease liabilities will be recorded. The Company
also expects that the adoption of this guidance will result in additional lease-related disclosures in the footnotes to its consolidated
financial statements.
During the fiscal year ended December
31, 2018, Company was an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act and the extended
transition period applies to all aforementioned ASUs, until such time as the Company is no longer an “emerging growth company”.
However, as of January 1, 2019, the Company no longer meets the definition of an “emerging growth company” and for
periods subsequent to December 31, 2018, the Company will cease to take advantage of the extended transition period applied to
such ASUs.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
Note 2. PROPERTY, PLANT AND EQUIPMENT (NET)
Equipment is recorded at cost and consisted of the following
at December 31, 2018 and December 31, 2017:
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
Computer equipment
|
|
$
|
8,956
|
|
|
$
|
8,956
|
|
Less: accumulated depreciation
|
|
|
(8,365
|
)
|
|
|
(7,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
592
|
|
|
$
|
1,232
|
|
Depreciation expense was $640 and $640, for the years ended
December 31, 2018 and 2017 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 December 31, 2018 and December 31, 2017, 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 December 31,
2018 and 2017 a stockholder of the Company advanced the Company $557 and $-0- respectively. The loan has a balance of $8,955 at
December 31, 2018 and $8,398 at December 31, 2017, respectively. The loan bears no interest and is payable on demand.
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 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 shares of the Company’s common stock. At December 31, 2018 and December 31, 2017, the loan balance was
$100 and $100, respectively.
At December 31, 2018 and December 31,
2017, 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 shares
of common stock. Principal and accrued interest were due and payable on January 1, 2014.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
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 shares of common stock as follows:
Date of Conversion
|
|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
June 2013
|
|
$
|
70
|
|
|
$
|
0.0001
|
|
|
|
700
|
|
August 2013
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400
|
|
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 shares
of common stock.
In
September 2013, the new note holder converted $100 of note principal into 1,000 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 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
|
|
December 2013
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500
|
|
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
|
|
April 2014
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400
|
|
Subsequent to these conversions there remains $125 in note
principal outstanding at December 31, 2018.
Note Payable-SF
In July 2013, the holder of the second
note converted $240 of note principal into 400 shares of the Company’s common stock at $0.0006 per share. At December 31,
2018 and December 31 2017, 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 347,936 shares at December 31, 2018 and 84,859 shares
at December 31, 2017.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
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 shares of common stock as follows:
Date of Conversion
|
|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
December 2012
|
|
$
|
150
|
|
|
$
|
0.001
|
|
|
|
150
|
|
January 2013
|
|
$
|
660
|
|
|
$
|
0.001
|
|
|
|
660
|
|
March 2013
|
|
$
|
200
|
|
|
$
|
0.001
|
|
|
|
200
|
|
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 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 shares of the Company’s common stock at $0.001 per share.
In October 2014, the note holder converted
$1,100 of note principal into 1,100 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
347,936 shares at December 31, 2018 and 84,858,757 shares at December 31, 2017.
In August 2016, the note holder converted
$3,000 of note principal into 3,000,000 shares of the Company’s common stock. At December 31, 2018 and December 31, 2017,
the remaining principal balance on this portion of the note is $715 and $715 respectively.
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 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 shares of common stock. During
April 2017, the current noteholder converted $410 of remaining principal into 6,000 shares of common stock. There remains $890
in principal balance at December 31, 2018 with the current noteholder and $890 in principal balance with the original noteholder
at December 31, 2017.
Medifirst Solutions, Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
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 62,068 shares of common stock and
therefore there is no principle balance outstanding at December 31, 2018 and December 31, 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 December 31, 2018
and December 31, 2017.
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 23,490 shares of common stock thereby leaving a principal balance of $25,452 on the note
at December 31, 2017. During the first quarter of 2018, the noteholder converted $23,000 of the principle balance into 122,727
shares of common stock thereby leaving a principal balance of $2,452 on the note at June 30, 2018. During the quarter ended September
30, 2018, the noteholder converted the remaining balance of the note into 148,316 shares on common leaving no balance due on the
note as of December 31, 2018. There is $12,896 in accrued interest and penalty assessments on this note as of December 31, 2018
which is included in accrued expenses payable on the balance sheet.
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 December 31, 2018 and December 31, 2017.
Medifirst Solutions, Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
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 expected 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 (the “back-end notes”). However, all these “back-end notes” were cancelled in early
2018 and will not fund. Accordingly, all the “back-end” notes were removed from the books at December 31, 2017 along
with the associated investor notes receivable. In addition, all previously accrued interest expense and interest income as been
removed on these “back-end notes” for the period ended December 31, 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.
However, all these “back-end notes” were cancelled in early 2018 and will not fund. According, all the “back-end”
notes were removed from the books at December 31, 2017 along with the associated investor notes receivable. In addition, all previously
accrued interest expense and interest income as been removed on these “back-end notes” for the period ended December
31, 2017.
The two notes issued May 1,2017 ($131,250)
and June 2, 2017 ($125,000) became convertible on October 28, 2017 and December 4, 2017 respectively and required derivative treatment
at that time. The embedded derivative was bifurcated and accounted for separately along with the derivative discount. The derivative
liability is marked-to-market each quarter with the resulting gain or loss valuation being reported in the statement of operations.
During the quarter ended December 31,
2017 (after the six-month waiting period) the holder of the original note in the principal amount of $131,250 converted $21,500
and $15,350 of the note’s principal balance into 35,058 and 39,714 shares of the Company’s common stock, respectively.
The principal balance remaining on this convertible note is $94,400 as of December 31,2017. During the quarter ended March 31,
2018 the holder of the original note converted, through four separate conversion transactions, a total of $38,870 of the note’s
principal balance into total of 193,384 shares of the Company’s common stock. During the quarter ended June 30, 2018 the
holder of the original note converted $10,030 of the note’s principal balance into total of 62,015 shares of the Company’s
common stock. During the quarter ended September 30, 2018 the holder of the original note converted $2,200 of the note’s
principal balance into total of 69,439 shares of the Company’s common stock. During the quarter ended December 31, 2018
the holder of the original note converted $10,640 of the note’s principal balance and $1,312 of accrued interest into total
of 148,545 shares of the Company’s common stock. The principal balance remaining on this convertible note is $32,660 as
of December 31, 2018.
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 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 embedded derivative on the note was valued and bifurcated effective October 1, 2018. During
the quarter ended December 31, 2018, $4,500 in principal on this note was satisfied by the noteholder converting such amount into
150,000 shares of the Company’s common stock. The remaining principal balance outstanding on the note is $45,500 as of December
31, 2018.
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 it’s 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, $18,986 in accrued interest
was satisfied through the issuance of 17,273 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
it’s embedded derivative and discount. On September 25, 2017, $16,250 in principal on this note was satisfied by the conversion
into 25,000 shares of the Company’s common stock leaving a balance on the note of $133,750 at December 31, 2017. During
the year ended December 31, 2018 the Company made cash paydowns to the noteholder in the total amount of $32,550. In addition,
$30,195 in principal balance on the note was converted into 495,000 shares of the Company’s common stock. The ending principal
balance on this note at December 31, 2018 is $51,005 to the original noteholder. During the year-ended December 31, 2018 the unrelated
third-party noteholder converted $3,350 in principal balance into 120,000 shares of the Company’s common stock thereby leaving
a principal balance to this unrelated noteholder in the amount of $16,650.
Medifirst Solutions, Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
Convertible Notes
Payable - LG (8%) (Notes 5 & 6)
On January 25, 2018 the Company
issued a convertible note payable (promissory note) to an investor in the principal amount of $78,750. The note matures on January
25, 2019 and bears interest at 8%. The note holder has has the right at any time on or after the day that is six months from January
25, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock.
The entire principal balance of $78,750 is outstanding as of December 31, 2018.
On June 4, 2018 the Company issued
a convertible note payable (promissory note) to an investor in the principal amount of $52,500. The note matures on June 4, 2019
and bears interest at 8%. The note holder has has the right at any time on or after the day that is six months from June 4, 2018
to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock. The entire
principal balance of $52,500 is outstanding as of December 31, 2018.
Convertible Notes Payable - PULG (8%) (Notes
1 & 2)
On October 1, 2018 the Company
issued a convertible note payable (convertible promissory note PULG (8%) Note 1) to an investor in the principal amount of $58,000.
The note matures on April 1, 2020 and bears interest at 8%. The note holder has has the right at any time on or after the day
that is six months from October 1, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of
the Company’s common stock. The entire principal balance of $58,000 is outstanding as of December 31, 2018.
On November 19, 2018 the Company
issued a convertible note payable (convertible promissory note PULG (8%) Note 2) to an investor in the principal amount of $65,000.
The note matures on May 19, 2020 and bears interest at 8%. The note holder has has the right at any time on or after the day that
is six months from November 19, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the
Company’s common stock. The entire principal balance of $65,000 is outstanding as of December 31, 2018.
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 December 31, 2018 as follows:
12/31/2018
|
|
Remaining
|
|
|
Original
|
|
|
|
|
|
Deferred
|
|
|
Total
|
|
|
|
|
|
|
Principal
|
|
|
Issue
|
|
|
Derivative
|
|
|
Financing
|
|
|
Convertible
|
|
|
Derivative
|
|
Debt
|
|
Amount
|
|
|
Discount
|
|
|
Discount
|
|
|
Costs
|
|
|
Notes 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%)
|
|
|
45,500
|
|
|
|
|
|
|
|
(45,486
|
)
|
|
|
|
|
|
|
14
|
|
|
|
51,639
|
|
Convertible Note Payable - HG (10%)
|
|
|
16,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,650
|
|
|
|
|
|
Convertible Note Payable - CB (5%)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
1,431
|
|
Convertible Notes Payable- SO (8%)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Convertible Note Payable - LGC (8%) 1
|
|
|
32,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,660
|
|
|
|
15,356
|
|
Convertible Note Payable - LGC (8%) 2
|
|
|
125,000
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
125,000
|
|
|
|
22,713
|
|
Convertible Note Payable - LGC (8%) 3
|
|
|
125,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
22,743
|
|
Convertible Note Payable - LGC (8%) 4
|
|
|
125,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
22,768
|
|
Convertible Note Payable - MLM (10%) (Related party)
|
|
|
51,005
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
51,005
|
|
|
|
28,741
|
|
Convertible Note Payable - LGC (8%) 5
|
|
|
78,750
|
|
|
|
|
|
|
|
(28,646
|
)
|
|
|
(462
|
)
|
|
|
49,642
|
|
|
|
8,354
|
|
Convertible Note Payable - LGC (8%) 6
|
|
|
52,500
|
|
|
|
|
|
|
|
(26,803
|
)
|
|
|
(808
|
)
|
|
|
24,889
|
|
|
|
16,972
|
|
Convertible Notes Payable- PULG (8%) 1
|
|
|
65,000
|
|
|
|
|
|
|
|
(63,610
|
)
|
|
|
(2,244
|
)
|
|
|
(854
|
)
|
|
|
35,933
|
|
Convertible Notes Payable- PULG
(8%) 2
|
|
|
58,000
|
|
|
|
|
|
|
|
(47,690
|
)
|
|
|
(2,655
|
)
|
|
|
7,655
|
|
|
|
36,818
|
|
|
|
$
|
791,855
|
|
|
$
|
-
|
|
|
$
|
(212,235
|
)
|
|
$
|
(6,169
|
)
|
|
$
|
573,451
|
|
|
$
|
263,468
|
|
As of December 31, 2018, the convertible notes payable
can be converted into approximately 727,373 shares of common stock.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
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,
the 9% Convertible Note payable issued October 1, 2016 the 8% Convertible Notes Payable issued January 25, 2018 and June 4, 2018
and the 8% convertible notes payable issued October 1, 2018 and November 19, 2018. 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
July 10, 2017 and August 15, 2017, the 9% Convertible Note payable issued October 1, 2016, The 8% Convertible note payable issued
January 25, 2018, the 8% Convertible note payable issued June 4, 2018 and the 8% convertible notes payable issued October 1, 2018
and November 19, 2018 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 December 31,
2018. The primary assumptions include: projected annual volatility of 145%-240%; the follow-on securities purchase option; the
conversion feature as a percentage of Market; automatic/conditional conversions; market price trigger events.
As of December 31, 2018 the Company’s
derivative financial instruments included:
1) Embedded derivatives associated
with certain of the Company’s unsecured convertible notes payable. The Company’s 5% convertible notes payable and
8% convertible notes payable and 9% convertible 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.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
The 5% Convertible Note Payable
and the 8% Convertible Notes Payable and the 9% convertible note payable are valued at December 31,2018. The following assumptions
were used for the valuation of the embedded derivative:
- The stock price (prior period
reverse split 1,000:1) of $0.12 decreased to $0.0438 in this period (basis for the variable conversion prices) 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) was previously a factor for the VV Note but are no longer projected. The full reset
events projected to occur based on future stock issuance (single event) result in a reset exercise price.
-The monthly trading volume would
average $458,000 (rounded) as of 12/31/18 and would increase at 5% per month; ownership limits conversion across LG’s notes
based on 4.99% with shares outstanding increasing monthly by 1%.
- The variable conversion price
of 45% to 58% over 3 to 20 trading days would have effective rates of 34.36% to 53.40%;
- 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 in the range 230.9% to 415.0%.
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
December 31, 2018
The Company’s derivative liabilities
on convertible notes payable are presented at market value in the financial statements at December 31, 2018 as follows:
12/31/2018
|
|
|
|
|
|
Original
|
|
|
|
|
|
Derivative
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Ended
March 31,
|
|
|
Derivative
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Ended
June 30,
|
|
|
Derivative
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Ended
September 30,
|
|
|
Derivative
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Ended
December 31,
|
|
|
Derivative
|
|
Convertible
|
|
Derivative
Treatment
|
|
Maturity
|
|
Principal
Note
|
|
|
Original
Derivative
|
|
|
Valuation
December 31,
|
|
|
March 31,
2018
|
|
|
March 31,
2018
|
|
|
2018
Mark-to-
|
|
|
Valuation
March 31,
|
|
|
June 30,
2018
|
|
|
June 30,
2018
|
|
|
2018
Mark-to-
|
|
|
Valuation
June 30,
|
|
|
September 30,
2018
|
|
|
September 30,
2018
|
|
|
2018
Mark-to-
|
|
|
Valuation
September 30,
|
|
|
December 31,
2018
|
|
|
December 31,
2018
|
|
|
2018
Mark-to-
|
|
|
Valuation
December 31,
|
|
Note
|
|
Date
|
|
Date
|
|
Amount
|
|
|
Valuation
|
|
|
2017
|
|
|
Issuances
|
|
|
Conversions
|
|
|
Market
|
|
|
2018
|
|
|
Issuances
|
|
|
Conversions
|
|
|
Market
|
|
|
2018
|
|
|
Issuances
|
|
|
Conversions
|
|
|
Market
|
|
|
2018
|
|
|
Issuances
|
|
|
Conversions
|
|
|
Market
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Note Payable-issued 5/2/2016
|
|
10/1/2016
|
|
5/2/2017
|
|
$
|
57,750
|
|
|
$
|
58,355
|
|
|
$
|
24,925
|
|
|
|
|
|
|
$
|
(26,745
|
)
|
|
$
|
5,123
|
|
|
$
|
3,303
|
|
|
|
|
|
|
|
|
|
|
$
|
(665
|
)
|
|
$
|
2,638
|
|
|
|
|
|
|
$
|
(2,740
|
)
|
|
$
|
102
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
% Convertible Note- Payable -issued 6/12/2015
|
|
4/12/2016
|
|
1/7/2017
|
|
|
35,863
|
|
|
|
37,827
|
|
|
$
|
832
|
|
|
|
|
|
|
$
|
-
|
|
|
|
305
|
|
|
$
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
(233
|
)
|
|
$
|
904
|
|
|
|
|
|
|
|
|
|
|
|
211
|
|
|
$
|
1,115
|
|
|
|
|
|
|
|
|
|
|
|
316
|
|
|
$
|
1,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued May 1, 2016
|
|
10/28/2017
|
|
5/1/2018
|
|
|
131,250
|
|
|
|
103,294
|
|
|
$
|
52,989
|
|
|
|
|
|
|
$
|
(31,013
|
)
|
|
|
8,541
|
|
|
$
|
30,517
|
|
|
|
|
|
|
$
|
(9,148
|
)
|
|
|
17,439
|
|
|
$
|
38,808
|
|
|
|
|
|
|
$
|
(1,605
|
)
|
|
|
(11,075
|
)
|
|
$
|
26,128
|
|
|
|
|
|
|
$
|
(10,591
|
)
|
|
|
(181
|
)
|
|
$
|
15,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued June 7, 2016
|
|
12/4/2017
|
|
6/7/2018
|
|
|
125,000
|
|
|
|
90,596
|
|
|
$
|
64,458
|
|
|
|
|
|
|
|
|
|
|
|
(14,452
|
)
|
|
$
|
50,006
|
|
|
|
|
|
|
|
|
|
|
|
55,818
|
|
|
$
|
105,824
|
|
|
|
|
|
|
|
|
|
|
|
(75,201
|
)
|
|
$
|
30,623
|
|
|
|
|
|
|
|
|
|
|
|
(7,815
|
)
|
|
$
|
22,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
Convertible Notes Payable-issued March 8, 2016
|
|
9/15/2017
|
|
9/8/2018
|
|
|
150,000
|
|
|
|
167,164
|
|
|
$
|
108,682
|
|
|
|
|
|
|
$
|
(19,359
|
)
|
|
|
23,426
|
|
|
$
|
112,749
|
|
|
|
|
|
|
$
|
(26,895
|
)
|
|
|
44,802
|
|
|
$
|
130,656
|
|
|
|
|
|
|
$
|
(17,872
|
)
|
|
|
(70,817
|
)
|
|
$
|
41,967
|
|
|
|
|
|
|
$
|
(34,169
|
)
|
|
|
20,943
|
|
|
$
|
28,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued August 15, 2017
|
|
4/1/2018
|
|
8/15/2018
|
|
|
125,000
|
|
|
|
108,878
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
108,878
|
|
|
|
|
|
|
|
(3,760
|
)
|
|
$
|
105,118
|
|
|
|
|
|
|
|
|
|
|
|
(74,541
|
)
|
|
$
|
30,577
|
|
|
|
|
|
|
|
|
|
|
|
(7,834
|
)
|
|
$
|
22,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued July 10, 2017
|
|
4/1/2018
|
|
7/10/2018
|
|
|
125,000
|
|
|
|
108,061
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
108,061
|
|
|
|
|
|
|
|
3,092
|
|
|
$
|
111,153
|
|
|
|
|
|
|
|
|
|
|
|
(80,625
|
)
|
|
$
|
30,528
|
|
|
|
|
|
|
|
|
|
|
|
(7,855
|
)
|
|
$
|
22,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued January 25, 2018
|
|
4/1/2018
|
|
1/25/2019
|
|
|
78,750
|
|
|
|
65,896
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
65,896
|
|
|
|
|
|
|
|
135
|
|
|
$
|
66,031
|
|
|
|
|
|
|
|
|
|
|
|
(44,217
|
)
|
|
$
|
21,814
|
|
|
|
|
|
|
|
|
|
|
|
(13,460
|
)
|
|
$
|
8,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued June 4, 2017
|
|
6/4/2018
|
|
6/4/2018
|
|
|
52,500
|
|
|
|
42,755
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
42,755
|
|
|
|
|
|
|
|
532
|
|
|
$
|
43,287
|
|
|
|
|
|
|
|
|
|
|
|
(14,084
|
)
|
|
$
|
29,203
|
|
|
|
|
|
|
|
|
|
|
|
(12,231
|
)
|
|
$
|
16,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued August 2, 2017
|
|
10/1/2018
|
|
8/2/2020
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,234
|
|
|
$
|
(6,927
|
)
|
|
|
(40,668
|
)
|
|
$
|
51,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued October 1, 2018
|
|
10/1/2018
|
|
4/1/2020
|
|
|
58,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,952
|
|
|
|
|
|
|
|
(13,134
|
)
|
|
$
|
36,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued November 19, 2018
|
|
11/19/2018
|
|
5/19/2020
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66,134
|
|
|
|
|
|
|
|
(30,201
|
)
|
|
$
|
35,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,054,113
|
|
|
$
|
782,826
|
|
|
$
|
251,886
|
|
|
$
|
-
|
|
|
$
|
(77,117
|
)
|
|
$
|
22,943
|
|
|
$
|
197,712
|
|
|
$
|
325,590
|
|
|
$
|
(36,043
|
)
|
|
$
|
117,160
|
|
|
$
|
604,419
|
|
|
$
|
-
|
|
|
$
|
(22,217
|
)
|
|
$
|
(370,247
|
)
|
|
$
|
211,955
|
|
|
$
|
215,320
|
|
|
$
|
(51,687
|
)
|
|
$
|
(112,120
|
)
|
|
$
|
263,468
|
|
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
The Company’s mark-to-market fair value adjustment
((income)/expense) for the year ended December 31, 2018 totaled ($342,264) as follows:
Mark-to market fair value adjustment for the quarter ended March 31, 2018
|
|
$
|
22,943
|
|
Mark-to market fair value adjustment for the quarter ended June 30, 2018
|
|
|
117,160
|
|
Mark-to market fair value adjustment for the quarter ended September 30, 2018
|
|
|
(370,247
|
)
|
Mark-to market fair value adjustment for the quarter ended December 31,
2018
|
|
|
(112,120
|
)
|
Total mark-to market fair value adjustment for the year ended December 31,
2018
|
|
$
|
(342,264
|
)
|
Note 7. STOCKHOLDERS’ EQUITY
Effective July 23, 2018, the Company
effected a 1-for-1,000 reverse stock split of its issued and outstanding common stock. The number of shares of common stock issued
and outstanding post- reverse stock split is 1,404,073. All fractional shares have been rounded up to the next whole share. There
is no reduction in the number of the Company’s shareholders of record. Unless otherwise noted, impacted amounts and share
information included in the financial statements and notes thereto have been retroactively adjusted for the reverse stock split
as if such reverse stock split occurred on the first day of the first period presented. As a result of the aforementioned reverse
stock split, additional paid-in-capital was increased by $140,169 and $84,861 as of December 31, 2018 and December 31, 2017 respectively
on the balance sheet with a corresponding decrease in the par value of common stock issued as of the same dates.
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 3,482,840 and 849,437 shares of common
stock issued and outstanding at December 31, 2018 and December 31, 2017, respectively.
The Company has authorized 1,000,000
shares of Series A preferred stock with a par value of $0.0001 per share. At December 31, 2018 and December 31, 2017, there were
500,000 shares of Series A preferred stock issued and outstanding respectively. The preferred stock has preferential voting rights
of 2,000 votes per outstanding share.
The Company has authorized 50,000
shares of Series B convertible preferred stock with a par value of $0.0001 per share. At 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 December 31, 2018. 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.
On
October 12, 2018, the Company filed with the State of Nevada a certificate of designation pursuant to which the Company designated
a new class of preferred stock as the Company’s Series C Convertible Preferred Stock (“Series C Preferred”)
having a $100.00 stated value per share (“Stated Value”) and a par value equal to $0.0001 per share. The Company designated
5,000 shares of Series C Preferred. Subject to a beneficial ownership limitation equal to 4.99% and a prohibition on conversions
within the first sixty days of its issuance, each share of Series C Preferred is convertible into 25,000 shares of the Company’s
common stock. Holders of Series C Preferred are not entitled to receive dividends. In the event of any liquidation, dissolution
or winding up of the Company, holders of Series C Preferred are entitled to distributions from the assets in an amount equal to,
or if less, on a prorated basis, the Stated Value per share of Series C Preferred held by such holders. Holders of Series C Preferred
are entitled to vote, on an as-converted basis, together with holders of Common Stock on all actions to be taken by the shareholder
of the Company. During the quarter-ended December 31, 2018 the company issued 177 shares of Series C Convertible Preferred Stock
for services provided to the company by various professionals. As of December 31, 2018 there are 177 shares issued and outstanding
with a stated value of $17,700 and par value of $-0-. The preferred shares issued to professionals for their services were valued,
in total, at $204,212 based upon a valuation using the underlying convertible feature of the company’s common stock and
a Black-Scholes calculation methodology.
The
fair value of each issuance of Series C Preferred Stock on the date of issuance is estimated using the Black-Scholes option-pricing
model reflecting the following assumptions:
Expected volatility
|
|
403% to 435%
|
Expected life
|
|
0.7
|
Risk free interest rate
|
|
2.75%
|
Dividend yield
|
|
0.00%
|
During the quarter ended March
31, 2017, the Company issued an aggregate 43,000 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 112,498 shares of common stock at prices ranging from $0.0001 to $0.0028 per share as
partial conversion of notes.
During the quarter ended March
31, 2017, the Company issued an aggregate 9,050 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 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 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 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 shares of common stock at prices ranging from $0.00065 to $0.00099 per share
as partial conversion of notes and accrued interest.
During the quarter ended December
31, 2017, the Company issued an aggregate 71,000 shares of common stock at prices ranging from $0.0006 to $0.0011 per share for
services provided to the Company.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
During the quarter
ended December 31, 2017, the Company issued an aggregate 74,772 shares of common stock at prices ranging from $0.0004 to $0.0006
per share as partial conversion of notes and accrued interest.
During the quarter ended March
31, 2018, the Company issued an aggregate 18,000 shares of common stock at prices ranging from $0.0006 to $0.0011 per share for
services provided to the Company.
During the quarter ended March
31, 2018, the Company issued an aggregate 376,111 shares of common stock at prices ranging from $0.0004 to $0.0006 per share as
partial conversion of notes and accrued interest.
During the quarter ended June
30, 2018, the Company issued an aggregate 67,500 shares of common stock at prices ranging from $0.0004 to $0.0004 per share for
services provided to the Company.
During the quarter ended June
30, 2018, the Company issued an aggregate 92,015 shares of common stock at prices ranging from $0.000174 to $0.00025 per share
as partial conversion of notes and accrued interest.
During the quarter ended September
30, 2018, the Company issued an aggregate 634,053 shares of common stock at prices ranging from $0.0525 to $0.18 per share for
services provided to the Company.
During the quarter ended September
30, 2018, the Company issued an aggregate 427,755 shares of common stock at prices ranging from $0.0190 to $0.1173 per share as
partial conversion of notes and accrued interest.
During the quarter ended December,
2018, the Company issued an aggregate 1,017,959 shares of common stock at prices ranging from $0.019 to $0.025 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 $6,300 for the year ended December 31, 2018. 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 year ended
December 31, 2018 was $1,188. 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 $1,550. The cost of this space
for the year ended December 31, 2018 was $23,442. A new lease was signed in March 2018 for the same space. The following are the
minimum required lease payments under the lease for the next three years:
2019
|
|
|
24,600
|
|
2020
|
|
|
24,600
|
|
2021
|
|
|
4,100
|
|
Total rent expense for the year ended December 31,
2018 and 2017 was $30,929 and $20,713 respectively.
The Company has a distribution agreement with Dr. Ronald L.
Rubin where upon any sales generated by him he will receive the following commissions:
|
●
|
5% for
any sale that he oversees that involves another sales person
|
|
|
|
|
●
|
5% for
any sales related to a distribution agreement.
|
|
|
|
|
●
|
He is to
be issued 1 Series C Preferred share or 25,000 common shares per month
|
The Company has a distribution agreement with Dr. Gupta Pharma
LLC with the following provisions:
|
●
|
The Company,
via its subsidiary USA Pharma, has exclusive New Jersey distribution rights for all CBD
products and non-exclusive rights to all other territories.
|
|
|
|
|
●
|
The agreement
is for a term of 3 years, but parties have the right to terminate.
|
|
|
|
|
●
|
Upon agreement
signing, 120 shares of Series C Convertible Preferred stock was issued by the Company
to Dr. Gupta.
|
|
|
|
|
●
|
Dr. Gupta
shall have 30% of the issued and outstanding common stock of the Company during the term
of this agreement. Should the percentage of ownership drop below 30% then the Company
must issue additional Series C Convertible Preferred Shares which are convertible into
the required additional amount of common stock minus 3,000,000 shares of common stock.
|
Note 9. INCOME TAXES
On December 22, 2017, the President
signed into law the Tax Cuts and Jobs Act (H.R. 1) (the “Act”). The Act includes a number of changes in existing tax
law impacting businesses including, among other things, a permanent reduction in the corporate income tax rate from 34% to 21%.
The rate reduction would take effect on January 1, 2018.
As of December 31, 2016, the Company
had net deferred tax assets consisting primarily of net operating losses totaling $484,037 that were fully reserved. Under U.S.
generally accepted accounting principles, the Company uses the asset and liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company’s net deferred tax asset as of December 31, 2016 was determined
based on the current enacted federal tax rate of 34% prior to the passage of the Act. As a result of the reduction in the corporate
income tax rate to 21% from 34% under the Act, the Company revalued its December 31, 2016 net deferred tax asset as of December
31, 2017. The Company reduced the value of its net deferred tax asset by approximately $146,337, which, since it is fully reserved,
was not recorded as an additional income tax expense in the Company’s statement of operations in the fourth quarter of 2017.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
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 following
represents the tax NOLs incurred by the Company on a per year basis and the resulting estimated deferred tax asset and valuation
allowance:
Year Ended December 31,
|
|
Net
Operating
Loss
|
|
|
Estimated
Deferred
Tax Asset
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
4,457
|
|
|
$
|
1,337
|
|
2011
|
|
|
34,325
|
|
|
$
|
10,298
|
|
2012
|
|
|
174,024
|
|
|
$
|
52,207
|
|
2013
|
|
|
114,267
|
|
|
$
|
34,280
|
|
2014
|
|
|
294,880
|
|
|
$
|
88,464
|
|
2015
|
|
|
121,619
|
|
|
$
|
36,486
|
|
2016
|
|
|
382,095
|
|
|
$
|
114,629
|
|
2017
|
|
|
1,148,020
|
|
|
$
|
344,406
|
|
2018
|
|
|
629,038
|
|
|
$
|
188,711
|
|
Total
|
|
$
|
2,902,725
|
|
|
$
|
870,818
|
|
|
|
|
|
|
|
|
|
|
Less: Valuation Allowance
|
|
|
|
|
|
$
|
(870,818
|
)
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset
|
|
|
|
|
|
$
|
-
|
|
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,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Statutory federal income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
State income taxes, net of federal taxes
|
|
|
9
|
%
|
|
|
9
|
%
|
Valuation allowance
|
|
|
(30
|
)%
|
|
|
(30
|
)%
|
Effective income tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
As of December 31, 2018, the Company
has a net operating loss carryforward of approximately $2,902,725 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. Under the current Tax Cuts and Jobs Act (H.R. 1) (the “Act”),
federal net operating losses generated after December 31, 2017 can be carried forward indefinitely but only 80% of taxable income
can be offset with a net-operating loss deduction. Net operating losses generated in years 2017 and prior may be fully utilized
up to 100% of taxable income and they still maintain their 20-year carry-forward life.
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 2014 are subject to federal and state tax examinations.
Note 10. RELATED PARTY TRANSACTIONS
As more fully described in Notes
3 and 4 to the Consolidated Financial Statements, the Company owed the following amounts to related parties as of the following:
|
|
December 31,
|
|
|
December 31
|
|
|
|
2018
|
|
|
2017
|
|
Due to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
Due to officer/stockholder
|
|
|
8,955
|
|
|
|
8,398
|
|
Due to other stockholders
|
|
|
3,100
|
|
|
|
6,790
|
|
Total Related Party Obligations
|
|
$
|
20,976
|
|
|
$
|
24,109
|
|
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 31, 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 June 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. During the quarter
ended December 31, 2017 $44,673 in accrued compensation was paid to the CEO. As of December 31, 2018, the company owes accrued
compensation to it’s CEO in the amount of $388,981.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
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 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 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 17,273 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 shares of the Company’s
common stock. During the quarter ended March 31, 2018, $15,000 in principal on this note was satisfied by the conversion into
60,000 shares of the Company’s common stock. During the quarter ended June 30, 2018, $7,500 in principal on this note was
satisfied by the conversion into 30,000 shares of the Company’s common stock. During the quarter ended June 30, 2018 the
original related-party noteholder sold $20,000 in principal on this note to an unrelated third party investor thereby leaving
$80,250 in principal balance due to the related party original noteholder and $20,000 in principal due to the unrelated third-party
investor. During the year ended December 31, 2018 the Company made cash paydowns to the noteholder in the total amount of $32,550.
In addition, $30,195 in principal balance on the note was converted into 495,000 shares of the Company’s common stock. The
ending principal balance on this note at December 31, 2018 is $51,005 to the original noteholder. During the year-ended December
31, 2018 the unrelated third-party noteholder converted $3,350 in principal balance into 120,000 shares of the Company’s
common stock thereby leaving a principal balance to this unrelated noteholder in the amount of $16,650.
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.
The Company has incurred losses
from inception of approximately $4,633,720 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 not enable it to meet its obligations for twelve months from the date these financial statements are available to be issued
unless the Company received additional funding.
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.
During the quarter ended March
31, 2017, the Company issued from the Plan a total of 27,100 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 “2017 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 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 year ended December 31, 2017,
the Company issued from the Plan 108,000 shares to non-employees for services rendered. As of December 31, 2017 there is a balance
of 17,000 shares available for future issuance under the Medifirst Solutions, Inc. 2017 Equity Incentive Plan.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
December 31, 2018
In January 2018, the Company adopted
the Medifirst Solutions, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) pursuant to which the Company may grant
stock options, restricted stock purchase offers and other equity-based awards up to an aggregate of 175,000 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 quarter ended March
31, 2018, the Company issued from the 2018 Plan a total of 4,000 shares of common stock to non-employees for services rendered.
As of March 31, 2018 there is a balance of 188,000 shares available for future issuance under the Medifirst Solutions, Inc. 2018
Equity Incentive Plan.
During the quarter ended June
30, 2018, the Company issued from the 2018 Plan a total of 17,500 shares of common stock to non-employees for services rendered.
As of June 30, 2018 there is a balance of 170,500 shares available for future issuance under the Medifirst Solutions, Inc. 2018
Equity Incentive Plan.
During the quarter ended September
30, 2018, there were no issuances from the 2018 Plan and therefore as of September 30, 2018 there is a balance of 170,500 shares
available for future issuance under the Medifirst Solutions, Inc. 2018 Equity Incentive Plan.
During the quarter ended December
30, 2018, there were no issuances from the 2018 Plan and therefore as of December 31, 2018 there is a balance of 170,500 shares
available for future issuance under the Medifirst Solutions, Inc. 2018 Equity Incentive Plan.
Note 13. SUBSEQUENT EVENTS
The Company has evaluated subsequent events
through the date which the consolidated financial statements were issued. Based upon the evaluation, the Company did not identify
any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial
statements, except as disclosed.
Subsequent to the year ended December
31, 2018 the Company issued an aggregate 2,049,043 shares of Common Stock upon conversions of an aggregate principal amount equal
to $34,038 outstanding convertible promissory notes and $2,977 in accrued interest.
Subsequent to the year ended December
31, 2018 the Company issued an aggregate 277,000 shares of Common Stock to consultants for services performed. These 277,000 shares
were issued under the Company’s 2019 Equity Incentive Plan.
Subsequent to the year ended December
31, 2018 the Company issued an aggregate 52 shares of Series C Convertible Preferred Stock to consultants for services performed.
These 52 shares of Series C Convertible Preferred Stock are convertible into 1,550,000 shares of common stock of the Company.
These 52 shares of Series C Convertible Preferred Stock will be recorded on the Company’s books at fair value using a Black-Scholes
pricing model.
On January 24, 2019, the Company entered
into a Securities Purchase Agreement with an investor to issue a convertible promissory note in the amount of $43,000. The note
pays 12% interest per annum and matures on November 15, 2019. After six months from the date of the note, the investor may convert
the principal balance into common stock of the Company. On January 28, 2019 the cash funding was received by the Company and the
convertible note was issued.
On February 4, 2019, the Company entered
into a Securities Purchase Agreement with an investor to issue a convertible promissory note in the amount of $38,000. The note
pays 12% interest per annum and matures on November 30, 2019. After six months from the date of the note, the investor may convert
the principal balance into common stock of the Company. On February 6, 2019 the cash funding was received by the Company and the
convertible note was issued.
On February 20, 2019, the Company entered
into a Securities Purchase Agreement with an investor to issue a convertible promissory note in the amount of $54,000. The note
pays 8% interest per annum and matures on August 20, 2019. At any time after the date of the note, the investor may convert the
principal balance of the note into common stock of the Company. On February 21, 2019 the cash funding was received by the Company
and the convertible note was issued to the investor.
On February 25, 2019, the Company entered
into a Securities Purchase Agreement with an investor to issue a convertible promissory note in the amount of $65,000. The note
pays 12% interest per annum and matures on February 25, 2020. At any time after six months from the date of the note, the investor
may convert the principal balance of the note into common stock of the Company. On February 26, 2019 the cash funding was received
by the Company and the convertible note was issued to the investor.
On February 27, 2019, the Company entered
into a Securities Purchase Agreement with an investor to issue a convertible promissory note in the amount of $154,500. The note
pays 8% interest per annum and contains a $15,000 original issue discount (OID). The note is to be funded in two tranches. After
funding of the initial tranche, the principal balance of the note will be $51,500 which includes the first tranche of $46,500
and $,5000 of pro-rated OID. The maturity date for each tranche shall be 18 months from the effective date of each tranche payment.
At any time after the date of the note, the investor may convert the principal balance of the note into common stock of the Company.
On March 1, 2019 the cash funding for the initial tranche was received by the Company and the convertible note issued to the investor.
On March 8, 2019, the Company issued sixty
(60) shares of the Company’s Series C Convertible Preferred Stock to the Company’s Chief Executive Officer. Each share
of Series C Preferred has a $100.00 stated value per share. Subject to a beneficial ownership limitation equal to 4.99% and a
prohibition on conversions within the first sixty days of its issuance, each share of Series C Preferred is convertible into 25,000
shares of the Company’s common stock. Holders of Series C Preferred are not entitled to receive dividends. In the event
of any liquidation, dissolution or winding up of the Company, holders of Series C Preferred are entitled to distributions from
the assets in an amount equal to, or if less, on a prorated basis, the Stated Value per share of Series C Preferred held by such
holders. Holders of Series C Preferred are entitled to vote, on an as-converted basis, together with holders of Common Stock on
all actions to be taken by the shareholders of the Company.
Subsequent to the year ended December
31, 2018 the Company created the Medifirst Solutions, Inc. 2019 Equity Incentive Plan which 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. The total number of shares of Common Stock which may be purchased or granted
directly by Options, Stock Awards or Restricted Stock Purchase Offers, or purchased indirectly through exercise of Options granted
under the Plan shall not exceed Five Million (5,000,000). Subsequent to the year end, the Company issued 277,000 shares under
this plan.
On March 7, 2019, the Company entered
into a Distribution Agreement with a company based in Guatemala City, Guatemala, Central America to distribute its products(s)
on a non-exclusive basis throughout Latin America. The term of this agreement is for three years and shall automatically renew
for successive three year periods unless either party notifies the other, in writing, that they do not desire renewal.