Item
1. Financial Statements.
MedeFile
International, Inc.
Consolidated
Balance Sheets
(Unaudited)
|
|
June 30
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
Cash
|
|
$
|
455
|
|
|
$
|
13,118
|
|
Merchant services reserve
|
|
|
2,938
|
|
|
|
2,938
|
|
Total current assets
|
|
|
3,393
|
|
|
|
16,056
|
|
|
|
|
|
|
|
|
|
|
Domain - net of amortization of $2,640
|
|
|
15,205
|
|
|
|
-
|
|
Total assets
|
|
$
|
18,598
|
|
|
$
|
16,056
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
156,759
|
|
|
$
|
78,865
|
|
Bank overdraft
|
|
|
2,429
|
|
|
|
-
|
|
Note payable - related party
|
|
|
467,654
|
|
|
|
334,817
|
|
Convertible debenture - related party
|
|
|
18,142
|
|
|
|
17,287
|
|
Derivative liability convertible note
|
|
|
16,189
|
|
|
|
12,567
|
|
Total current liabilities
|
|
|
661,173
|
|
|
|
443,536
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.0001 par value: 10,000,000 authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.0001 par value: 700,000,000 authorized; 28,756,010 and 28,756,010 shares issued and outstanding on June 30, 2017 and December 31, 2016, respectively
|
|
|
2,875
|
|
|
|
2,875
|
|
Additional paid-in capital
|
|
|
28,504,754
|
|
|
|
28,504,754
|
|
Accumulated deficit
|
|
|
(29,150,204
|
)
|
|
|
(28,935,109
|
)
|
Total stockholders’ deficit
|
|
|
(642,575
|
)
|
|
|
(427,480
|
)
|
Total liabilities and stockholders’ deficit
|
|
$
|
18,598
|
|
|
$
|
16,056
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
MedeFile
International, Inc.
Consolidated
Statements of Operations
(Unaudited)
|
|
For the three
|
|
|
For the three
|
|
|
For the six
|
|
|
For the six
|
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
|
$
|
12,440
|
|
|
$
|
10,498
|
|
|
$
|
22,149
|
|
|
$
|
15,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
109,196
|
|
|
|
119,372
|
|
|
|
215,790
|
|
|
|
236,195
|
|
Amortization expense
|
|
|
2,640
|
|
|
|
-
|
|
|
|
2,640
|
|
|
|
-
|
|
Total operating expenses
|
|
|
111,836
|
|
|
|
119,372
|
|
|
|
218,430
|
|
|
|
236,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(99,396
|
)
|
|
|
(108,874
|
)
|
|
|
(196,281
|
)
|
|
|
(220,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(8,239
|
)
|
|
|
(2,605
|
)
|
|
|
(15,192
|
)
|
|
|
(3,498
|
)
|
Change in fair value of derivative liabilities
|
|
|
140
|
|
|
|
(5,509
|
)
|
|
|
(3,622
|
)
|
|
|
(55
|
)
|
Total other income (expense)
|
|
|
(8,099
|
)
|
|
|
(8,114
|
)
|
|
|
(18,814
|
)
|
|
|
(3,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(107,495
|
)
|
|
$
|
(116,988
|
)
|
|
$
|
(215,095
|
)
|
|
$
|
(224,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: basic and dilute
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average share outstanding: basic and diluted
|
|
|
28,756,010
|
|
|
|
28,756,010
|
|
|
|
28,756,010
|
|
|
|
28,756,010
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
MedeFile
International, Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
For the
|
|
|
For the
|
|
|
|
six months ended
|
|
|
six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows from operating activities
|
|
|
|
Net loss
|
|
$
|
(215,095
|
)
|
|
$
|
(224,255
|
)
|
Adjustments to reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
2,640
|
|
|
|
|
|
Change in derivative liability - convertible debenture
|
|
|
3,622
|
|
|
|
55
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
4,965
|
|
Accounts payable and accrued liabilities
|
|
|
77,894
|
|
|
|
23,858
|
|
Bank overdraft
|
|
|
2,429
|
|
|
|
|
|
Accrued interest - convertible debenture
|
|
|
855
|
|
|
|
779
|
|
Accrued interest - note payable
|
|
|
14,337
|
|
|
|
2,719
|
|
Deferred revenue
|
|
|
-
|
|
|
|
(89
|
)
|
Net cash used in operating activities
|
|
|
(113,318
|
)
|
|
|
(191,968
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Cash paid for domain names
|
|
|
(17,845
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(17,845
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from note payable - related party
|
|
|
118,500
|
|
|
|
175,000
|
|
Net cash provided by financing activities
|
|
|
118,500
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(12,663
|
)
|
|
|
(16,968
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
13,118
|
|
|
|
38,371
|
|
Cash and cash equivalents at end of period
|
|
$
|
455
|
|
|
$
|
21,403
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying
notes are an integral part of these unaudited consolidated financial statements.
MedeFile
International, Inc.
Notes
to Unaudited Consolidated Financial Statements
1.
BASIS OF PRESENTATION AND GOING CONCERN
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of MedeFile International Inc., a Nevada corporation (the “Company”),
have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These
unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s Form 10-K for the
fiscal year ended December 31, 2016. In the opinion of management, these unaudited consolidated financial statements reflect all
adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company
as of June 30, 2017, and the results of operations and cash flows for the six months ended June 30, 2017 and 2016. The results
of operations for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the
entire fiscal year.
Going
Concern
The
accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. However,
the Company has reported a net loss of $215,095 for the six months ended June 30, 2017 and has negative working capital of $657,780
as of June 30, 2017.
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. The operating losses
and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s
ability to obtain additional financing depends on the success of its growth strategy and its future performance, each of which
is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond the Company’s control.
We
will need additional investments in order to continue operations. Additional investments are being sought, but we cannot guarantee
that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities,
obtaining credit facilities, or other financing mechanisms.
However,
the trading price of our common stock could make it more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, we may incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if
we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may
have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not
available or is not available on acceptable terms, we will have to curtail our operations.
Fair
Value of Financial Instruments
Cash
and Equivalents, Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Accounts Payable, Accrued Salaries and Wages
and Other Current Liabilities
The
carrying amounts of these items approximated fair value.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting
Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).
Level 1
—Valuations
based on quoted prices for identical assets and liabilities in active markets.
Level 2
—Valuations
based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs
that are observable or can be corroborated by observable market data.
Level 3
—Valuations
based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market
participants. These valuations require significant judgment.
The
application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities as of June 30,
2017 and December 31, 2016 are described below:
|
|
Fair Value Measurements
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,189
|
|
|
$
|
16,189
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,189
|
|
|
$
|
16,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,567
|
|
|
$
|
12,567
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,567
|
|
|
$
|
12,567
|
|
Derivative
liability as of June 30, 2017 is $16,189, compared to $12,567 as of December 31, 2016.
2.
NOTE PAYABLE – RELATED PARTY
During
the year ended December 31, 2016, the Company entered into eight unsecured 7% Promissory Notes with a significant shareholder.
During the six months ended June 30, 2017, the Company entered into an additional five unsecured 7% Promissory Notes totaling
$53,000. The notes mature four to twelve month from issuance and total $275,000.
The
changes in these notes payable to related party consisted of the following during the six months ended June 30, 2017:
|
|
June 30,
2017
|
|
Notes payable – related party at beginning of period
|
|
$
|
231,569
|
|
Borrowings on notes payable – related party
|
|
|
53,000
|
|
Repayment
|
|
|
-
|
|
Accumulated interest
|
|
|
9,604
|
|
Notes payable – related party
|
|
$
|
294,173
|
|
On
July 15, 2016, the Company entered into an unsecured 7% Promissory Notes with a significant shareholder in the amount of $100,000.
The note has a one year term.
The
changes in these notes payable to related party consisted of the following during the six months ended June 30, 2017:
|
|
June 30,
2017
|
|
Notes payable at beginning of period
|
|
$
|
103,248
|
|
Borrowings on notes payable
|
|
|
-
|
|
Repayment
|
|
|
-
|
|
Accumulated interest
|
|
|
3,635
|
|
Notes payable – related party
|
|
$
|
106,883
|
|
During
the quarter ended June 30, 2017, the Company entered into five unsecured 7% Promissory Notes with a significant shareholder totaling
$65,500.
The
changes in these notes payable to related party consisted of the following during the six months ended June 30, 2017:
|
|
June 30,
2017
|
|
Notes payable – related party at beginning of period
|
|
$
|
|
|
Borrowings on notes payable – related party
|
|
|
65,500
|
|
Repayment
|
|
|
-
|
|
Accumulated interest
|
|
|
1,098
|
|
Notes payable – related party
|
|
$
|
66,598
|
|
3.
CONVERTIBLE DEBEBTURE – RELATED PARTY
The
Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November
4, 2013 and $60,000 on December 17, 2013. The debentures carry a one year term.
Both
debentures are convertible into common stock at conversion price equal to the lower of $2.00 or 80% of the previous day’s
closing price.
The
changes in these outstanding convertible notes payable to related party consisted of the following during the six months ended
June 30, 2017:
|
|
June 30,
2017
|
|
Convertible debenture – related party at beginning of period
|
|
$
|
17,287
|
|
Conversion
|
|
|
-
|
|
Repayment
|
|
|
-
|
|
Accumulated interest
|
|
|
855
|
|
Convertible debenture – related party at end of period
|
|
$
|
18,142
|
|
4.
DERIVATIVE LIABILITIES
As noted above, the Company entered into two
10% Secured Convertible Debentures with a significant shareholder, one in the amount of $50,000 on November 4, 2013 and the other
in the amount of $60,000 on December 17, 2013. The debentures carry a one year term. The debentures are convertible into common
stock at a conversion price equal to the lower of $1.00 or 80% of the previous day’s closing price.
The
Company assesses the fair value of the convertible debenture using the Black Scholes pricing model and records a derivative liability
for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases
or decreases the liability to the new value, and records a corresponding gain or loss (see below for variables used in assessing
the fair value).
Due
to the variable conversion rates, the Company treats the convertible debenture as a derivative liability in accordance with the
provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments
or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially
settle in an entity’s own common stock. The fair value of the conversion options was determined using the Black-Scholes
Option Pricing Model and the following significant assumptions during the six months ended June 30, 2017:
|
|
June 30,
2017
|
|
Risk-free interest rate at grant date
|
|
|
0.08
|
%
|
Expected stock price volatility
|
|
|
179
|
%
|
Expected dividend payout
|
|
|
-
|
|
Expected option in life-years
|
|
|
.2
|
|
The
change in fair value of the conversion option derivative liability consisted of the following during the six months ended June
30, 2017:
|
|
June 30,
2017
|
|
Conversion option liability (beginning balance)
|
|
$
|
12,567
|
|
Additional liability due to new convertible note
|
|
|
-
|
|
Loss (gain) on changes in fair market value of conversion option liability
|
|
|
3,622
|
|
Net conversion option liability
|
|
$
|
16,189
|
|
Change
in fair market value of conversion option liability resulted in a gain of $3,622 for the six months ended June 30, 2017 and a
gain of $55 for the six months ended June 30, 2016.
5.
INTELLECTUAL PROPERTY
In January 2017, the Company purchased a website
and two domain names including the intellectual property. In March 2017, the Company purchased two additional domain names. The
Company has purchased a website and domain names for a total purchase price of $17,845.
Intellectual
property is stated at cost. When retired or otherwise disposed, the related carrying value and accumulated amortization are removed
from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor
additions and renewals are expensed in the year incurred. The properties will be depreciated over their estimated useful lives
being 3 years. Amortization expense for the six months ended June 30, 2017 totaled $2,640 compared to $0 for the six months ended
June 30, 2016.
6.
SUBSEQUENT EVENT
On
July 13, 2017, the Company entered into a 7% Promissory Note with a related party in the amount of $25,000 with an interest rate
of 7% and a term of 6 months.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain “forward-looking
statements.” The terms “believe,” “anticipate,” “intend,” “goal,” “expect,”
and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company’s current
expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in the forward-looking statements, including customer
acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. In light of
the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should
not be regarded as a representation that the strategy, objectives or other plans of the Company will be achieved. The Company
wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date
made. Except as may be required under applicable securities laws, we undertake no duty to update this information.
OVERVIEW
Organizational
History
On November 1, 2005, Bio-Solutions International, Inc. (“Bio-Solutions”) entered into an Agreement
and Plan of Merger (the “Agreement”) with OmniMed Acquisition Corp. (the “Acquirer), a Nevada corporation and
a wholly owned subsidiary of Bio-Solutions, OmniMed International, Inc., a Nevada corporation (“OmniMed”), and the
shareholders of OmniMed (the “OmniMed Shareholders”). Pursuant to the Agreement, Bio-Solutions acquired all of the
outstanding equity stock of OmniMed from the OmniMed Shareholders.
As
a result of the Agreement, the OmniMed Shareholders assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions
changed its name to OmniMed International, Inc. Effective January 17, 2006, OmniMed changed its name to MedeFile International,
Inc. (“MedeFile” or the “Company”).
Overview
of Business
MedeFile
International, Inc., through its MedeFile, Inc. subsidiary, has developed and markets a proprietary, patient-centric, Internet-enabled
Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s actual
medical records. Our goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business
of medicine. We intend to accomplish our objective by providing individuals with a simple and secure way to access their lifetime
of actual medical records in an efficient and cost-effective manner. Our products and services are designed to provide healthcare
providers with the ability to reference their patient’s actual past medical records, thereby ensuring the most accurate treatment
and services possible while simultaneously reducing redundant procedures.
Interoperable
with most electronic medical record systems utilized by physician practices, clinics, hospitals and other care providers, the
highly secure, feature-rich MedeFile iPHR solution has been designed to gather all of its members’ actual medical records
on behalf of each member, and create a single, comprehensive Electronic Health Record (EHR). The member can access
his/her records 24-hours a day, seven days a week – or authorize a third party user – on any web-enabled device (PC,
cell phone, PDA, e-reader, et al), as well as the portable MedeFile flash drive/keychain or branded UBS-bracelet.
By
subscribing to the MedeFile system, members can empower themselves to take control of their own health and well-being, as well
as empower their healthcare providers to make sound and lifesaving decisions with the most accurate, up-to-date medical information
available. In addition, with MedeFile, members enjoy the peace of mind that comes from knowing that their medical records
are protected from fire, natural disaster, document misplacement or the closing of a medical or dental practice.
Since
launching operations in 2006, MedeFile has endeavored to revolutionize the delivery and effective management of healthcare by
bringing our novel patient-centric digital technology to the forefront of the healthcare industry. However, despite ongoing development
and diligent marketing of our iPHR solution, an array of complex industry dynamics and opposing forces have done little to aid
our Company in achieving our core market penetration objectives.
However,
technological advances, coupled with a shift toward patient-centered care and unprecedented consumer access to information, have
created a new era of consumer engagement, empowerment and activation – and potentially new life and growth opportunities
for pioneering companies, like MedeFile. As healthcare reimbursement continues to shift towards risk-based contracting, providers
are seeking to understand the totality of patients’ experience, which requires aggregating data across numerous care silos
– something not reasonably possible given today’s electronic medical record system constraints. We maintain the belief
that patient-centric, patient-controlled PHR solutions, such as MedeFile, could be the answer.
While
MedeFile will continue to take steps to capitalize on changing attitudes towards PHR adoption, we believe it is also our responsibility
to begin identifying and pursuing other attractive growth opportunities capable of creating and sustaining meaningful, long term
value for our Company’s shareholders. To that end, our management team has begun exploring both alternative and complementary
business plans and technology-related growth strategies that may allow us to best leverage our team’s collective experience,
technological assets and diverse industry expertise to help drive greater revenue and earnings growth for our Company.
RESULTS
OF OPERATIONS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2016
Revenues
Revenues
for the three months ended June 30, 2017 totaled $12,440 compared to revenues of $10,498 during the three months ended June 30,
2016. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors for sending
updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative expense. Revenues
received from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a
fraction of the membership in the quarter being reported.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the three months ended June 30, 2017 totaled $109,196, a decrease of $10,176 or approximately
8.5% compared to selling, general and administrative expenses of $119,372 for the three months ended June 30, 2016. The decrease
was due mainly to decreased payroll, legal expense, and consulting fees.
Amortization
Expenses
Amortization expense for the three months ended
June 30, 2017 totaled $1,487 compared to $0 for the three months ended June 30, 2016. During the first quarter of 2016, the Company
purchased website and domain names for a total purchase price of $17,845. The properties will be amortized over their estimated
useful lives being 3 years.
Interest
Expense
Interest
expense on convertible debentures for the three months ended June 30, 2017 and 2016, was $435 and $394 respectively. The Company
entered into two secured convertible debentures during the third quarter of 2013. The notes have a 10% annual interest rate. Interest
expense decreased due to lower note payable balance from partial repayment of note.
Interest expense on promissory notes for the
three months ended June 30, 2017 and 2016 was $7,804 and $2,211, respectively. The Company entered into several promissory notes
with an annual interest rate of 7%, with terms varying from 4 months to one year.
Other
Expense
Gain
on change in fair value of derivate liabilities for the three months ended June 30, 2017 was $140 compared to a loss of $5,509
for the three months ended June 30, 2016
Net
Loss
For the reasons stated above, our net loss
for the three months ended June 30, 2017 was $107,495, a decrease in net loss of $9,493, compared to net loss of $116,988, for
the three months ended June 30, 2016. The decrease is primarily related to adjustments in the fair value of our derivative liability
and a decrease in our general and administrative and compensation expenses.
FOR
THE SIX MONTHS ENDED JUNE 30, 2017 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2016
Revenues
Revenues
for the six months ended June 30, 2017 totaled $22,149 compared to revenues of $15,493 during the six months ended June 30, 2016.
Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors for sending
updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative expense. Revenues
received from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a
fraction of the membership in the quarter being reported.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the six months ended June 30, 2017 totaled $215,790, a decrease of $20,405 or approximately
8.6% compared to selling, general and administrative expenses of $236,195 for the six months ended June 30, 2016. The decrease
was due mainly to decreased payroll, legal expense, and consulting fees.
Amortization
Expenses
Amortization expense for the six months ended
June 30, 2017 totaled $2,640 compared to $0 for the six months ended June 30, 2016. During the first quarter of 2016, the Company
purchased website and domain names for a total purchase price of $17,845. The properties will be amortized over their estimated
useful lives being 3 years.
Interest
Expense
Interest
expense on convertible debentures for the six months ended June 30, 2017 and 2016, was $855 and $779 respectively. The Company
entered into two secured convertible debentures during the third quarter of 2013. The notes have a 10% annual interest rate. Interest
expense decreased due to lower note payable balance from partial repayment of note.
Interest expense on promissory notes for the
six months ended June 30, 2017 and 2016 was $14,337 and $2,719. The Company entered into several promissory notes with an annual
interest rate of 7%, with terms varying from 4 months to one year.
Other
Expense
Loss
on change in fair value of derivate liabilities for the six months ended June 30, 2017 was $3,622 compared to a loss of $55 for
the six months ended June 30, 2016
Net
Loss
For the reasons stated above, our net loss
for the six months ended June 30, 2017 was $215,095, a decrease in net loss of $9,160, compared to a net loss of $224,255, for
the six months ended June 30, 2016. The decrease is primarily related to adjustments in the fair value of our derivative liability
and a decrease in our general and administrative and compensation expenses.
FINANCIAL
CONDITION
Liquidity
and Capital Resources
As
of June 30, 2017, we had cash and cash equivalents of $455, and merchant services reserve of $2,938. Net cash
used in operating activities for the six months ended June 30, 2017 was $113,318. Our current liabilities as of June 30, 2017
of $661,173 consisted of: $156,759 for accounts payable and accrued liabilities, convertible debenture of $18,142, overdraft of
$2,429, note payable – related party of $467,654, and derivative liability of $16,189. We have negative working capital
of $643,235 as of June 30, 2017.
The
accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company
has reported a net loss of $215,095 for the six months ended June 30, 2017 and had an accumulated deficit of $29,150,204
as of June 30, 2017.
The
Company currently estimates that it will require approximately $420,000 to continue its operations for the next twelve months. Additional
investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions
may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the
trading price of our common stock and conditions in the U.S. stock and debt markets could make it more difficult to obtain financing
through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could
incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements
that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may
experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing
holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to
curtail our operations.
Off-Balance
Sheet Arrangements
We
do not have any off balance sheet arrangements as of June 30, 2017 or as of the date of this report.
Critical
Accounting Policies
The
preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in
the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses,
and the disclosure of contingent assets and liabilities.
We
base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the
circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number
of significant accounting policies affecting our condensed consolidated financial statements, we believe the following critical
accounting policies involve the most complex, difficult and subjective estimates and judgments:
Revenue
Recognition
The
Company generates revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare
information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria
which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred;
(3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and
(4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
Stock-based
Compensation
The
Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued
to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of
the related agreement.