UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

OR

 

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to __________

 

Commission File Number 033-25126-D

 

MedeFile International, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   85-0368333
State or other jurisdiction of   (I.R.S. Employer
incorporation or organization   Identification No.)

 

301 Yamato Rd, Suite 1200

Boca Raton, FL  33431

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code (561) 912-3393

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes  ☐  No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒  Yes  ☐  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer   Accelerated filer
  Non-accelerated filer   Smaller reporting company
        Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes ☒  No

 

Number of shares outstanding of registrant’s common stock, par value $0.0001: 28,756,010 as of August 14, 2017.

 

 

 

 

 

 

Table of Content

 

  Page
PART I  
   
FINANCIAL INFORMATION 1
ITEM 1. Financial Statements 1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 7
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 10
ITEM 4. Controls and Procedures 10
   
PART II  
   
OTHER INFORMATION 11
ITEM 1. Legal Proceedings 11
ITEM 1A. Risk Factors 11
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Mine Safety Disclosures 11
ITEM 5. Other Information 11
ITEM 6. Exhibits 11
Signatures 12

 

 

 

 

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.

 

  1  

 

 

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. 

 

  2  

 

 

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.

 

  3  

 

 

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.

 

  4  

 

 

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  

 

  5  

 

 

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.

 

  6  

 

 

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.

 

  7  

 

 

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.  

 

  8  

 

 

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.

 

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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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (Principal Executive and Financial Officer) of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer (Principal Executive and Financial Officer) concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and also are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (Principal Executive and Financial Officer), to allow timely decisions regarding required disclosure.

 

Management concluded that the design and operation of our disclosure controls and procedures are not effective because the following material weaknesses exist:

 

●       Our chief executive officer also functions as our chief financial officer. As a result, our officers may not be able to identify errors and irregularities in the financial statements and reports.

 

●       We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.

 

●       Documentation of all proper accounting procedures is not yet complete.

 

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended June 30, 2017, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not party to any material legal proceedings.

 

Item 1A. Risk Factors

 

Not required for a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information

 

None. 

 

Item 6. Exhibits

 

31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
   
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

EX-101.INS XBRL INSTANCE DOCUMENT
   
EX-101.SCH XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
   
EX-101.CAL XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
   
EX-101.DEF XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
   
EX-101.LAB XBRL TAXONOMY EXTENSION LABELS LINKBASE
   
EX-101.PRE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

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  SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MEDEFILE INTERNATIONAL, INC.
     
Date: August 17, 2017 By: /s/ Niquana Noel
    Niquana Noel
    Chief Executive Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)

 

 

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