Notes to Consolidated Financial Statements
March 31, 2018
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization
Medifirst Solutions, Inc. (“MSI” or the
“Company”) was incorporated in Nevada in November 2010. The Company has not generated significant sales to date. The
Company intends to have a diverse product line of consumer products. Since inception, the Company has been engaged in business
planning activities, including researching the industry, identifying target markets for the Company’s products, developing the
Company’s models and financial forecasts, performing due diligence regarding potential geographic locations most suitable for establishing
the Company’s offices and identifying future sources of capital. At the present time, the Company is building products and affiliations
in and related to the cosmetic healthcare industry. The company has started to hire a salesforce and sign distribution agreements
in anticipation of future sales.
In July 2016, Medifirst, in response to its Premarket Notification
510(k) submission for “The Time Machine” Series Laser, received clearance from the U.S. Food and Drug Administration
(“FDA”) to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device. The Company is actively
putting together a sales and distribution team to offer our lasers in the US and foreign markets.
Pursuant to a sale and purchase agreement dated August
19, 2015 between the Company and the Company’s president, the Company acquired 100% of the equity interests in Medical Lasers Manufacturer,
Inc. (“MLM”) with the total purchase price of 20,000 shares of the Company’s common stock at $0.001 per share (or $20).
The fair value of the acquired entity was $20.
The transaction was considered as a business acquisition
and accordingly the acquisition method of accounting has been applied. MLM had no assets at the date of the business combination.
The Consolidated financial statements include the
accounts of MSI and its only wholly owned subsidiary, MLM. All material intercompany balances and transactions have been eliminated
in consolidation.
The Company’s activities are subject to significant
risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology.
Basis of Presentation
The unaudited interim consolidated financial statements
include the accounts of Medifirst Solutions Inc. and its wholly owned subsidiary (Medical Laser Manufactures, Inc., (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 March 31, 2018, the
consolidated results of its operations for the three-month periods ended March 31, 2017 and 2018, the consolidated change in stockholders’
equity for the three-month period ended March 31, 2018 and the consolidated cash flows for the three-month periods ended March
31, 2017 and 2018. The results of operations for the three-month period ended March 31, 2018 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, 2017 included in the Company’s Annual Report
on Form 10-K for the year then ended.
Some items in the prior year financial statements
were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’
equity.
Revenue Recognition
In general, the Company records revenue when persuasive
evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various
revenues streams of the Company:
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.
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’s revenue recognition policy standards include the following elements under ASU
No. 2014-09 (Topic 606):
i.
|
Identify the contract with a customer.
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ii.
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Identify the performance obligations in the contract.
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iii.
|
Determine the transaction price.
|
iv.
|
Allocate the transaction price to the performance obligations in the contract.
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v.
|
Recognize revenue when (or as) the entity satisfies a performance obligation.
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Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
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 March 31, 2018 or December 31, 2017. There are no customer account receivables as of March 31, 2018 or December 31, 2017.
Inventory
Inventory consists of finished goods and is stated
at the lower of cost (first-in, first-out) or market value. Finished goods inventory includes hand held laser devices, their carrying
cases and goggles.
Equipment
Equipment, consisting of computer equipment, is stated
at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives
of the assets, of five years.
Long-Lived Assets
The Company reviews long-lived assets, such as equipment,
for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash
flows expected to be generated by the asset. If the carrying amount of an asset exceeds the estimated future cash flows, an impairment
loss will be recorded by the amount the carrying value exceeds the fair value of the asset.
In August 2015, the Company’s wholly-owned subsidiary
MLM, acquired a trademark for $20,000. Due to the uncertainty of future cash flows from the trademark, management has deemed it
to be impaired and recorded an impairment expense of $20,000 in 2015.
Intangible Asset- Licensing Agreement
On March 8th 2016 (with an effective date of October
1, 2015), the company, through 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:
-
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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
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-
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use or copy the Technology and/or any Product; and
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-
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market, make, have made, Sell, offer for Sale, import and distribute Products; and
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-
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sublicense the Technology; and
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-
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prepare, or have prepared on its behalf, modifications, enhancements and/or derivative works of the Technology.
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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. On January 31, 2018, $7,500 in principal on this note was satisfied by the conversion into
30,000,000 shares of the Company’s common stock. On March 2, 2018, another $7,500 in principal on this note was satisfied
by the conversion into 30,000,000 shares of the Company’s common stock. The principal balance on this note as of March 31,
2018 is $118,750.
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.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
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.
Debt Issue Costs and Debt Discount
The Company may pay debt issue costs, and record debt
discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized over the life of
the debt to interest expense. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts are
immediately expensed. Beginning in 2015, the Company adopted ASU 2015-03: Simplifying the Presentation of Debt Issuance Costs and
has reflected the deferred financing costs as a direct reduction of the related debt (See table included in Note 5 to Consolidated
Financial Statements).
Original Issue Discount
For certain convertible debt issued, the Company provides
the debt holder with an original issue discount. The original issue discount is recorded to debt discount, reducing the face amount
of the note and is amortized to interest expense over the life of the debt.
Derivative Liabilities
Fair value accounting requires bifurcation of embedded
derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value
for accounting purposes. The Company assessed its securities for purposes of determining the proper accounting treatment and valuation
as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37
Fair Value in Financial Instruments
;
Statement of Financial Accounting Standard ASC 815
Accounting for Derivative Instruments and Hedging Activities
; and Emerging
Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05.
In assessing the convertible debt instruments, management
determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion
feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its
evaluation process of these instruments as derivative financial instruments.
Once the derivative liabilities are determined, they
are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded
in results of operations as an adjustment to fair value of derivatives.
Use of Estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the dates of the condensed consolidated balance sheets and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
Financial Instruments
The carrying amounts reported in the balance sheets
for cash, accounts receivable, accounts payable, and other accrued liabilities approximate their fair values.
Segment Information
The Company follows Accounting Standards Codification
(“ASC”) 280, “Segment Reporting”. The Company currently operates in a single segment and will evaluate additional
segment disclosure requirements as it expands its operations.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Net Income (Loss) Per Common Share
The Company calculates net income (loss) per share
based on the authoritative guidance. Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which
the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive.
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 March 31, 2018, and does not expect this to change significantly
over the next 12 months.
Stock-Based Compensation
The Company accounts for equity instruments issued
to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments
to be recognized in the financial statements based on the fair value on the issuance date.
Equity instruments granted to non-employees are accounted
for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria
is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for
non-performance.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. At March 31, 2018, the Company had $234,617 in cash equivalents.
Recent Pronouncements
In May 2014, FASB and IASB issued a new joint revenue recognition
standard that supersedes nearly all GAAP guidance on revenue recognition. The core principle of the standard is that revenue recognition
should depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods and services. The new standard is effective for the Company to annual reporting
periods beginning after December 15, 2017 (that is, a public organization is required to apply the new revenue standard beginning
in the first interim period within the year of adoption). Additionally, the Board decided to permit public organizations to adopt
the new revenue standard early, but not before the original public organization effective date (that is, annual periods beginning
after December 15, 2016). A public organization should apply the new revenue standard to all interim reporting periods within the
year of adoption.
For the three-month period ended March 31, 2018 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 evaluated the impact of this ASU on the consolidated financial statements
and has determined, the ASU’s implementation did not have a material impact on revenue recognition. See below - Accounting
Standards Update 2016-10 - Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
In February 2018, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement - Reporting Comprehensive
Income (Topic 220)”. The objective of the ASU is to allow a reclassification from accumulated comprehensive income (loss)
to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information
reported to financial statement users. This ASU is effective for interim and annual reporting periods beginning after December
15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on the consolidated financial
statements.
Note 2. PROPERTY, PLANT AND EQUIPMENT (NET)
Equipment is recorded at cost and consisted of the following
at March 31, 2018 and December 31, 2017:
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March 31, 2018
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|
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December 31, 2017
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Computer equipment
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$
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8,956
|
|
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$
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8,956
|
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Less: accumulated depreciation
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|
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(7,885
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)
|
|
|
(7,725
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)
|
|
|
|
|
|
|
|
|
|
|
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$
|
1,072
|
|
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$
|
1,232
|
|
Depreciation expense was $159 and $159, for the three
months ended March 31, 2018 and 2017 respectively.
Note 3. DUE TO RELATED PARTY
The Company was indebted to a related party through
common management in the amount of $8,921 at March 31, 2018 and December 31, 2017, respectively. The loan bears no interest and
is payable on demand. See Note 10 for additional related party transactions.
Note 4. LOANS PAYABLE - STOCKHOLDERS
During the periods ended March 31, 2018 and 2017 a
stockholder of the Company advanced the Company $-0- and $-0- respectively. The loan has a balance of $8,955 at March 31, 2018
and December 31, 2017, respectively. The loan bears no interest and is payable on demand.
In December 2012, the Company issued a promissory note to a
stockholder in the amount of $5,000 with interest at 10% per annum. Principal and interest were due and payable on June 2, 2013.
In April 2014, the note was amended to provide the note holder with the option to convert the note to the Company’s common
stock at $0.0001 per share. Subsequently, in 2014, in a private transaction, the note holder transferred $2,500 of note principal
to third parties and the new holders converted their holdings into 2,500,000 shares of the Company’s common stock. During
2015, the original note holder transferred an additional $2,400 of note principal to third parties who converted their holdings
into 2,400,000 shares of the Company’s common stock. At March 31, 2018 and December 31, 2017, the loan had balance was $100
and $100, respectively.
At March 31, 2018 and December 31, 2017, the Company
was indebted to a stockholder in the amount of $1,000 and $1,500, respectively. The loan has an interest rate of 26.7%. In February
2017 the note was sold to another investor and that noteholder converted $500 in principal into 5,000,000 shares of common stock.
Principal and accrued interest were due and payable on January 1, 2014.
In February 2016, the Company issued a promissory
note to a stockholder in the amount of $7,000 with interest at the rate of 6% per annum. On September 6, 2016 the note holder converted
the entire principal balance and accrued interest into common stock and therefore at March 31, 2018 there is no principal balance
remaining on the note.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Note 5. CONVERTIBLE NOTES PAYABLE
Note Payable-BS
In March 2011, the Company issued $800 aggregate principal
amount of 6% convertible notes due in January 2012. Interest on the notes accrue at the rate of 6% per annum and are payable when
the notes mature. The notes matured prior to conversion but have not been repaid. Interest continues to accrue at the rate of 6%
per annum.
The holder of one of the notes converted $110 of note
principal into 1,100,000 shares of common stock as follows:
Date of Conversion
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Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
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June 2013
|
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$
|
70
|
|
|
$
|
0.0001
|
|
|
|
700,000
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|
August 2013
|
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$
|
40
|
|
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$
|
0.0001
|
|
|
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400,000
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|
In August 2013, in a private transaction,
the same note holder transferred $330 of the remaining note principal plus $55 in accrued interest to a third party.
In August 2013, in a private transaction,
the new note holder transferred $5 of the remaining note principal to a third party who then converted the note into 50,000 shares
of common stock.
In September 2013, the new note holder
converted $100 of note principal into 1,000,000 shares of common stock.
In September 2013, in a private transaction,
the new note holder transferred $35 of the remaining note principal to a third party who then converted the note into 350,000 shares
of common stock.
In November and December 2013, the new
note holder converted an additional $90 of note principal into 900,000 shares of common stock as follows:
Date of Conversion
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Principal Amount Converted
|
|
|
Conversion Rate
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|
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Shares Received
|
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November 2013
|
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$
|
40
|
|
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$
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0.0001
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|
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400,000
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December 2013
|
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$
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50
|
|
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$
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0.0001
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|
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500,000
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|
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
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|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
March 2014
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500,000
|
|
April 2014
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
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|
Subsequent to these conversions there remains $125 in note principal
outstanding at March 31, 2018.
Note Payable-SF
In July 2013, the holder of the second
note converted $240 of note principal into 400,000 shares of the Company’s common stock at $0.0006 per share. At March 31, 2018
and December 31 2017, the note had a remaining principal balance of $60 and $60, respectively.
At any time on or after the maturity date,
the holders of the notes, have the option of converting any of the unpaid principal and interest into the Company’s common stock.
The notes plus any accrued but unpaid interest are convertible at the rate of $0.0001 per share at the time of conversion up to
a maximum of 9.99% of the then issued and outstanding common stock, or 124,230,472 shares at March 31, 2018 and 84,858,757 shares
at December 31, 2017.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Note Payable-RK
In May 2012, the Company issued a $25,000
6% per annum note that matured in November 2012. In December 2012 the note was amended to be a convertible note. Interest on the
note accrues interest at 6% per annum and is payable when the note matures.
The holder of the $25,000 note had the
option of converting it at any time prior to maturity. The note plus any accrued but unpaid interest were convertible at the rate
of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock.
The holder of the note converted $1,010
of note principal into 1,010,000 shares of common stock as follows:
Date of Conversion
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|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
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Shares Received
|
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December 2012
|
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$
|
150
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|
|
$
|
0.001
|
|
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$
|
150,000
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January 2013
|
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$
|
660
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|
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$
|
0.001
|
|
|
$
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660,000
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March 2013
|
|
$
|
200
|
|
|
$
|
0.001
|
|
|
$
|
200,000
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|
In July 2013, the Company retired $14,000
of note principal in payment for consulting services provided to the note holder.
In July 2013, the note holder converted
$300 of note principal into 300,000 shares of the Company’s common stock.
In July 2013, in a private transaction,
the note holder transferred the remaining note principal balance of $9,690 to a third party (See
Note Payable-NW
below).
Note Payable-NW
After receiving the transfer of the principal
balance of $9,690 in July 2013 in the private transaction noted in
Note Payable-RK
above, in August 2013, in a private transaction,
the new note holder of the aforementioned note transferred $4,475 of principal to a stockholder of the company.
In October 2013, the note holder converted
$400 of note principal into 400,000 shares of the Company’s common stock at $0.001 per share.
In October 2014, the note holder converted
$1,100 of note principal into 1,100,000 of the Company’s common stock.The note holder has the option of converting the balance
at any time with the approval of the Board of Directors. The note plus any accrued but unpaid interest are convertible at the rate
of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 124,230,472
shares at March 31, 2018 and 84,858,757 shares at December 31, 2017.
In August 2016, the note holder converted
$3,000 of note principal into 3,000,000 shares of the Company’s common stock. At March 31, 2018 and December 31, 2017, the remaining
principal balance on this portion of the note is $715 and $715 respectively.
Note Payable-MC #2
In April 2015, the Company issued a $3,000 8% per annum note
that matures in October 2015. The holder of the note has the right to convert the principal into shares of the Company’s
common stock at any time 180 days after the closing date at $0.0001 per share. Interest on the note accrues interest at 8% per
annum and is payable when the note matures. During January 2017, the current noteholder converted $1,100 in principal balance into
11,000,000 shares of common stock. During the same period, the current noteholder transferred $600 of the remaining principal balance
to another investor who then converted the entire principal balance he received into 6,000,000 shares of common stock. During April
2017, the current noteholder converted $410 of remaining principal into 6,000,000 shares of common stock. There remains $890 in
principal balance at March 31, 2018 with the current noteholder and $890 in principal balance with the original noteholder at December
31, 2017.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Convertible Note Payable-LGC (8%)
On January 7 2016, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”)
for the sale of convertible redeemable notes in aggregate principal amount of $251,803. On January 7, 2016, the Company and the
Investor conducted the first closing under the Purchase Agreement, pursuant to which the Company issued to the Investor (i) a convertible
redeemable note in principal amount of $105,000 containing an original issue discount of $20,000 (the “$105K Note”);
and (ii) a convertible redeemable note in principal amount of $50,000 (the “$50K Note” and together with the $105K
Note, the “Notes”). Under the Purchase Agreement, on March 15, 2016 and June 15, 2016, the Company and the Investor
conducted additional closings for the sale and purchase of additional notes having the same terms as the Notes in principal amounts
equal to $50,000 and $46, 803, respectively (see
Convertible Notes Payable-LGC (8%) BEN
below). During the quarter ended
March 31, 2017 the noteholder converted the entire principal balance into 62,067,838 shares of common stock and therefore there
is no principle balance outstanding at March 31, 2018 and December 31, 2017.
Convertible Notes Payable-LGC (8%) BEN
In consideration for the issuance of the
$105K Note, on January 13, 2016, the Company received net proceeds (after deducting the original issue discount and legal fees)
in the amount of $75,697. In consideration for the issuance of the $50K Note, the Investor issued to the Company a $50,000 fully-collateralized
secured promissory note (the “Investor Note”), pursuant to which the Investor agreed to pay the Company $50,000 on
or before April 30, 2016. The Notes, which are due on January 7, 2017, bear interest at the rate of 8% per annum. Subject to a
beneficial ownership limitation equal to 9.99%, principal and interest on the Notes is convertible into shares of the Company’s
common stock (“Common Stock”) at a conversion price equal to 55% of the lowest trading price of Common Stock during
the 20 trading day period prior to conversion.
In accordance with the terms of the Purchase Agreement, the
investor and the Company closed on the two outstanding notes ($50,000 and $46,803) in May and June 2016 when the Company received
the cash funding. During April 2017 the noteholder converted the entire principal balance of the $50,000 note into common stock
of the Company. During June 2017 the noteholder converted $16,000 of the remaining principal of the $46,803 note into common stock
of the Company. In July and September 2017 the noteholder converted the remaining $30,803 of the note’s principal balance into
common stock. As a result, there is no principal balance remaining on either note as of March 31, 2018 and December 31, 2017.
Convertible Notes Payable-SO (8%)
On May 2, 2016, the Company issued to an Investor a convertible
redeemable note in the principal amount of $57,750 (“the Note”). The Note, which matures on May 2, 2017, pays interest
at the rate of 8% per annum. The note contains a 10% original issue discount. The holder of the note is entitled, at its option
beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then outstanding into shares
of the Company’s common stock at the price equal to 55% of the lowest trading price for the twenty prior trading days including
the date of conversion. During the quarter ended March 31, 2017 the noteholder converted $32,298 of the principle balance into
23,489,690 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 122,727,273 shares of common stock thereby leaving
a principal balance of $2,452 on the note at March 31, 2018.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Convertible Notes Payable-BBCG (9%)
On October 11, 2016, the Company issued to an Investor a convertible
note in the principal amount of $157,895 (“the Note”). The Note, which matures on March 27, 2018, pays interest at the
rate of 9% per annum. The note contains an original issue discount in the amount of $7,895. The holder of the note is entitled,
at its option beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then outstanding
into shares of the Company’s common stock at the price equal to 57.5% of the lowest trading price for the twenty prior trading
days including the date of conversion. During April and June of 2017, the noteholder converted the entire remaining principal balance
of the note into common stock of the Company. There is no principal balance remaining on the note as of March 31, 2018 and December
31, 2017.
Convertible Notes Payable - Funding (8%)
On May 1 2017, the Company entered into a Securities Purchase
Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale of 8 convertible
redeemable notes in aggregate principal amount of $1,012,500. On May 1st, 2017 and June 2, 2017, the Company and the Investor conducted
the first two closings under the Purchase Agreement, pursuant to which the Company issued to the Investor (i) a convertible redeemable
note in principal amount of $131,250 (the “$131K Note”) ; and (ii) a convertible redeemable note in principal amount
of $125,000 (the “$125K Note”). On July 10, 2017 and August 7, 2017, the Company and the Investor conducted the second
two closings under the Purchase Agreement, pursuant to which the Company issued to the Investor two convertible redeemable notes
each in the principal amount of $125,000; Under the Purchase Agreement, on January 1, 2018, February 2, 2018, March 10 ,2018 and
April 7, 2018 the Company and the Investor expected to conduct additional closings for the sale and purchase of additional notes
having the same terms as the Notes in principal amounts equal to $131,250, $125,000, $125,000 and $125,000 respectively (the “back-end
notes”). However, all these “back-end notes” were cancelled in early 2018 and will not fund. Accordingly, all
the “back-end” notes were removed from the books at December 31, 2017 along with the associated investor notes receivable.
In addition, all previously accrued interest expense and interest income has been removed on these “back-end notes”
for the period ended December 31, 2017.
In consideration for the issuance of the $131K Note and the
$125K Note, on May 1, 2017 and June 2, 2017 and for the two $125k Notes on July 10, 2017 and August 7, 2017, the Company received
net proceeds (after deducting $25,000 in legal fees) in the amount of $481,250. In consideration for the issuance of the $131K
and the three $125k Notes, the Investor issued to the Company a $131,250 fully-collateralized secured promissory note and three
$125,000 fully-collateralized secured promissory notes (the “Investor Notes”), pursuant to which the Investor agreed
to pay the Company $131,250 and $375,000 on or before January 1, 2018, February 2, 2018, March 10, 2018 and April 7, 2018 respectively.
These Notes (often referred to as “back-end Notes”), bear interest at the rate of 8% per annum. However, all these
“back-end notes” were cancelled in early 2018 and will not fund. According, all the “back-end” notes were
removed from the books at December 31, 2017 along with the associated investor notes receivable. In addition, all previously accrued
interest expense and interest income has been removed on these “back-end notes” for the period ended December 31, 2017.
The two notes issued May 1,2017 ($131,250) and June 2, 2017
($125,000) became convertible on October 28, 2017 and December 4, 2017 respectively and required derivative treatment at that time.
The embedded derivative was bifurcated and accounted for separately along with the derivative discount. The derivative liability
is marked-to-market each quarter with the resulting gain or loss valuation being reported in the statement of operations.
During the quarter ended December 31, 2017 (after the six-month
waiting period) the holder of the original note in the principal amount of $131,250 converted $21,500 and $15,350 of the note’s
principal balance into 35,0358,103 and 39,713,817 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 193,383,992 shares of the Company’s common stock. The principal balance remaining on this convertible note
is $55,530 as of March 31,2018.
Convertible Notes Payable - JR (5%)
On August 2, 2017 the Company issued a convertible note payable
(promissory note) to an investor in the principal amount of $50,000. The note matures on August 2, 2018 and bears interest at 5%.
The note holder has the right at any time on or after the day that is six months from August 2, 2018 to convert any part or all
of the outstanding unpaid principal balance into shares of the Company’s common stock at a fixed price of .003 per share.
The entire principal balance of $50,000 is outstanding as of March 31, 2018 and December 31, 2017.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Convertible Notes Payable - MLM (10%)
As more fully described in Note 1 to the financial statements,
on March 8th 2016 (with an effective date of October 1, 2015), the company, through it’s sole wholly-owned subsidiary (“Licensee”),
entered into a Product and Know-How License Agreement (“Agreement”) with a Florida Corporation (“Licensor”)
which is owned by a related party - the son of the Company’s CEO. The consideration for the licensing agreement consisted
of the issuance of 25,000 Series B Preferred stock shares to the Licensor (at par) plus a $150,000 promissory note issued by the
Company to the licensor. During the quarter-ended June 30, 2017, $18,986 in accrued interest was satisfied through the issuance
of 17,272,727 shares of the Company’s common stock. On September 15, 2017 the Note was amended to include provisions to allow
conversion of the Note into common stock of the Company. At such time the Note was valued with it’s embedded derivative and
discount. On September 25, 2017, $16,250 in principal on this note was satisfied by the conversion into 25,000,000 shares of the
Company’s common stock leaving a balance on the note of $133,750 at December 31, 2017. During the quarter-ended March 31,
2018, $15,000 in principal on this note was satisfied by the conversion into 60,000,000 shares of the Company’s common stock
leaving a balance on the note of $118,750 at March 31, 2018.
The Company’s convertible notes payable
and the related derivative liabilities, derivative discount, deferred financing costs and original-issue discount are presented
in the financial statements at March 31, 2018 as follows:
3/31/2018
|
|
Remaining
|
|
|
Original
|
|
|
|
|
|
Deferred
|
|
|
Total
|
|
|
|
|
|
|
Principal
|
|
|
Issue
|
|
|
Derivative
|
|
|
Financing
|
|
|
Convertible
|
|
|
Derivative
|
|
Debt
|
|
Amount
|
|
|
Discount
|
|
|
Discount
|
|
|
Costs
|
|
|
Notes Payable
|
|
|
Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable - BS
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
Note Payable - SF
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
Note Payable - SD
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
Note Payable - NW
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
715
|
|
|
|
|
|
Note Payable - MC #2
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890
|
|
|
|
|
|
Convertible Note Payable - JR (5%)
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
Convertible Note Payable - CB (5%)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
1,137
|
|
Convertible Notes Payable- SO (8%)
|
|
|
2,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,452
|
|
|
|
3,303
|
|
Convertible Note Payable - LGC (8%) 1
|
|
|
55,530
|
|
|
|
|
|
|
|
(8,248
|
)
|
|
|
|
|
|
|
47,282
|
|
|
|
30,517
|
|
Convertible Note Payable - LGC (8%) 2
|
|
|
125,000
|
|
|
|
|
|
|
|
(46,982
|
)
|
|
|
(497
|
)
|
|
|
77,521
|
|
|
|
50,006
|
|
Convertible Note Payable - LGC (8%) 3
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
(1,695
|
)
|
|
|
123,305
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) 4
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
(2,174
|
)
|
|
|
122,826
|
|
|
|
|
|
Convertible Note Payable - MLM (10%)
|
|
|
118,750
|
|
|
|
|
|
|
|
(101,142
|
)
|
|
|
|
|
|
|
17,608
|
|
|
|
112,749
|
|
Convertible Note Payable - LGC (8%) 5
|
|
|
78,750
|
|
|
|
|
|
|
|
|
|
|
|
(3,267
|
)
|
|
|
75,483
|
|
|
|
|
|
|
|
$
|
697,272
|
|
|
$
|
-
|
|
|
$
|
(156,372
|
)
|
|
$
|
(7,633
|
)
|
|
$
|
533,267
|
|
|
$
|
197,712
|
|
As of March 31, 2018, the convertible notes payable can be converted
into approximately 564,247,282 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 and the 9% Convertible Note payable
issued October 1, 2016. Based on the guidance in paragraph 815-10-05-4 of the FASB Accounting Standards Codification the Company
concluded these instruments were required to be accounted for as derivatives on issuance date. The Company records the fair value
of the Convertible Notes Payable and certain warrants that are classified as derivatives on issuance date and the fair value changes
on each reporting date reflected in the consolidated statements of operations as “Change in Fair Value - derivatives.”
These derivative instruments are not designated as hedging instruments under paragraph 815-10-05-4 of the FASB Accounting Standards
Codification and are disclosed on the balance sheet under Derivative Liabilities.
The Company follows paragraph 820-10-35-37 of the FASB Accounting
Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph
825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph
820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs
to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined
by Paragraph 820-10-35-37 are described below:
Level 1 Quoted market prices available in active markets for
identical assets or liabilities as of the reporting date.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Level 2 Pricing inputs other than quoted prices in active markets
included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally unobservable inputs
and not corroborated by market data.
Financial assets are considered Level 3 when their fair values
are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model
assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted
prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the
inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization
is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets
and liabilities, such as cash, prepayments and other current assets, accounts payable, and accrued expenses, approximate their
fair values because of the short maturity of these instruments.
The Company’s Level 3 financial liabilities consist of
the 5% Convertible Notes Payable issued June 12th 2015 and the 8% Convertible Note payable issued June 25th 2015 and for the 8%
Convertible Notes Payable issued January 7, 2016 and March 7, 2016 and May 1, 2017 and June 2, 2017 and the 9% Convertible Note
payable issued October 1, 2016, for which there is no current market for these securities such that the determination of fair value
requires significant judgment or estimation. We have valued the automatic conditional conversion, re-pricing/down-round, change
of control; default and follow-on offering provisions using a lattice model, with the assistance of a valuation consultant, for
which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual
terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of issuance
and March 31, 2018. The primary assumptions include: projected annual volatility of 127%-265%; the follow-on securities purchase
option; the conversion feature as a percentage of Market; automatic/conditional conversions; market price trigger events.
As of March 31, 2018 the Company’s derivative financial
instruments included:
1) Embedded derivatives associated with certain of the Company’s
unsecured convertible notes payable. The Company’s 5% convertible notes payable and 8% convertible notes payable and 9% convertible
note payable issued to unrelated investors is a hybrid instrument, which warrants separate accounting as a derivative instrument.
The embedded derivative feature has been bifurcated from the debt host contract, referred to as the Derivative Liability, which
resulted in a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes Payable. The unamortized
discount is amortized to interest expense using the effective interest method over the life of the Notes. The embedded derivative
feature includes the conversion feature within the notes and an early redemption option. The compound embedded derivatives within
the convertible notes have been recorded at fair value at the date of issuance; and are marked-to-market each reporting period
with changes in fair value recorded to the Company’s statement of operations as Change in fair value of derivative liabilities.
The 5% Convertible Note Payable and the 8% Convertible Notes
Payable and the 9% convertible note payable are valued at March 31, 2017. The following assumptions were used for the valuation
of the embedded derivative:
-
|
The stock price of $0.0007 decreased to $0.0005 in this period (basis for the variable conversion price) would fluctuate with
the Company projected volatility;
|
-
|
An event of default for the Convertible Note would occur 0% of the time, increasing 1.00% per month to a maximum of 5.0%;
|
-
|
Alternative financing for the Convertible Note would be initially available to redeem the note 0% of the time and increase monthly
by 1% to a maximum of 10%;
|
-
|
Capital raising events (a single financing at 1 month from the valuation date) are a factor for the VV Convertible Note. The full
reset events projected to occur based on future stock issuance (single event) resulting in a reset exercise price.
|
-
|
The monthly trading volume would average $576,891 (rounded) as of 3/31/2018 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 50% to 58% over 3 to 20 trading days would have effective rates of 42.38% to 57.18%;
|
-
|
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;
|
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
-
|
The projected annual volatility for each valuation period was based on the historical volatility of the company:
|
12/31/2017
|
|
|
128
|
%
|
|
2/12/2018
|
|
|
178
|
%
|
1/3/2018
|
|
|
127
|
%
|
|
2/21/2018
|
|
|
161
|
%
|
1/16/2018
|
|
|
140
|
%
|
|
2/22/2018
|
|
|
163
|
%
|
1/16/2018
|
|
|
142
|
%
|
|
3/2/2018
|
|
|
265
|
%
|
1/31/2018
|
|
|
157
|
%
|
|
3/31/2018
|
|
|
185
|
%
|
2/9/2018
|
|
|
151
|
%
|
|
|
|
|
|
|
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.
The Company’s derivative liabilities
on convertible notes payable are presented at market value in the financial statements at March 31, 2018 as follows:
3/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Ended
March 31,
|
|
|
Derivative
|
|
|
|
Derivative
|
|
|
|
Principal
|
|
|
Original
|
|
|
Valuation
|
|
|
March
31,
|
|
|
March
31,
|
|
|
2018
|
|
|
Valuation
|
|
|
|
Treatment
|
|
Maturity
|
|
Note
|
|
|
Derivative
|
|
|
December
31,
|
|
|
2018
|
|
|
2018
|
|
|
Mark-to-
|
|
|
March
31,
|
|
Convertible
Note
|
|
Date
|
|
Date
|
|
Amount
|
|
|
Valuation
|
|
|
2017
|
|
|
Issuances
|
|
|
Conversions
|
|
|
Market
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Note
Payable- issued 5/2/2016
|
|
10/1/2016
|
|
5/2/2017
|
|
$
|
57,750
|
|
|
$
|
58,355
|
|
|
$
|
24,925
|
|
|
|
|
|
|
$
|
(26,745
|
)
|
|
$
|
5,123
|
|
|
$
|
3,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 % Convertible Note-
Payable - issued 6/12/2015
|
|
4/12/2016
|
|
1/7/2017
|
|
|
35,863
|
|
|
|
37,827
|
|
|
$
|
832
|
|
|
|
|
|
|
$
|
-
|
|
|
|
305
|
|
|
$
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9% Convertible Notes
Payable- issued 10/01/2016
|
|
3/26/2017
|
|
3/27/2018
|
|
|
157,895
|
|
|
|
56,956
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
105,000
|
|
|
|
87,287
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
50,000
|
|
|
|
15,803
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued March 7, 2016
|
|
3/7/2016
|
|
3/7/2017
|
|
|
50,000
|
|
|
|
87,538
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued March 7, 2016
|
|
3/7/2016
|
|
1/7/2017
|
|
|
46,803
|
|
|
|
82,115
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued May 1, 2016
|
|
10/28/2017
|
|
5/1/2018
|
|
|
131,250
|
|
|
|
103,294
|
|
|
$
|
52,989
|
|
|
|
|
|
|
$
|
(31,013
|
)
|
|
|
8,541
|
|
|
$
|
30,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued June 7, 2016
|
|
12/4/2017
|
|
6/7/2018
|
|
|
125,000
|
|
|
|
90,596
|
|
|
$
|
64,458
|
|
|
|
|
|
|
|
|
|
|
|
(14,452
|
)
|
|
$
|
50,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
Convertible Notes Payable- issued March 8, 2016
|
|
9/15/2017
|
|
9/8/2018
|
|
|
150,000
|
|
|
|
167,164
|
|
|
$
|
108,682
|
|
|
|
|
|
|
$
|
(19,359
|
)
|
|
|
23,426
|
|
|
$
|
112,749
|
|
|
|
|
|
|
|
$
|
909,561
|
|
|
$
|
786,935
|
|
|
$
|
251,886
|
|
|
$
|
-
|
|
|
$
|
(77,117
|
)
|
|
$
|
22,943
|
|
|
$
|
197,712
|
|
The Company’s mark-to-market fair value adjustment ((income)/expense)
for the quarter ended March 31, 2018 totaled $22,943.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
Note 7. STOCKHOLDERS’ EQUITY
The Company has authorized 4,000,000,000
shares of common stock with a par value of $0.0001 per share. Effective September 19, 2017, the Company amended its Articles of
Incorporation to increase its authorized Common Stock to 4,000,000,000 shares. There were 1,243,548,268 and 849,437,003 shares
of common stock issued and outstanding at March 31, 2018 and December 31, 2017, respectively.
The Company has authorized 1,000,000 shares
of Series A preferred stock with a par value of $0.0001 per share. At September 30, 2017 and December 31, 2016, there were 500,000
shares and 50,000 shares of Series A preferred stock were issued and outstanding respectively. The preferred stock has preferential
voting rights of 100 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 March 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.
During the quarter ended March 31, 2017,
the Company issued an aggregate 43,000,000 shares of common stock at prices ranging from $0.0028 to $0.0094 per share for services
provided to the Company.
During the quarter ended March 31, 2017,
the Company issued an aggregate 112,497,708 shares of common stock at prices ranging from $0.0001 to $0.0028 per share as partial
conversion of notes.
During the quarter ended March 31, 2017, the Company issued
an aggregate 9,050,000 shares of common stock for conversion of 18,100 shares of Preferred Series B stock.
During the quarter ended June 30, 2017,
the Company issued an aggregate 33,000,000 shares of common stock at prices ranging from $0.0022 to $0.0028 per share for services
provided to the Company.
During the quarter ended June 30, 2017,
the Company issued an aggregate 177,072,945 shares of common stock at prices ranging from $0.0001 to $0.0028 per share as partial
conversion of notes and accrued interest.
During the quarter ended June 30, 2017, the Company issued an
aggregate 450,000 shares of Preferred Series A stock at par of $.0001.
During the quarter ended September 30,
2017, the Company issued an aggregate 41,000,000 shares of common stock at prices ranging from $0.0002 to $0.0021 per share for
services provided to the Company.
During the quarter ended September 30,
2017, the Company issued an aggregate 62,196,454 shares of common stock at prices ranging from $0.00065 to $0.00099 per share as
partial conversion of notes and accrued interest.
During the quarter ended December 31, 2017,
the Company issued an aggregate 71,000,000 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 December 31, 2017,
the Company issued an aggregate 74,771,920 shares of common stock at prices ranging from $0.0004 to $0.0006 per share as partial
conversion of notes and accrued interest.
During the quarter ended March 31, 2018, the Company issued
an aggregate 18,000,000 shares of common stock at a price of $0.0005 per share for services provided to the Company.
During the quarter ended March 31, 2018,
the Company issued an aggregate 376,111,265 shares of common stock at prices ranging from $0.0004 to $0.0006 per share as partial
conversion of notes and accrued interest.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
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 or the
quarter ended March 31, 2018. The Company also has ready-to-go office space available to be used for meetings etc. at a nominal
cost of approximately $100 per month with no commitment. The cost of this space for the quarter ended March 31, 2018
was
$297. On September 12th 2016 the Company entered into a commercial lease agreement for office premises at an original cost of $650
per month for a one-year term with the option to renew for one extended term of three years. In July 2017 the Company leased additional
space at this location thereby increasing the monthly rent to $1,550. The cost of this space for the quarter ended March 31, 2018
was $3,950.
Total rent expense for the quarter ended March 31, 2018 and 2017 was $5,822 and $3,822 respectively. In March 2018, the Company
prepaid four months rent totaling $6,200 which is on the balance sheet at March 31, 2018.
The Company has agreements with consultants for
ongoing services to be rendered with the following commitments:
|
|
Commitment
|
|
Term
|
Consultant - FDA requirements and compliance
|
|
$2,000 per month
|
|
12 Months
|
Consultant - capital formation and market services
|
|
Various equity percentage issuances of restricted stock for fundings
|
|
6 Months
|
Consultant - tradeshow attendance, strategy and collaboration, coordination regarding FDA compliance, manufacturing operations, sales and marketing, other related services
|
|
$10,000 per month (payable quarterly in cash or common stock from the 2016/2017 Equity Incentive Plan)
|
|
12 Months
|
Note 9. INCOME TAXES
The Company 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 March 31, 2018, 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
In August 2015, the Company acquired 100%
of the issued and outstanding common stock of Medical Lasers Manufacturer, Inc. (“MLM”) from a stockholder and officer
of the Company for 20,000 common shares which were valued at $0.001 per share. All intercompany transactions were eliminated during
consolidation.
As more fully described in Note 3 to the Consolidated Financial
Statements, the Company owed the following amounts to related parties as of the following:
|
|
March 31
|
|
|
December 31
|
|
|
|
2018
|
|
|
2017
|
|
Due to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
Due to officer/stockholder
|
|
|
8,955
|
|
|
|
8,398
|
|
Due to other stockholders
|
|
|
6,100
|
|
|
|
6,790
|
|
Total Related Party Obligations
|
|
$
|
23,976
|
|
|
$
|
24,109
|
|
|
|
|
|
|
|
|
|
|
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
The company has entered into an employment agreement with its
Chief Executive Officer (CEO) for the five year period beginning January 1, 2012. The agreement provides for base compensation,
annual bonus, benefits, vacation and reimbursements. Under this agreement, the base compensation of the Company’s CEO is
$100,000 per annum which has been accrued for the years ended December 31, 2015 and 2014. In mid-year 2016 the Company commenced
payroll and is paying the CEO for current wages in this manner. During the year ended December 31, 2016, $18,974 in accrued compensation
was paid. Accrued compensation in the amount of $30,000 was converted to shares of common stock during 2015. In the quarter ended
June 30, 2017, $45 in accrued CEO compensation was converted to Series A Preferred shares. During the quarter ended September 30,
2017, $25,500 in accrued compensation was paid to the CEO. Effective October 1, 2017, the employment agreement between the Company
and it’s CEO was amended to increase the annual salary to $150,000. During the quarter ended December 31, 2017 $44,673 in
accrued compensation was paid to the CEO. As of March 31, 2018, the company owes accrued compensation to it’s CEO in the
amount of $396,803.
In August 2015, MLM acquired a trademark
from the son of the Company’s President for $20,000 due 90 days from the date of acquisition. During the quarter ended June
30, 2016, the Company issued 3,400 shares of Preferred Series B stock as settlement on this liability. Due to the uncertainty of
future cash flows from the trademark management has deemed it to be impaired and recorded an impairment expense of $20,000 at September
30, 2015.
In August 2015, subsequent to the date
the Company acquired MLM, MLM purchased $50,000 in inventory from the son of the Company’s President. The inventory consisted of
20 hand-held laser devices. During the quarter-ended March 31, 2016, 10,000 shares of Series B Preferred stock were issued in settlement
of this liability.
As more fully described in Note 1-Intangible Asset-Licensing
Agreement, on March 8th 2016 (with an effective date of October 1, 2015) the Company entered into a Licensing Agreement with a
Florida Corporation (Licensor) that is owned by a related party. The Company issued 25,000 shares of Series B Preferred stock to
the Licensor as partial consideration for the Licensing agreement plus a $150,000 promissory note to the Licensor for the balance
of the consideration. During the quarter-ended March 31, 2016, 3,400 shares of Series B Preferred stock were converted into 1,700,000
shares of common stock in accordance with the terms of the Series B Preferred stock. During the quarter ended March 31, 2017, 18,100
shares of Series B preferred stock was converted into 9,050,000 shares of common stock in accordance with the terms of the Series
B Preferred stock.
As more fully described in Note 1 and Note 5 to the financial
statements, $18,986 in accrued interest on the $150,000 note was satisfied through the issuance of 17,272,727 shares of the Company’s
common stock. On September 15, 2017 the Note was amended to include provisions to allow conversion of the Note into common stock
of the Company. At such time the Note was valued with it’s embedded derivative and discount. On September 25, 2017, $16,250
in principal on this note was satisfied by the conversion into 25,000,000 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 60,000,000 shares of the Company’s
common stock
Note 11. BASIS OF REPORTING - GOING CONCERN
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction
of liabilities in the normal course of business.
The Company has incurred losses from inception
of approximately $3,959,698 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 it’s 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 32,000,000.
During the quarter ended March 31, 2017, the Company issued
from the Plan a total of 27,100,000 shares of common stock to non-employees for services rendered. As of March 31, 2017 there is
a balance of -0- shares available for future issuance under the Medifirst Solutions, Inc. 2016 Equity Incentive Plan.
Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
March 31, 2018
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 125,000,000 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 108,000,000 shares to non-employees for services rendered. As of December 31, 2017 there is a balance of 17,000,000
shares available for future issuance under the Medifirst Solutions, Inc. 2017 Equity Incentive Plan. During the quarter ended March
31, 2018, the Company issued 17,000,000 shares of common stock to non-employees for services rendered leaving a balance of no
shares left to be issued in the 2017 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 175,000,000 shares of common stock. The Plan is designed
to retain directors, executives and selected employees and consultants and reward them for making contributions to the success
of the Company. These objectives are accomplished by making long-term incentive awards under the Plan thereby providing Participants
with a proprietary interest in the growth and performance of the Company.
During the quarter ended March 31, 2018, the Company
issued from the 2018 Plan a total of 4,500,000 shares of common stock to non-employees for services rendered. As of March 31,
2018 there is a balance of 170,500,000 shares available for future issuance under the Medifirst Solutions, Inc. 2018 Equity
Incentive Plan.
Note 13. SUBSEQUENT EVENTS
Subsequent to the quarter ended March 31, 2018, the Company
issued an aggregate of 42,500,000 shares of Common Stock for services rendered by consultants and professionals.
Subsequent to the quarter ended March 31, 2018, the Company
issued an aggregate 92,015,114 shares of Common Stock upon conversions of an aggregate principal amount equal to $17,580 outstanding
convertible promissory notes and $718 in accrued interest.
Subsequent to the quarter ended March 31, 2018, the Company
and a noteholder agreed to change the terms of two outstanding convertible notes originally issued July 10, 2017 and August 7,
2017 in the amounts of $125,000 and $125,000 respectively. The notes original terms allowed for principal balances to be converted
into the Company’s common stock after a six-month waiting period. The new terms of the notes now require a nine-month waiting
period. As such, principal conversions on these notes cannot take place until April 1, 2018. There have been no conversions on
these notes thus far.
Subsequent
to the quarter ended March 31, 2018, Medifirst launched a new division, Concierge Concepts Rx (CCRx), a majority-owned
subsidiary of Medifirst, incorporated in New Jersey on April 18, 2018, which will provide a unique niche billing service to
independent pharmacies. In addition to its insurance billing services, CCRx plans to provide the following consulting
services that will utilize over 60 years of combined specialty pharmacy management and infusion therapy experience to its
pharmacy clients: managing and enhancing sales, improving patient care, supporting general operations, and navigating the
complex landscape of major medical insurance billing.