Notes to Consolidated
Financial Statements
June 30, 2019 (unaudited)
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. All material intercompany balances and transactions
have been eliminated in consolidation.
The Company’s activities are subject
to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current
technology.
Basis of Presentation
The unaudited interim consolidated financial
statements include the accounts of Medifirst Solutions Inc. and its wholly owned subsidiary (Medical Laser Manufactures, Inc.,
and Concierge Concepts Rx (CCRx) (collectively referred to as the “Company”). All material intercompany balances and
transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments
(consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial
position of the Company as of June 30, 2019, the consolidated results of its operations for the three-month periods ended June
30, 2019 and 2018, the consolidated change in stockholders’ equity for the six-month period ended June 30, 2019 and 2018
and the consolidated cash flows for the six-month periods ended June 30, 2019 and 2018. The results of operations for the three-month
and six-month periods ended June 30, 2019 are not necessarily indicative of the operating results for the full year. These financial
statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the year
ended December 31, 2018 included in the Company’s Annual Report on Form 10-K for the year then ended.
Some items in the prior year financial
statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income
or shareholders’ equity.
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
June 30, 2019 (unaudited)
Revenue Recognition
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 it’s CCRx division. Such revenue is recognized at the time services are performed. As a practical expedient, the Company
has elected to recognize revenue based on the amount invoiced to the customer if that amount corresponds directly with the value
to the customer of the Company’s performance completed to date. Such an assessment requires judgment. The Company can look
to the market prices or standalone selling prices of the goods or services as evidence of the value to the customer; however, other
evidence could also be used to demonstrate that the amount invoiced corresponds directly with the value transferred to the customer.
The right to invoice practical expedient is described as a measure of progress, but it effectively allows the Company to bypass
significant portions of the revenue recognition model. Since the Company elects the practical expedient, it typically does not
need to determine the transaction price, allocate the transaction price, or select a measure of progress. The Company elects the
right to invoice practical expedient and also elects to exclude certain disclosures about the remaining performance obligations
in the contract.
The Company adopted the new accounting
standard on revenue recognition, ASU No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, which became
effective on January 1, 2018.
The Company’s revenue recognition policy standards include the following
elements under ASU No. 2014-09 (Topic 606):
|
i.
|
Identify the
contract with a customer.
|
|
ii.
|
Identify
the performance obligations in the contract.
|
|
iii.
|
Determine
the transaction price.
|
|
iv.
|
Allocate
the transaction price to the performance obligations in the contract.
|
|
v.
|
Recognize
revenue when (or as) the entity satisfies a performance obligation.
|
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 June 30, 2019 or December 31, 2018.
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 handheld laser devices,
their carrying cases and goggles. In addition, as part of the Company’s expansion into the CBD market, they have purchased
a small amount of finished goods inventory of CBD products which are ready for resale.
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.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 2019 (unaudited)
Intangible Asset- Licensing Agreement
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 license provides with respect to the Technology, Licensor hereby grants
to Licensee an irrevocable, nontransferable, royalty-bearing license, with a right of sublicense (the “License”),
throughout the Territory in the Field of Use, whether or not under the Licensed Patent, to:
-use or submit or deliver the Technology
and/or any Product to any regulatory body throughout the Territory for purposes of obtaining approval to make, Sell, offer for
Sale, import, export and distribute the Technology or Products; and
- use or copy the Technology and/or any
Product; and
- market, make, have made, Sell, offer
for Sale, import and distribute Products; and
- sublicense the Technology; and
- prepare, or have prepared on its behalf,
modifications, enhancements and/or derivative works of the Technology.
In connection with the license granted,
Licensor hereby grants to Licensee a license to the Licensed Patents, whether now existing or hereafter acquired.
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. 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. During the quarter-ended June 30, 2019 there were $2,700 in principal paydowns
to the original noteholder and $13,580 in conversions to common stock. The principal balance on this note as of June 30, 2019
is $25,225 to the original noteholder and $16,650 in principal balance to the new unrelated third-party noteholder.
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.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 2019 (unaudited)
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. Although there
is a revenue stream from consulting within our CCRx subsidiary, such amounts have been immaterial and do not warrant separate
segment reporting at this time. Currently, the Company does not evaluate the separate segment results and the Company’s
chief operating decision maker (CODM) whose function is to allocate resources, does
not assess the performance of the segments of the Company under
ASC 280-10-50-1
.
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 June 30, 2019, convertible debt can be converted into approximately
46,710,984 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 June 30, 2019, 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.
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 June 30, 2019, the Company had $313,290
in cash equivalents.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 2019 (unaudited)
Recent Pronouncements
The Company is no longer an “emerging
growth company” as defined in Section 2(a)(19) of the Securities Act.
In August 2018, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles-Goodwill
and Other-Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract”, which align the requirements for capitalizing implementation costs incurred in
a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop
or obtain internal-use software (and hosting arrangements that include an internal use software license). ASU 2018-15 is effective
for the Company beginning in the first fiscal quarter of 2022, with early adoption permitted. The Company is currently evaluating
the impact of this ASU on the consolidated financial statements.
In June 2016, the FASB issued ASU No.
2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,”
which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to
address the issue that the previous “incurred loss” methodology was restrictive for an entity’s ability to record
credit losses based on not yet meeting the “probable” threshold. The new language will require these assets to be
valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This update standard
is effective for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of this ASU on
the consolidated financial statements.
In August 2018, the Securities and Exchange
Commission (the “SEC”) issued a final rule that amends certain of the SEC’s disclosure requirements, including
requirements relating to disclosures about changes in stockholders’ equity. For Quarterly Reports on Form 10-Q, the final
rule extends to interim periods the annual requirement in Rule 3-04 of Regulation S-X, to disclose (1) changes in stockholders’
equity and (2) the amount of dividends per share for each class of shares (as opposed to common stock only, as previously required).
Pursuant to the final rule, registrants must now analyze changes in stockholders’ equity, in the form of a reconciliation,
for “the current and comparative year-to-date [interim] periods, with subtotals for each interim period,” i.e., a
reconciliation covering each period for which an income statement is presented. Rule 3-04 of Regulation S-X permits the disclosure
of changes in stockholders’ equity (including dividend-per-share amounts) to be made either in a separate financial statement
or in the notes to the financial statements. The final rule is effective for all filings made on or after November 5, 2018. SEC
staff has indicated it would not object if a registrant’s first presentation of the changes in shareholders’ equity
is included in its Form 10-Q for the quarter that begins after the effective date of the amendments. Therefore, the Company conformed
to this rule in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.
Note 2. PROPERTY, PLANT AND EQUIPMENT
(NET)
Equipment is recorded at cost and consisted of the following
at June 30, 2019 and December 31, 2018:
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Computer equipment
|
|
$
|
8,956
|
|
|
$
|
8,956
|
|
Less: accumulated depreciation
|
|
|
(8,606
|
)
|
|
|
(8,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
351
|
|
|
$
|
592
|
|
Depreciation expense was $241 and $320, for the six-months
ended June 30, 2019 and 2018 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 June 30, 2019 and December 31, 2018, 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 six-months ended June 30, 2019
and the year ended December 31, 2018 a stockholder of the Company advanced the Company $-0- and $-0- respectively. The loan has
a balance of $6,375 at June 30, 2019 and $8,375 at December 31, 2018, 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 June 30, 2019 and December 31, 2018, the loan balance was $100
and $100, respectively.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 2019 (unaudited)
At June 30, 2019 and December 31, 2018,
the Company was indebted to a stockholder in the amount of $1,000 and $1,000, respectively. The loan has an interest rate of 26.7%.
Principal and accrued interest were due and payable on January 1, 2014.
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 June 30, 2019.
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 June 30, 2019
and December 31, 2018, 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 580,307 shares at June 30, 2019 and 347,936 shares
at December 31, 2018.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 2019 (unaudited)
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.
In August 2016, the note holder converted
$3,000 of note principal into 3,000,000 shares of the Company’s common stock. At June 30, 2019 and December 31, 2018, 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 June 30, 2019 and at December 31, 2018.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
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. During the quarter-ended March 31, 2019 the Company reached
a settlement agreement with the noteholder where it paid all the outstanding interest and penalty and nothing is due to the noteholder
as of March 31, 2019 The noteholder converted $5,813 of interest and penalty into 398,859 shares of common stock of the Company
and $9,815 was paid in cash to the noteholder by the Company thereby resulting in a recognized loss on the extinguishment of the
debt in the amount of $2,732.
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 convertible redeemable notes in aggregate principal amount of $1,012,500. The back
end-notes were all cancelled so only a total of $506,250 were actually funded. 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;
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. During the quarter-ended March 31, 2019 the noteholder converted $21,125
in principal and $2,977 in accrued interest into 1,249,684 shares of common stock. The principal balance remaining on this convertible
note is $11,535 as of March 31, 2019. During the quarter-ended June 30, 2019 the noteholder converted the remaining $11,535 in
principal and $3,609 in accrued interest into 488,866 shares of common stock. There $-0- in principal balance left on the note
as of June 30, 2019.
There is an aggregate principal balance outstanding in the amount of $346,290 on the three remaining convertible
notes under this securities purchase agreement.
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. During the quarter-ended March 31, 2019 the noteholder converted $3,300
in principal balance into 200,000 shares of the Company’s common stock. The remaining principal balance outstanding on the
note is $42,200 as of March 31, 2018. During the quarter-ended June 30, 2019 the noteholder converted $6,000 in principal balance
into 333,333 shares of the Company’s common stock. The remaining principal balance outstanding on the note is $36,200 as
of June 30, 2019.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
Convertible Notes Payable - MLM
(10%)
As more fully described in Note 1 to the
financial statements, on March 8th 2016 (with an effective date of October 1, 2015), the company, through its sole wholly-owned
subsidiary (“Licensee”), entered into a Product and Know-How License Agreement (“Agreement”) with a Florida
Corporation (“Licensor”) which is owned by a related party - the son of the Company’s CEO. The consideration
for the licensing agreement consisted of the issuance of 25,000 Series B Preferred stock shares to the Licensor (at par) plus a
$150,000 promissory note issued by the Company to the licensor. During the quarter-ended June 30, 2017, $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. During the quarter-ended March 31, 2019 the Company
made principal paydowns in the amount of $5,700 to the original noteholder and the original noteholder converted $3,800 in principal
balance into 200,000 shares of the Company’s common stock. The ending principal balance on this note at March 31, 2019 is
$41,505 to the original noteholder and $16,650 to the unrelated third-party noteholder. During the quarter-ended June 30, 2019
the Company made principal paydowns in the amount of $2,700 to the original noteholder and the original noteholder converted $13,580
in principal balance into 580,000 shares of the Company’s common stock. The ending principal balance on this note at June
30, 2019 is $25,225 to the original noteholder and $16,650 to the unrelated third-party noteholder.
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 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 June 30, 2019.
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 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 June 30, 2019.
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 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. During the quarter ended June 30, 2019 the noteholder converted the entire $58,000 principal balance into 1,649,537
shares of common stock. There is no principal balance outstanding as of June 30, 2019 on this note.
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 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. During the quarter-ended June 30, 2019 the noteholder converted $57,900 of principal balance into 2,380,451 shares
of common stock. The Company then paid $13,736 to retire the remaining $7,100 in principal balance along with $2,740 in accrued
interest thereby recognizing $3,896 in gain on the debt extinguishment. There is no principal balance outstanding as of June 30,
2019 on this note.
Convertible Notes Payable - PULG
(8%) (Notes 3, 4 & 5)
On January 24, 2019 the Company issued
a convertible note payable (convertible promissory note PULG (12%) Note 3) to an investor in the principal amount of $43,000.
The note matures on May 24, 2020 and bears interest at 12%. The note holder has the right at any time on or after the day that
is six months from January 24, 2019 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 $43,000 is outstanding as of June 30, 2019.
On February 4, 2019 the Company issued
a convertible note payable (convertible promissory note PULG (12%) Note 4) to an investor in the principal amount of $38,000. The
note matures on November 30, 2019 and bears interest at 12%. The note holder has the right at any time on or after the day that
is six months from February 4, 2019, 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 $38,000 is outstanding as of June 30, 2019.
On March 26, 2019 the Company issued a
convertible note payable (convertible promissory note PULG (8%) Note 5) to an investor in the principal amount of $43,000. The
note matures on September 21, 2020 and bears interest at 8%. The note holder has the right at any time on or after the day that
is six months from March 26, 2019 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 $43,000 is outstanding as of June 30, 2019.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
Convertible Notes Payable - BR (12%)
(Note 1)
On February 25, 2019 the Company issued
a convertible note payable (convertible promissory note BR (12%) Note 1) to an investor in the principal amount of $65,000. The
note matures on February 25, 2020 and bears interest at 12%. The note holder has the right at any time on or after the day
that is six months from February 25, 2019 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 June 30, 2019.
Convertible Notes Payable - CB (8%)
(Note 1)
On February 27, 2019 the Company issued
a convertible note payable (convertible promissory note CB (8%) Note 2) to an investor in the principal amount of $51,500. The
note matures on August 20, 2020 and bears interest at 8%. The note holder has the right at any time on or after the day that
is six months from February 27, 2019 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 $51,500 is outstanding as of June 30, 2019.
Convertible Notes Payable - GS (8%)
(Note 1)
On February 20, 2019 the Company issued
a convertible note payable (convertible promissory note GS (8%) Note 1) to an investor in the principal amount of $54,000. The
note matures on August 20, 2020 and bears interest at 8%. The note holder has the right at any time after issuance 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 $54,000 is outstanding as of June 30, 2019.
Convertible Notes Payable - PULG
(8%) (Notes 6 & 7)
On April 24, 2019 the Company issued a
convertible note payable (convertible promissory note PULG (8%) Note 6) to an investor in the principal amount of $58,000. The
note matures on October 24, 2019 and bears interest at 8%. The note holder has the right at any time on or after the day that
is six months from April 24, 2019 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 June 30, 2019.
On June 11, 2019 the Company issued a
convertible note payable (convertible promissory note PULG (8%) Note 7) to an investor in the principal amount of $43,000. The
note matures on December 11, 2019 and bears interest at 8%. The note holder has the right at any time on or after the day
that is six months from June 11, 2019 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 $43,000 is outstanding as of June 30, 2019.
Convertible Notes Payable - CB (8%)
(Note 2)
On May 24, 2019 the Company issued a convertible
note payable (convertible promissory note CB (8%) Note 2) to an investor in the principal amount of $51,500. The note matures
on November 24, 2019 and bears interest at 8%. The note holder has the right at any time on or after the day that is six months
from May 24, 2019 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 $51,500 is outstanding as of June 30, 2019.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
The Company’s convertible notes
payable, other notes payable, and the related derivative liabilities, derivative discount, deferred financing costs and original-issue
discount are presented in the financial statements at June 30, 2019 as follows:
|
|
Remaining
|
|
|
Original
|
|
|
|
|
|
Deferred
|
|
|
Total
Convertible
|
|
|
|
|
6/30/2019
|
|
Principal
|
|
|
Issue
|
|
|
Derivative
|
|
|
Financing
|
|
|
Notes
|
|
|
Derivative
|
|
Debt
|
|
Amount
|
|
|
Discount
|
|
|
Discount
|
|
|
Costs
|
|
|
Payable
|
|
|
Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
Payable - BS
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
Note
Payable - SF
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
Note
Payable - SD
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
Note
Payable - NW
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
715
|
|
|
|
|
|
Note
Payable - MC #2
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890
|
|
|
|
|
|
Note
Payable - KinerjaPay
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
Convertible
Note Payable - JR (5%)
|
|
|
36,200
|
|
|
|
|
|
|
|
(33,391
|
)
|
|
|
|
|
|
|
2,809
|
|
|
|
53,539
|
|
Convertible
Note Payable - HG (10%)
|
|
|
16,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,650
|
|
|
|
-
|
|
Convertible
Note Payable - LGC (8%) 2
|
|
|
96,290
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
96,290
|
|
|
|
46,305
|
|
Convertible
Note Payable - LGC (8%) 3
|
|
|
125,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
44,384
|
|
Convertible
Note Payable - LGC (8%) 4
|
|
|
125,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
46,247
|
|
Convertible
Note Payable - MLM (10%) (Related party)
|
|
|
25,225
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
25,225
|
|
|
|
53,590
|
|
Convertible
Note Payable - LGC (8%) 5
|
|
|
78,750
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
78,750
|
|
|
|
42,941
|
|
Convertible
Note Payable - LGC (8%) 6
|
|
|
52,500
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
52,500
|
|
|
|
41,126
|
|
Convertible
Notes Payable- PULG (8%) 3
|
|
|
43,000
|
|
|
|
|
|
|
|
(21,669
|
)
|
|
|
(2,031
|
)
|
|
|
19,300
|
|
|
|
43,218
|
|
Convertible
Notes Payable- PULG (8%) 4
|
|
|
38,000
|
|
|
|
|
|
|
|
(24,887
|
)
|
|
|
(1,886
|
)
|
|
|
11,227
|
|
|
|
31,240
|
|
Convertible
Notes Payable- PULG (8%) 5
|
|
|
43,000
|
|
|
|
|
|
|
|
(42,282
|
)
|
|
|
(2,411
|
)
|
|
|
(1,693
|
)
|
|
|
37,474
|
|
Convertible
Notes Payable- BR (12%) 1
|
|
|
65,000
|
|
|
|
|
|
|
|
(27,593
|
)
|
|
|
(3,288
|
)
|
|
|
34,119
|
|
|
|
50,323
|
|
Convertible
Notes Payable- CB (8%) 1
|
|
|
51,500
|
|
|
|
(3,876
|
)
|
|
|
(51,203
|
)
|
|
|
(1,163
|
)
|
|
|
(4,742
|
)
|
|
|
61,670
|
|
Convertible
Notes Payable- GS (8%) 1
|
|
|
54,000
|
|
|
|
(141
|
)
|
|
|
(52,278
|
)
|
|
|
(1,000
|
)
|
|
|
581
|
|
|
|
64,322
|
|
Convertible
Notes Payable- CB (8%) 2
|
|
|
51,500
|
|
|
|
(4,662
|
)
|
|
|
(49,177
|
)
|
|
|
(1,399
|
)
|
|
|
(3,738
|
)
|
|
|
43,890
|
|
Convertible
Notes Payable- PULG (8%) 6
|
|
|
43,000
|
|
|
|
|
|
|
|
(10,400
|
)
|
|
|
(2,896
|
)
|
|
|
29,704
|
|
|
|
11,861
|
|
Convertible
Notes Payable- PULG (8%) 7
|
|
|
58,000
|
|
|
|
|
|
|
|
(18,063
|
)
|
|
|
(2,628
|
)
|
|
|
37,309
|
|
|
|
12,863
|
|
|
|
$
|
1,034,405
|
|
|
$
|
(8,678
|
)
|
|
$
|
(330,943
|
)
|
|
$
|
(18,702
|
)
|
|
$
|
676,082
|
|
|
$
|
684,993
|
|
As of June 30, 2019, the convertible notes
payable can be converted into approximately 46,710,984 shares of common stock.
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, the 8% convertible
notes payable issued October 1, 2018 and November 19, 2018, the 8% convertible notes payable issued February 20, 2019 and February
27, 2019, March 26, 2019, April 26, 2019, May 4, 2019, June 11, 2019 and to the 12% convertible notes payable issued January
28, 2019 and February 6, 2019 and February 25, 2019. 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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
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, the 8% convertible notes payable issued February 20, 2019 and February 27, 2019, March 26, 2019, April
26, 2019, May 4, 2019, June 11, 2019 and to the 12% convertible notes payable issued January 28, 2019 and February 6, 2019
and February 25, 2019 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 June 30, 2019.
The primary assumptions include: projected annual volatility of 260% to 346%; the follow-on securities purchase option; the conversion
feature as a percentage of Market; automatic/conditional conversions; market price trigger events.
As of June 30, 2019 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.
The 5% Convertible Note Payable and the
8% Convertible Notes Payable, the 9% convertible note payable and the 12% convertible notes payable are valued at June 30, 2019.
The following assumptions were used for the valuation of the embedded derivative:
- The stock price (prior period reverse
split 1,000:1) of $0.0622 increased to $0.090 then decreased to $0.0230 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
$216,000 (rounded) as of 6/30/19 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 65% over 3 to 20 trading days would have effective rates of 32.74% to 66.91%;
- 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 260% to 346%.
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
June 30, 2019 (unaudited)
The Company’s derivative liabilities
on convertible notes payable are presented at market value in the financial statements at June 30, 2019 as follows:
6/30/2019
Convertible Note
|
|
Derivative
Treatment Date
|
|
Maturity
Date
|
|
Original
Principal Note Amount
|
|
|
Original
Derivative Valuation
|
|
|
Derivative
Valuation
December 31,
2018
|
|
|
Quarter
Ended
March 31,
2019
Issuances
|
|
|
Quarter
Ended
March 31,
2019
Conversions
|
|
|
Ended
March 31,
2019
Mark-to- Market
|
|
|
Derivative
Valuation
March 31,
2019
|
|
|
Quarter
Ended
June 30,
2019
Issuances
|
|
|
Quarter
Ended
June 30,
2019
Conversions
|
|
|
Ended
June 30,
2019
Mark-to- Market
|
|
|
Derivative
Valuation
June 30
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
% Convertible Note- Payable-issued 6/12/2015
|
|
4/12/2016
|
|
1/7/2017
|
|
|
35,863
|
|
|
|
37,827
|
|
|
$
|
1,431
|
|
|
|
|
|
|
$
|
-
|
|
|
|
(1,431
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued May 1, 2016
|
|
10/28/2017
|
|
5/1/2018
|
|
|
131,250
|
|
|
|
103,294
|
|
|
$
|
15,356
|
|
|
|
|
|
|
$
|
(21,462
|
)
|
|
|
18,890
|
|
|
$
|
12,784
|
|
|
|
|
|
|
$
|
(13,240
|
)
|
|
|
456
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued June 7, 2016
|
|
12/4/2017
|
|
6/7/2018
|
|
|
125,000
|
|
|
|
90,596
|
|
|
$
|
22,808
|
|
|
|
|
|
|
|
|
|
|
|
36,386
|
|
|
$
|
59,194
|
|
|
|
|
|
|
$
|
(28,559
|
)
|
|
|
13,749
|
|
|
$
|
44,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
Convertible Notes Payable-issued March 8, 2016
|
|
9/15/2017
|
|
9/8/2018
|
|
|
150,000
|
|
|
|
167,164
|
|
|
$
|
28,741
|
|
|
|
|
|
|
$
|
(17,244
|
)
|
|
|
60,574
|
|
|
$
|
72,071
|
|
|
|
|
|
|
$
|
(37,204
|
)
|
|
|
18,723
|
|
|
$
|
53,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued August 15, 2017
|
|
4/1/2018
|
|
8/15/2018
|
|
|
125,000
|
|
|
|
108,878
|
|
|
$
|
22,673
|
|
|
|
|
|
|
|
|
|
|
$
|
36,370
|
|
|
$
|
59,043
|
|
|
|
|
|
|
|
|
|
|
|
(12,796
|
)
|
|
$
|
46,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued July 10, 2017
|
|
4/1/2018
|
|
7/10/2018
|
|
|
125,000
|
|
|
|
108,061
|
|
|
$
|
22,743
|
|
|
|
|
|
|
|
|
|
|
$
|
36,379
|
|
|
$
|
59,122
|
|
|
|
|
|
|
|
|
|
|
|
(12,817
|
)
|
|
$
|
46,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued January 25, 2018
|
|
4/1/2018
|
|
1/25/2019
|
|
|
78,750
|
|
|
|
65,896
|
|
|
$
|
8,354
|
|
|
|
|
|
|
|
|
|
|
$
|
46,302
|
|
|
$
|
54,656
|
|
|
|
|
|
|
|
|
|
|
|
(11,715
|
)
|
|
$
|
42,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued June 4, 2017
|
|
6/4/2018
|
|
6/4/2018
|
|
|
52,500
|
|
|
|
42,755
|
|
|
$
|
16,972
|
|
|
|
|
|
|
|
|
|
|
$
|
12,760
|
|
|
$
|
29,732
|
|
|
|
|
|
|
|
|
|
|
|
11,394
|
|
|
$
|
41,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued August 2, 2017
|
|
10/1/2018
|
|
8/2/2020
|
|
|
50,000
|
|
|
|
99,234
|
|
|
$
|
51,639
|
|
|
|
|
|
|
$
|
(4,990
|
)
|
|
$
|
22,429
|
|
|
$
|
69,078
|
|
|
|
|
|
|
$
|
(8,344
|
)
|
|
|
(7,195
|
)
|
|
$
|
53,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued October 1, 2018
|
|
10/1/2018
|
|
4/1/2020
|
|
|
58,000
|
|
|
|
49,952
|
|
|
$
|
36,818
|
|
|
|
|
|
|
|
|
|
|
$
|
32,844
|
|
|
$
|
69,662
|
|
|
|
|
|
|
$
|
(83,311
|
)
|
|
|
13,649
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued November 19, 2018
|
|
11/19/2018
|
|
5/19/2020
|
|
|
65,000
|
|
|
|
66,134
|
|
|
$
|
35,933
|
|
|
|
|
|
|
|
|
|
|
$
|
41,365
|
|
|
$
|
77,298
|
|
|
|
|
|
|
$
|
(64,824
|
)
|
|
|
(12,474
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12%
Convertible Notes Payable-issued January 28, 2019
|
|
1/28/2019
|
|
5/24/2020
|
|
|
43,000
|
|
|
|
|
|
|
$
|
-
|
|
|
|
26,634
|
|
|
|
|
|
|
$
|
31,232
|
|
|
$
|
57,866
|
|
|
|
|
|
|
|
|
|
|
|
(14,648
|
)
|
|
$
|
43,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12%
Convertible Notes Payable-issued February 6, 2019
|
|
2/6/2019
|
|
11/30/2019
|
|
|
38,000
|
|
|
|
|
|
|
$
|
-
|
|
|
|
31,746
|
|
|
|
|
|
|
$
|
11,562
|
|
|
$
|
43,308
|
|
|
|
|
|
|
|
|
|
|
|
(12,068
|
)
|
|
$
|
31,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued February 25, 2019
|
|
2/20/2019
|
|
8/20/2020
|
|
|
54,000
|
|
|
|
|
|
|
$
|
-
|
|
|
|
74,826
|
|
|
|
|
|
|
$
|
8,599
|
|
|
$
|
83,425
|
|
|
|
|
|
|
|
|
|
|
|
(19,103
|
)
|
|
$
|
64,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12%
Convertible Notes Payable-issued February 25, 2019
|
|
2/25/2019
|
|
2/25/2020
|
|
|
65,000
|
|
|
|
|
|
|
$
|
-
|
|
|
|
34,811
|
|
|
|
|
|
|
$
|
35,535
|
|
|
$
|
70,346
|
|
|
|
|
|
|
|
|
|
|
|
(20,023
|
)
|
|
$
|
50,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued February 27, 2019
|
|
2/27/2019
|
|
8/27/2020
|
|
|
51,500
|
|
|
|
|
|
|
$
|
-
|
|
|
|
75,013
|
|
|
|
|
|
|
$
|
3,962
|
|
|
$
|
78,975
|
|
|
|
|
|
|
|
|
|
|
|
(17,305
|
)
|
|
$
|
61,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued March 26, 2019
|
|
3/26/2019
|
|
9/21/2020
|
|
|
43,000
|
|
|
|
|
|
|
$
|
-
|
|
|
|
46,775
|
|
|
|
|
|
|
|
3,368
|
|
|
$
|
50,143
|
|
|
|
|
|
|
|
|
|
|
|
(12,669
|
)
|
|
$
|
37,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued April 24, 2019
|
|
4/24/2019
|
|
10/24/2019
|
|
|
58,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
22,463
|
|
|
|
|
|
|
|
(9,600
|
)
|
|
$
|
12,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued May 24, 2019
|
|
5/24/2019
|
|
11/24/2019
|
|
|
51,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
58,020
|
|
|
|
|
|
|
|
(14,130
|
)
|
|
$
|
43,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable-issued June 11, 2019
|
|
6/11/2019
|
|
12/11/2019
|
|
|
43,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
11,440
|
|
|
|
|
|
|
|
421
|
|
|
$
|
11,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,443,363
|
|
|
$
|
939,791
|
|
|
$
|
263,468
|
|
|
$
|
289,805
|
|
|
$
|
(43,696
|
)
|
|
$
|
437,126
|
|
|
$
|
946,703
|
|
|
$
|
91,923
|
|
|
$
|
(235,482
|
)
|
|
$
|
(118,151
|
)
|
|
$
|
684,993
|
|
The Company’s mark-to-market fair
value adjustment ((income)/expense) for the six months ended June 30, 2019 totaled $318,975
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
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 as of December 31, 2018 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 13,441,875 and 3,482,840 shares of common
stock issued and outstanding at June 30, 2019 and December 31, 2018, respectively.
The Company has authorized 1,000,000 shares
of Series A preferred stock with a par value of $0.0001 per share. At June 30, 2019 and December 31, 2018, 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 June 30, 2019 and 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%, 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.
For quarter-ended December 31, 2018, 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, 2019
the company issued 138 shares of Series C Convertible Preferred Stock for services provided to the company by various professionals.
The preferred shares issued to professionals for their services were valued, in total, at $184,506 based upon a valuation using
the underlying convertible feature of the company’s common stock and a Black-Scholes calculation methodology.
Expected volatility
|
|
|
342%
to 415
|
%
|
Expected life
|
|
|
0.7
|
|
Risk free interest rate
|
|
|
2.4%
to 2.46
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
As of March 31, 2019 there are a total
of 315 shares Series C Convertible Preferred Stock issued and outstanding with a stated value of $31,500 and par value of $-0-.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
During the quarter-ended June 30, 2019
the company issued 23 shares of Series C Convertible Preferred Stock for services provided to the company by various professionals.
The preferred shares issued to professionals for their services were valued, in total, at $36,163 based upon a valuation using
the underlying convertible feature of the company’s common stock and a Black-Scholes calculation methodology.
Expected volatility
|
|
|
335.45
|
%
|
Expected life
|
|
|
0.5
|
|
Risk free interest rate
|
|
|
2.46
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
As of June 30, 2019 there are a total
of 338 shares Series C Convertible Preferred Stock issued and outstanding with a stated value of $33,800 and par value of $-0-.
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 31,
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.
During the quarter ended March 31, 2019,
the Company issued an aggregate 277,000 shares of common stock at a price of $0.051 per share for services provided to the Company.
During the quarter ended March 31, 2019,
the Company issued an aggregate 2,049,043 shares of common stock at prices ranging from $0.015 to $0.029 per share as partial
conversion of notes.
During the quarter ended June 30, 2019,
the Company issued an aggregate 7,632,992 shares of common stock at prices ranging from $0.0122 to $0.039 per share as partial
conversion of notes.
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 $1,575 for the quarter-ended June 30, 2019 and 2018 respectively. The Company also has ready-to-go office space available
to be used for meetings etc. at a nominal cost of approximately $100 per month with no commitment. The cost of this space for
the quarter-ended June 30, 2019 and 2018 was $300. These two aforementioned commitments meet the definition of a “short-term
lease” under ASC 842-20-25-2 (generally less than 12 months in duration) and therefore, the company has elected an accounting
policy to not to apply the recognition requirements under ASC 842 and instead recognizes these lease payments on a straight line
basis.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
Total rent expense for the six months-ended
June 30, 2018 was $12,344 and was $9,769 for the six months-ended June 30, 2019.
The following are the minimum required
lease payments for the remainder of the lease term for the one operating lease (see below) under ASC 840:
2019
|
|
$
|
18,600
|
|
2020
|
|
|
24,600
|
|
2021
|
|
|
4,100
|
|
LEASES
The Company has one operating lease for
its main office location occupancy. 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. A new lease was
signed in March 2018 for the same space with the rent increasing to $2,050 effective January 1, 2020 (after negotiation with the
landlord). The Company has no finance leases.
Effective January 1, 2019, we adopted
ASU 2016-02 “Leases” (Topic 842), which requires the recognition of lease assets and liabilities for items classified
as operating leases under previous guidance. The original guidance required application on a modified retrospective basis with
the earliest year presented. In August 2018, the FASB issued ASU 2018-11 “Targeted Improvements to ASC 842” that included
an option to not restate comparative periods in transition and elect to use the effective date of Topic 842 as the date of initial
application of transition, which we elected. Adoption of the new standard resulted in the recording of additional net operating
lease assets and lease liabilities of $41,382 and $43,326 respectively, as of January 1, 2019. The difference between the additional
lease assets and lease liabilities was recorded as deferred rent. The standard did not materially impact our statements of operations
and cash flows.
The required disclosures for the quarter-ended
June 30, 2019 are as follows:
Lease Cost:
|
|
|
|
Operating lease
cost
|
|
$
|
10,468
|
|
Other Lease Information:
|
|
|
|
|
Cash paid for amounts in lease
liabilities
|
|
$
|
9,300
|
|
Operating cash flows from operating
leases
|
|
$
|
9,300
|
|
Right-of-use
assets obtained in exchange for new operating lease liabilities
|
|
$
|
41,382
|
|
Weighted-average remaining lease term-operating leases
|
|
|
1.67 years
|
|
Weighted-average discount rate--operating leases
|
|
|
8.00
|
%
|
OTHER COMMITMENTS
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 salesperson
|
|
●
|
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. Medifirst has
served Dr. Gupta a notice of cancellation due to lack of performance and plans to meet soon to reengage. No further shares will
be issued in accordance with this agreement.
|
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
Note 9. INCOME TAXES
The Company accounts for income taxes
under the asset and liability approach. Deferred tax assets and liabilities are recognized for the expected future tax consequences
attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to reverse.
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. As of June 30, 2019, the Company had provided a valuation allowance to
fully reserve its net operating loss carryforwards and other items giving rise to deferred tax assets, primarily as a result of
anticipated net losses for income tax purposes and has therefore recorded a full valuation allowance.
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:
|
|
June 30,
|
|
|
December 31
|
|
|
|
2019
|
|
|
2018
|
|
Due to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
Due to officer/stockholder
|
|
|
8,955
|
|
|
|
8,955
|
|
Due to other stockholders
|
|
|
1,100
|
|
|
|
3,100
|
|
Total Related Party Obligations
|
|
$
|
18,976
|
|
|
$
|
20,976
|
|
The company has entered into an employment
agreement with its Chief Executive Officer (CEO). The agreement provides for base compensation, annual bonus, benefits, vacation
and reimbursements. Under this agreement, the current base compensation of the Company’s CEO is $150,000 per annum. Prior
CEO employment agreements accrued $100,000 in annual salary 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. As of June 30, 2019, the company owes accrued
compensation to its CEO in the amount of $410,218.
As more fully described in Note 1-Intangible
Asset-Licensing Agreement, on March 8
th
, 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. During the quarter-ended March 31, 2019 the Company made cash paydowns to the
noteholder in the total amount of $5,700. In addition, $3,800 in principal balance on the note was converted into 200,000
shares of the Company’s common stock. The remaining principal balance to the original noteholder is $41,505 as of March
31, 2019 and is $16,650 to the third-party unrelated noteholder at the same date. During the quarter-ended June 30, 2019 the
Company made principal paydowns in the amount of $2,700 to the original noteholder and the original noteholder
converted $13,580 in principal balance into 580,000 shares of the Company’s common stock. The ending principal balance
on this note at June 30, 2019 is $25,225 to the original noteholder and $16,650 to the unrelated third-party noteholder.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
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 $5,744,864 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.
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, 2019
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 5,000,000 shares.
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.
During the quarter ended March 31, 2019,
277,000 shares were issued from the 2019 Plan and therefore as of March 31, 2019 there is a balance of 4,723.000 shares available
for future issuance under the Medifirst Solutions, Inc. 2019 Equity Incentive Plan.
During the quarter ended June 30, 2019,
no shares were issued from the 2019 Plan and therefore as of June 30, 2019 there is a balance of 4,723.000 shares available for
future issuance under the Medifirst Solutions, Inc. 2019 Equity Incentive Plan.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
June 30, 2019 (unaudited)
Note 13. SUBSEQUENT EVENTS
Subsequent to the quarter ended June 30,
2019 the Company issued an aggregate 8,466,692 shares of Common Stock upon conversions of an aggregate principal amount equal
to $86,419 outstanding convertible promissory notes and $8,423 in accrued interest.
Pursuant to a signed Securities Purchase
Agreement dated June 11, 2019 with an investor to issue a convertible promissory note in the amount of $43,000, the Company received
cash funding on June 11, 2019. The note pays 8% interest per annum and matures on December 11, 2020. After six months from the
date of the note, the investor may convert the principal balance into common stock of the Company.
Pursuant to a signed Securities Purchase
Agreement dated July 19, 2019 with an investor to issue a convertible promissory note in the amount of $33,000, the Company received
cash funding on July 11, 2019. The note pays 12% interest per annum and matures on January 11, 2021. After six months from the
date of the note, the investor may convert the principal balance into common stock of the Company.