Annual Report (10-k)

Date : 04/15/2019 @ 9:07PM
Source : Edgar (US Regulatory)
Stock : Medifirst Solutions Inc. (MFST)
Quote : 0.0065  0.0 (0.00%) @ 9:00PM

Annual Report (10-k)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

☒  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2018

 

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

 

For the transition period from [             ] to [             ]

 

Commission file number 000-55465

 

Medifirst Solutions, Inc.

(Name of small business issuer in its charter)

 

NEVADA   27-3888260
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification Number)

     

4400 Route 9 South. Suite 1000, Freehold NJ 07728

(Address of Principal Executive Offices)

 

Issuer’s telephone number: (732) 786-8044

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.0001

 

Indicate by check mark if registrant is a well-known seasoned issuer, as defined under Rule 405 of the Securities Act  Yes ☐  No ☒

 

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐  No ☒

 

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 during the preceding 12 months (or for such shorter period that the issuer 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

 

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 Act).  Yes ☐  No ☒

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2018: $491,063

 

As of April 12, 2019, there were 5,808,883 shares of the issuer’s common stock, par value $0.0001 per share, issued and outstanding.

 

Documents incorporated by reference: None

 

 

  

 

 

 

TABLE OF CONTENTS

 

    Page 
Part I   1
Item 1 Business 1
Item 1A Risk Factors 8
Item 1B Unresolved Staff Comments 16
Item 2 Properties 16
Item 3 Legal Proceedings 16
Item 4 Mine Safety Disclosures 16
     
Part II   17
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 17
Item 6 Selected Financial Data 21
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation 21
Item 7A Quantitative and Qualitative Disclosures about Market Risk 23
Item 8 Financial Statements and Supplementary Data 23
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 24
Item 9A Controls and Procedures 24
Item 9B Other Information 25
     
Part III   26
Item 10 Directors and Executive Officers and Corporate Governance 26
Item 11 Executive Compensation 27
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 29
Item 13 Certain Relationships and Related Transactions, and Director Independence 29
Item 14 Principal Accountant Fees and Services 30
     
Part IV   32
Item 15 Exhibits, Financial Statement Schedules 32
  Signatures 34

 

i

 

 

In this report, unless the context indicates otherwise, the terms “Medifirst,” “Company,” “we,” “us,” and “our” refer to Medifirst Solutions, Inc., a Nevada corporation, its wholly-owned subsidiary, Medical Lasers Manufacturer, Inc., a Nevada corporation, its wholly-owned subsidiary, Concierge Concepts Rx Inc., a New Jersey corporation, and its 51% majority-owned subsidiary, USA Pharma Corporation, a New Jersey Corporation.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934 or the “Exchange Act.” These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations and beliefs, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

 

  new competitors are likely to emerge and new technologies may further increase competition;
     
  our operating costs may increase beyond our current expectations and we may be unable to fully implement our current business plan;
     
  our ability to obtain future financing or funds when needed;
     
  our ability to successfully obtain and maintain our diverse customer base;
     
  our ability to protect our intellectual property through patents, trademarks, copyrights and confidentiality agreements;
     
  our ability to attract and retain a qualified employee base;
     
  our ability to respond to new developments in technology and new applications of existing technology before our competitors;
     
  acquisitions, business combinations, strategic partnerships, divestures, and other significant transactions may involve additional uncertainties; and
     
  our ability to maintain and execute a successful business strategy.

 

Other risks and uncertainties include such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the “SEC.” You should consider carefully the statements under “Item 1A. Risk Factors” and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

 

ii

 

 

PART I

 

ITEM 1. BUSINESS

 

Corporate History

 

Medifirst Solutions, Inc. (“Medifirst” and the “Company”) was incorporated in Nevada in November 2010. Our principal executive office is located at 4400 U.S. 9 South, Suite 1000, Freehold NJ, 07726, and our telephone number is (732) 786-8044. Our website address is www.medifirstsolutions.com. The Company began as a development stage company focused on developing products within the healthcare market for both consumer and professional applications. Medifirst has had several different products and related distribution and sales services which include: its own line of disposable electronic cigarettes (“e-cigs”), Light Therapy for therapeutic healthcare use and home water machines which made water from air. In 2015, the Company made a strategic decision to add laser technology to its health and wellness division and discontinue its efforts with other products and divisions. Management believed that it was in the best interest of the Company and its shareholders to narrow its focus and business to developing its laser technology, which lasers are expected to target professionals that treat pain and inflammation, as well as cosmetic and skincare related conditions. In connection with the changed focus, the Company began to develop a product that if successfully cleared by the U.S. Food and Drug Administration (“FDA”), would be the first in a series of proprietary medical devices for the Company. The Company entered into an exclusive manufacturing agreement to produce what is now its hand-held mobile laser system known as “The Time Machine Program” for which the Company purchased the registered trademark. Furthermore, the Company purchased inventory from the developer of the lasers.

 

Additionally, Medifirst, through its wholly-owned subsidiary Medical Laser Manufacturer, Inc., entered into a Product and Know-How License Agreement (the “License Agreement”) with Laser Lab Corp to license the use of various intellectual property in connection with seeking regulatory approval for and marketing, distributing and selling The Time Machine Series Lasers (“TM Lasers”). The License Agreement grants a license to the Company to use various technology, trade secrets, invention records, research records, reports and data, test results, clinical studies, engineering and technical data, designs, production specifications, processes, methods, procedures, facilities and know-how related to the inventions identified in the License Agreement, which inventions include the infrared laser in the TM Lasers for which the Company previously filed a Premarket Notification 510(k) submission with the FDA. Although the License is not exclusive, Laser Lab Corp may not license the know-how or inventions to a third party and may only directly, or through its wholly-owned subsidiary, use the know-how and inventions. In addition to the license granted to the Company, the License Agreement provides for an option to license other fields of use of the infrared laser in the TM Lasers, as well as additional wavelengths and colors, allowing the Company to develop a broader range of product offerings in the future. Furthermore, Laser Lab Corp granted the Company a right of first refusal to consider matching any bona fide offer to license other technologies of Laser Lab Corp.

 

On July 8, 2016, we received clearance from the FDA to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device (TM Laser). The FDA does not give advance notice or define a timeline during their evaluation for 510(k) clearance. Generally, when 510(k) clearance is granted, an early stage medical device company, such as Medifirst, is required to put together an infrastructure, including (i) new office space, (ii) instituting FDA controls and procedures, (iii) fine-tuning manufacturing, (iv) building and executing on sales strategies, (v) producing custom-made cases and packaging for the medical device, and (vi) aligning all staffing, consulting and personnel needs. As Medifirst was aware that the FDA time frame was unknown and 510(k) clearance was not guaranteed, we intentionally delayed the aggressive expansion of our operations and production before successfully receiving clearance to begin sales. The U.S., as well as countries across the globe, are currently facing a critical opioid addiction crisis, one that has reached epidemic proportions. The need is greater than ever for effective natural and non-invasive means to help people who suffer from pain and chronic pain. Globally, it is estimated that 1.5 billion people suffer from moderate to severe chronic pain. Pain is the leading cause of disability in the U.S., affecting, according to industry reports we believe up to 116 million adults, more than heart disease, cancer and diabetes combined. Pain continues to represent major clinical, social and economic challenges. Despite two decades of intensive R&D efforts, commercialization of new products targeting pain management has been limited. The opioid and narcotics addiction is often a hidden secret amongst families due to embarrassment and stigma.

 

  1

 

 

Since receiving clearance, we presented our laser and established business relationships in Morocco, China, Asia, Mid-East, Southeast Asia, Latin America and other international countries and markets. The international markets, although requiring complicated registration processes and ground work, offer the opportunity for significant distribution sales which would be very beneficial for the Company's growth. Medifirst believes it has made significant progress in setting up a sales and corporate infrastructure and continues to advance these efforts.

 

Medifirst believes that doctors can improve their patient’s quality of life by using the TTML-810/2000 Infrared Laser therapy. Laser therapy such as ours, is a rapidly growing drug-free treatment modality used in pain management. The learning and teaching curve is simple and straightforward and it is a natural and drug-free alternative to pills and narcotics. That is why we believe the TTML-810/2000 Infrared Laser is a viable pain solution. When used properly, it targets the root cause of the pain. The TTML-810/2000 Infrared Laser is a user friendly, easy-to-use, mobile, hand-held laser device, with pinpoint accuracy. The device gives fast results with no burning, redness, swelling or downtime for the patients which is prevalent with other medical lasers. Because the laser does not touch the skin there is no risk of transmission of virus or bacteria. The Laser treatment is safe, painless and fast. Patients feel a soothing warmth as laser energy gently penetrates the tissue and boosts the body’s own regeneration powers to relieve pain. The treatments are usually administered for 8 to 10 minutes, depending on the location on the body. The beneficial effects may often be experienced immediately, but most observed-results begin after 2 to 6 treatment sessions. In addition, the body continues to benefit from the effects of the therapy for 18-24 hours after treatment. During this time, modulated cellular activity leads to decreased pain and inflammation.

 

Regarding the US market, the Company plans to ramp up efforts to promote and present the laser to medical practitioners both in their offices as well as conferences and trade shows. The Company is engaged in ongoing due diligence as related to selling its TM Laser to the consumer OTC market. This process includes meeting home safety standards, FDA resubmission as well as a new clinical home study. The Company believes that chronic pain and simple everyday pain effects millions of people. The Company believes there is potential great benefit for OTC RX home use with the prescribing doctor training and educating the patient on how to use the Laser safely and effectively. This goes to the source of the pain and reduces and/or eliminates pain by the process of eliminating inflammation via Photobiomodulation. Consistency is key to receiving the Laser treatment to gain the maximum results of the treatment to temporary increase in local blood circulation and temporary relaxation of muscles by means of topical elevated tissue temperature from infrared spectral emissions. It is of great advantage to the patient to have the Laser for home use. This is especially needed by patients who are non-ambulatory as well as financially challenged or simply unable to get to a doctor's office several times a week.

  

Recent Developments

 

In the middle of fiscal year 2018, the Company incorporated Concierge Concepts Rx Inc. (CCRx) in the State of New Jersey, to be an 100% majority-owned subsidiary. Medifirst test-launched Concierge Concepts Rx, a new division focused on the pharmaceutical industry, to provide unique specialty drug consulting and niche billing services to independent pharmacies and retail pharmacy chains. CCRx services of specialty drug pharmacy consulting and revenue stream management utilizes over 60 years of combined specialty pharmacy and infusion therapy experience. The services are designed to increase profits for pharmacies.  Services will include: clinical review, expedited medical insurance verification, training for drug dispensing, insurance billing, collections, and reconciliation. The billing services will address any denials and include appeals and resubmissions. The division will provide key services to undervalued clients by securing reimbursement of overlooked revenue within the ever-expanding market of the specialty pharmacy market in today's healthcare system. As we are in the early stages of development, we are testing our new business strategies and affiliations. Although we are showing revenue related to certain target market viability testing, such revenues may not sustain or be recreated until, if ever, we complete and review our test-market and roll-out strategies and determine a long-term strategy for growth and direction.

 

  2

 

 

In November of 2018, Medifirst announced that it has launched USA Pharma Corporation (“USA Pharma”), its division for CBD distribution, sales and products and that it completed an agreement with Dr. Gupta Pharma LLC to exclusively distribute their line of premium CBD oils in New Jersey and non-exclusive in all other states. Dr. Sanjay Gupta, not related to Dr. Gupta of CNN, is a Harvard-trained physician who specializes in the treatment of pain, has significant experience using Marijuana and CBD for treating pain. As the President of the American Pain Association, Dr. Gupta believes that CBD, used under the guidance of a physician, can play a significant role in reducing pain and helping to curb the opioid epidemic. Additionally, he believes CBD can play a major role in overall health and wellness but, he concedes, CBD remains underutilized as there is a substantial lack of education and stigma from public and healthcare providers with regards to the benefits of CBD. Based on his clinical and research work and using proprietary patented methods, Dr. Gupta is working to develop and market premium CBD oils and wellness products that he believes can benefit patients suffering from many different health conditions. USA Pharma anticipates marketing and developing additional CBD products to round out its line for consumers. At the time of this filings, Dr. Gupta has still not completed his CBD products for markets and sales. In addition, with the FDA considering regulations that could affect the CBD industry and market, we are still in the due diligence stage and have not yet formed a firm business plan and rollout.

 

The Time Machine Series Laser

 

FDA 510(k) Clearance

 

On July 8, 2016, we received clearance from the FDA to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device.

 

Applications

 

Indication for use: The Time Machine Series Lasers Model TTML-8102000 - 810/830nm is intended for use in temporary relief of minor muscle and joint pain, stiffness, minor arthritis pain, muscle spasm, temporary increase in local blood circulation and temporary relaxation of muscles by means of topical elevated tissue temperature from infrared spectral emissions.

 

Specifications

 

The Time Machine Infrared Laser 810/830nm operates in continuous wave mode set at a fixed frequency. The Infrared laser operates at a 810/830nm wavelength and at 2000mw, as set forth in our 510(k) submission. The Laser is hand-held and mobile. It works on rechargeable batteries, has 6,000 hours of usage against average treatments of 8 minutes for a specified area to treat and has specifications that are often found on larger more expense laser machines.

  

Manufacturing Agreement

 

Medifirst has an exclusive manufacturing agreement allowing us to exclusively purchase various lasers in the TM Lasers having a range of wavelengths and colors, including Infrared, Green, Red, Violet, Ultra-Violet and Blue. We believe that our present manufacturing capacity at these facilities is sufficient to meet foreseeable demand for our products. We have established a quality control program, including a set of standard manufacturing and documentation procedures intended to ensure that, where required, our products are manufactured in accordance with applicable FDA regulations and the comparable requirements of the European community and other countries.

 

Business Plan

 

We have begun to solicit to sell our TM Infrared laser in the U.S. and international marketplace. The current strategy to rolling out the products will be multifaceted, starting with trade shows, direct sales, marketing and advertising and partnering with medical device distributors. Medifirst has implemented internal controls and procedures as mandated by the FDA, including checks and balances to be implemented prior to sale in the Company’s office, which procedures will also be put in place at the Company’s manufacturer. The Company continues to actively engage additional sales and distribution affiliates to offer our lasers in the US market. Furthermore, we expect to engage various product marketing teams to introduce our brand and products to direct and indirect customers of the TM Lasers.

 

We have started our sales initiatives from our new office space for FDA controls and procedures and for training. We are actively interviewing sales and marketing professionals on an ongoing basis to introduce the Time Machine technology to the US and international markets. As part of our sales strategy, we will highlight to the medical communities our belief that the Time Machine hand-held mobile laser unit offers a very unique, effective and affordable alternative to the extremely costly and bulky laser machines current being offered in the marketplace.

  

  3

 

 

The Company has presented the Time Machine Lasers to distributors and healthcare professionals in China, Latin America, Southeast Asia, Toronto, Morocco, Dubai and Paris and continues to follow up to initiate sales. In the U.S. market, the Company has enlisted sales representatives in New Jersey, Florida and New York City. Currently the Company is introducing, demonstrating and conducting training for the Lasers at the offices of its Medical Directors in New York City and Boca Raton, Florida, as well as in the corporate office in New Jersey.

 

The healthcare professionals that we believe will benefit from incorporating the TM Lasers into their practices include medical doctors, oral surgeons, chiropractors, pain specialists, dentists, cosmetic professional as well as hospitals and surgical centers. We also believe that our lasers will be useful to medi-spas, massage therapists, electrolysis providers, physical therapists and any professional that treats pain, inflammation and scarring. Because laser regulations vary from state-to-state, healthcare professionals will need to research their state-specific compliance requirements regarding their authorized usage.

 

The Time Machine Laser Series and Program (“TMP”) will be affordable and priced very competitively, as compared to other lasers in the industry which can typically cost tens of thousands of dollars. The Company currently offers financing through a third party for as little as just over two hundred dollars a month. List price is $9,995 and the company has the flexibility to offer deep discounts based on volume and strategic sales. Other lasers in the marketplace list at $16,000 to over $50,000. Many of these are not mobile and all-in-one units. We believe the benefits to healthcare professionals which include our treatment protocols as well as the additional benefit of additional revenue will make us highly competitive and in high demand in the medical laser industry. For example, although each practitioner can set the rates patients pay for laser treatments, which typically can range from $600 to $2,500 for a 6 treatment package. The prices are set by the healthcare facility taking into consideration the clientele and location of the practice.

 

Benefits of the The Time Machine Program (TMP):

 

  ●   Offers practitioners a lucrative opportunity to generate new revenues or enhance existing revenue sources with a low-cost device that provided what we believe to be an effective laser medical technology.
     
  ●   Allows businesses to expand their treatment offerings and increase their clientele using what our studies have shown are effective outcomes from treatment.
     
  ●   Allows businesses the possibility of recouping their initial investment within the first months, thereby creating a positive cash flow stream utilizing the recommended business model.
     
  ●   Promotes and advertises the doctors locations via The Time Machine Program’s social media updates which continues to bring in new patients.
     
  Laser has pinpoint accuracy.
     
  Easy to use and operate.
     
  No incision, no redness, no swelling, no burning, no pain and no downtime.
     
  Consistent “results-pleased” patients.
     
  Increased referrals from patients.
     
  ●   Helps patients with various pain issues: joint, neck & back, muscle & body, TMJ & jaw, sports injuries, nerve pain, neuropathy, arthritis, carpal tunnel inflammatory issues. The patient’s doctor will make the final determination on what and how to treat.

 

  4

 

 

Brand Awareness

 

The Company plans to develop social media, internet and advertising strategies so as to target medical professionals, as well as their perspective patients. In addition, our Sales Directors will implement and oversees a sales team to increase our exposure to patients and healthcare providers. A major component of the business roll-out strategy will includes industry trade shows, where we believe we will be able to reach a high number of professionals and distribution partners. These conferences will include those in the medical industry, the beauty and spa industry, as well as alternative healthcare practices.

 

The Market

 

Laser Systems

 

According to Global Industry Analysts Inc., the global market for medical laser systems is forecast to reach US$10 billion by 2020, driven by the aging population’s shift towards minimally invasive procedures, and growing awareness over the safety of laser-based procedures. Other factors driving growth in the market include rise in age related illnesses, increasing consumer spending on non-invasive cosmetic surgeries, developments in Diode Lasers & Fiber Lasers, and expanding applications in cardiology. The United States represents the largest market worldwide.

 

Medical laser systems refer to devices that emit monochromatic light beam in a highly concentrated form for excision of tissues. Lasers are being extensively used for diagnosis and treatment of a number of diseases that were previously difficult to treat or were known to lead to significant complications using traditional procedures. Most common applications of medical laser systems include ophthalmology, oncology, cosmetic surgery, cardiology, dentistry, gynecology, dermatology, gastroenterology, diagnostics and urology. Major factors driving growth in the market include aging population, increasing focus on aesthetics, and growing awareness over the benefits of laser procedures. Rising disposable incomes particularly in developing markets and growing adoption of laser-based treatments are also factors driving growth in the market.

 

Surgical lasers represent the largest product market, supported by developments in diode lasers and fiber lasers, and well-established applications in cardiology. Growing prevalence of cardiovascular diseases is therefore expected to provide sturdy opportunities for growth in the coming years. Advancements in laser technology are resulting in lesser pain and higher surgical accuracy thereby encouraging volume growth in laser procedures. Dedicated lasers with varying active media have been developed to meet specific needs of each procedure. These advancements enable physicians to provide more favorable and noticeable results to patients, with the added benefit of quicker post surgery recovery. Non-invasive methods of body contouring and fat reduction are also gaining popularity, supported by advancements such as Transdermal Focused Ultrasound, Monopolar RF, Low level laser, High Intensity Focused Ultrasound (HIFU) and Cryolipolysis.

  

Competition

 

Many laser devices and procedures currently used are invasive, which results in the potential of side effects and/or down time (redness, puffiness, swelling) after the laser treatments. Additionally, many of these procedures are very expensive for both the health care professionals that must purchase the expensive laser technology and for the patients paying for procedure costs of the laser treatments. The purchase price of such lasers range from $16,000 to $50,000 (plus) per unit and the laser units are typically big, stationary machines.

 

Because we anticipate the price range of The Time Machine Lasers to be approximately $9,995 or less, each healthcare professional will be paying less than traditionally spend on laser units and will have the flexibility to pass along the lower cost of the machinery onto their patients.

 

We believe, the Time Machine Lasers will be very well received in the Laser Industry as we are not aware of other handheld laser devices for pain that have the capabilities of our TM Lasers.

 

  5

 

 

The industry is subject to intense competition for minimally-invasive and non-invasive procedures. We compete against products and procedures using laser, light-based, RF, ultrasound, and other energy modalities from companies such as Lumix, LiteCure, Apollo, Thor, K-Laser and Aspen.

 

Some of our competitors are also publicly-traded companies and others have longer operating histories than we do. Many of them may enjoy several competitive advantages, including: greater name recognition, more extensive intellectual property protection, established relationships with practitioners and other health care professionals, established domestic and international distribution networks, broader product lines and existing treatment systems, and the ability to offer rebates or bundle products to offer higher discounts or incentives, greater experience in conducting research and development, manufacturing, clinical trials, obtaining regulatory approval for products and marketing approved products, greater financial resources for product development, sales and marketing and patent litigation. Competition among providers of laser, light-based, ultrasound, and other energy devices is characterized by intensive sales and marketing activities.

 

Government Regulation

 

Our products are medical devices that are subject to extensive regulation by government authorities in the United States and in other countries and jurisdictions, including the European Union, or EU. These governmental authorities regulate the marketing and distribution of medical devices in their respective jurisdictions. The regulations cover the entire life cycle of the product, including the research, development, testing, manufacture, quality control, packaging, storage, labeling, advertising and promotion of the devices. In addition, post-approval monitoring and reporting, as well as import and export of medical devices, are subject to various regulatory requirements. The processes for obtaining regulatory approvals or clearances in the United States and in foreign countries and jurisdictions, including the EU, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

 

Regulations Relating to Products and Manufacturing

 

Our products and research and development activities are regulated by numerous governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies. Any medical device or cosmetic we manufacture and/or distribute will be subject to pervasive and continuing regulation by the FDA. The FDCA, and other federal and state laws and regulations govern the pre-clinical and clinical testing, design, manufacture, use, labeling and promotion of medical devices. Product development and approval for medical devices within this regulatory framework takes a number of years and involves the expenditure of substantial resources.

   

Failure to comply with applicable regulatory requirements can result in fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspensions of production, refusals by the U.S and foreign governments to permit product sales and criminal prosecution.

 

Review and Clearance of Medical Devices in the United States

 

The FDA strictly regulates medical devices in the United States. Under the Federal Food, Drug and Cosmetic Act, or FDCA, a medical device is defined as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part or accessory, which is, among other things: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals; or intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes. Unless an exemption applies, a new medical device may not be marketed in the United States unless it has been cleared by the FDA through filing of a 510(k) premarket notification, or 510(k), or approved by the FDA pursuant to a premarket approval application, or PMA. Both premarket notifications and premarket approval applications, when submitted to the FDA, must be accompanied by a user fee, unless exempt.

 

  6

 

 

The information that must be submitted to the FDA in order to obtain clearance or approval to market a new medical device varies depending on how the medical device is classified by the FDA. Medical devices are classified into one of three classes depending on the level of control necessary to assure the safety and effectiveness of the device. Class I devices have the lowest level or risk associated with them, and are subject to general controls, including labeling, premarket notification and adherence to the QSR. Class II devices are subject to general controls and special controls, including performance standards. Class III devices, which have the highest level of risk associated with them, are subject to most of the aforementioned requirements as well as to premarket approval. Most Class I devices and some Class II devices are exempt from the 510(k) requirement, although manufacturers of these devices are still subject to registration, listing, labeling and QSR requirements.

 

510(k) Premarket Notification

 

A 510(k) is a premarket submission made to the FDA to demonstrate that the proposed device to be marketed is at least as safe and effective (i.e., substantially equivalent) to another legally marketed device, or predicate device, that did not require premarket approval. In evaluating a 510(k), the FDA will determine whether the device has the same intended use as the predicate device, and (a) has the same technological characteristics as the predicate device, or (b) has different technological characteristics, and (1) the data supporting substantial equivalence contains information, including appropriate clinical or scientific data, if deemed necessary by the FDA, that demonstrates that the device is as safe and as effective as a legally marketed device, and (2) does not raise different questions of safety and effectiveness than the predicate device. Most 510(k)s do not require clinical data for clearance, but the FDA may request such data.

 

The FDA seeks to review and act on a 510(k) within 90 days of submission, but it may take longer if the agency finds that it requires more information to review the 510(k). If the FDA concludes that a new device is not substantially equivalent to a predicate device, the new device will be classified in Class III and the manufacturer will be required to submit a PMA to market the product. With the enactment of the Food and Drug Administration Safety and Innovation Act, or the FDASIA, a de novo pathway is directly available for certain low to moderate risk devices that do not qualify for the 510(k) pathway due to the absence of a predicate device.

 

Healthcare Law and Regulation

 

Healthcare providers, physicians and third-party payors may play a role in the recommendation and selection of medical devices for patients. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to physicians and teaching physicians and patient privacy laws and regulations and other healthcare laws and regulations that may constrain business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations, include the following:

 

  The federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;
     
  The federal civil and criminal false claims laws, including the Civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government.
     
  The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
     
  HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

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  The federal false statements statute, which prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
     
  The federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the U.S. Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and
     
  Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including private insurers.

  

State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

  

Intellectual Property

 

Patents, Proprietary Technology and Trademarks

 

Our success may depend, in part, on our ability to obtain and maintain proprietary protection for our in-licensed products, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to try to protect our proprietary position by, among other methods, filing U.S. and foreign trademark applications, and, when it becomes applicable, patent applications related to proprietary technology, inventions and improvements that are important to the development of our business. However, currently, our rights to our proprietary technology are in-licensed rights and not a technology that we could directly patent. We also rely on trademarks, trade secret and copyright laws and contractual restrictions to protect our proprietary technology. These legal protections afford only limited protection for our technology. We currently own the trademark for “The Time Machine Program”. 

  

ITEM 1A. RISK FACTORS

   

In addition to the other information contained in this Annual Report and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, cash flows or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition, cash flows or results of operations. The following discussion of risk factors contains forward-looking statements as discussed in the section entitled “Information Regarding Forward Looking Statements.” Our business routinely encounters and addresses risks, some of which may cause our future results to be different – sometimes materially different – than we presently anticipate.

 

RISKS RELATING TO OUR BUSINESS

 

We have a limited operating history and a history of operating losses, and expect to incur significant additional operating losses.

 

We were organized on November 8, 2010, and we have had a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have generated net losses since we began operations. We expect to incur substantial additional net expenses in the foreseeable future as our research, development, and commercial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our ability to generate revenue and achieve profitability will depend on, among other things, receiving 510(k) clearance from the FDA for our next FDA submission; The Green Laser (anti-aging) medical device and similar international regulatory agencies; successful manufacturing; sales and marketing arrangements; and raising sufficient funds to finance our activities. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

 

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We may need to secure additional financing.

 

We anticipate that we will incur operating losses for the foreseeable future. As of December 31, 2018, we had cash in the amount of $83,387. Based on our current resources, we will not be able to continue to operate without additional immediate funding. If we are not successful in securing additional financing, we may be required to delay significantly, reduce the scope of or eliminate one or more of our development programs, downsize our general and administrative infrastructure, or seek alternative measures to avoid insolvency, including arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, assets, rights or products.

 

Our auditors have expressed substantial doubt about our ability to continue as a going concern.

 

Our auditor’s report on our December 31, 2018 financial statements expresses an opinion that substantial doubt exists as to whether we can continue as a going concern. Although we have obtained the FDA clearance on our infrared laser, we have only begun to market and sell our infrared product in select markets. We expect to commence our national products and services campaign to generate revenue for our Time Machine TTML-8102000 Laser Thermal Therapeutic Device as funds for such a strategy are available. If we are unable to develop sufficient additional customers for our products and services, we will not generate enough revenue to sustain our business, and the Company may fail.

  

Our success is dependent on our officers and director to properly manage the Company and the loss or unavailability of their services could cause the business to fail.

 

Currently, we have one Officer and Director, Bruce Schoengood, who has assumed responsibility for all planning, development and operational duties, and will continue to do so throughout the beginning stages of the Company. We are heavily dependent on the personal efforts and abilities of Mr. Schoengood.  He has, and expects to continue, to commit full-time to the development of our business plan in the next twelve months. The Company has added additional sales representatives as independent contractors in select territories and will continue to try to add sales persons for new territories.

 

The loss or unavailability of services of any of our consultants or officers would have a materially adverse effect on our business prospects and potential earning capacity. We do not currently carry any insurance to compensate for any such loss.

 

Changing and unpredictable market conditions may impact the demand for our products and services.

 

There can be no guarantee that there will be a demand for our products or services. There are several other companies that are currently marketing lasers for pain and although they are different from the Time Machine Laser, if these companies are successful in the marketplace, our products and services may face more competition, which can adversely affect our operations.

 

We may have difficulty managing growth in our business, which could have a material adverse effect on our business, financial condition and results of operations and our ability to execute our business plan in a timely fashion.

 

Because of our small size, growth in accordance with our business plans, if achieved, will place a significant strain on our financial, technical, operational and management resources. As we expand our activities, and increase the number of divisions within the company, we are evaluating or in which we participate, there will be additional demands on our financial, technical and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the inability to recruit and retain experienced personnel, could have a material adverse effect on our business, financial condition and results of operations and our ability to execute our business plan in a timely fashion.

  

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There may be deficiencies with our internal controls that require improvements, and we will be exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

 

As a result of becoming a reporting issuer under the federal securities laws and the rules and regulations of the SEC thereunder, we will be required to establish and maintain a system of internal controls and procedures. Because Bruce Schoengood is presently and for the foreseeable future, our sole executive officer and director, our internal controls and procedures may not be effective to assure timely and adequate disclosures.

 

There may not be a viable market for our products.

 

We believe that there will be many different applications for our products. We also believe that the anticipated market for our products and the marketplace will continue to expand. These assumptions may prove to be incorrect for a variety of reasons, including competition from other products and the degree of our products’ commercial viability.

 

We may not be successful in selling and marketing our new products.

 

The commercial success of our products and technologies we develop will depend upon the acceptance of these products by physicians and various healthcare professionals and their patients. It is difficult for us to predict how successful the products we are currently developing will be over the long term. If the products we develop do not gain market acceptance, our revenues and operating results will suffer. In addition, we expect to face significant competition, in some cases from companies that are more established, market more widely known products and have greater resources than we do. We may not be able to differentiate our new products sufficiently from our competitors’ products to achieve significant market penetration. As a result of these factors, we may incur significant sales and marketing expenses for our new products without achieving commercial success, which could harm our business and our competitive position.

 

The failure of our systems to meet patient expectations or the occurrence of unpleasant side effects from the procedures for which our products are used could impair our financial performance.

 

Our future success depends upon patients having a positive experience with the procedures for which our products are used in order to increase physician demand for our products, as a result of both individual patients’ repeat business and as a result of word-of-mouth referrals. We believe that patients may be dissatisfied with these procedures if they find them to be not effective for the conditions they are being treated for.

  

If there is not sufficient consumer demand for the procedures performed with our products, practitioners may not demand for our products, which would adversely affect our operating results.

 

The laser and light-based treatment system industry in which we expect to operate is particularly vulnerable to economic trends. Most procedures we expect to be performed using our pain treatment systems are elective procedures that are not reimbursable through government or private health insurance. The cost of these elective procedures must be borne by the patient. As a result, the decision to undergo a procedure that utilizes our products may be influenced by the cost.

 

Consumer demand, and therefore our business, is sensitive to a number of factors that affect consumer spending, including political and macroeconomic conditions, health of credit markets, disposable consumer income levels, consumer debt levels, interest rates, consumer confidence and other factors.  If there is not sufficient consumer demand for the procedures we expect to be performed with our products, practitioner demand for our products my not exist and our business would suffer.

 

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We may be exposed to potential product liability.

 

Our anticipated business can expose us to potential product liability risks, which are inherent in the testing, manufacturing, marketing and sale of medical devices. Medical devices involve an inherent risk of product liability claims and associated adverse publicity. While we will continue to take precautions we deem appropriate, there can be no assurance that we will be able to avoid significant product liability exposure. We do not currently maintain liability insurance coverage as such insurance is expensive and difficult to obtain. We plan to obtain liability insurance coverage in the jurisdictions applicable to our sales activity for the products cleared with the FDA. However, when we seek such insurance, it may not be available on acceptable terms, if at all. A product liability claim brought against us in could have a material adverse effect upon us and our financial condition. Should the insurance coverage be insufficient in amount or scope to address multiple and diverse claims, liabilities not covered by insurance could represent a significant financial liability for us.

 

We do offer training for users of our products, and we will sell these products only to healthcare professionals, there still exists an increased potential for misuse of these products, which could harm our reputation and our business.

 

With 510(k) clearance, our products may be purchased or operated by healthcare professionals with varying levels of training and, in some states, by non-physicians, including nurse practitioners, chiropractors and technicians. Outside the United States, many jurisdictions do not require specific qualifications or training for purchasers or operators of our prospective products. We will not supervise the procedures performed with our products, nor will we require that direct medical supervision occur. Purchasers need to check with their state or country regulations for laser usage. We will offer product training sessions, but we may not require purchasers or operators of our non-invasive products to attend training sessions. The lack of required training and the purchase and use of our non-invasive products by purchasers may result in product misuse and adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.

  

We may be involved in intellectual property litigation, which could be costly and time consuming, and may impact our future business and financial performance.

 

Litigation related to infringement and other intellectual property claims, with or without merit, is unpredictable, can be expensive, time-consuming, could divert management’s attention from planned business and could be asserted even before we begin our manufacturing or sales efforts. If we lose this kind of litigation, a court could require us to pay substantial damages, and prohibit us from using technologies essential to our products, any of which would have a material adverse effect on our business, results of operations and financial condition. We do not know whether necessary licenses would be available to us on satisfactory terms, or whether we could redesign our products or processes to avoid infringement. If our products or methods are found to infringe, we could be prevented from marketing or continuing to market the product series we expect to offer. In addition, we do not know whether our competitors or potential competitors have applied for, or will apply for or obtain, patents that will prevent, limit or interfere with our ability to make, use, sell, import or export our products. Competing products may also appear in other countries. If we lose a foreign patent lawsuit, we could be prevented from marketing our products in such countries.

  

In addition, we may hereafter become involved in litigation to protect our trademark rights associated with our company name or the names used with our products. Names used with our products and procedures may be claimed to infringe names held by others or to be ineligible for proprietary protection. If we have to change the name of our company or products, we may experience a loss in goodwill associated with our brand name, customer confusion and a loss of sales.

 

We may not realize the opportunities that are anticipated from our business expansion strategies.

 

The benefits we hope to achieve, as a result of our business expansion testing we are conducting through our subsidiaries, CCRx and USA Pharma, will depend, in part, on our ability to realize a viable business plan for such expansion strategies. Our success in realizing these opportunities, and the timing of this realization, is largely unknown to our management. Even if we are able to determine viable business strategies, no assurances can be made that the respective businesses will ever become profitable or generate revenue at all. While we anticipate that certain expenses will be incurred in the testing stages or after rolling-out a business plan, such expenses are difficult to estimate accurately, and may exceed revenues, if any. Accordingly, the benefits, if any, from the proposed business expansion strategies may be offset by costs incurred, which could have a material adverse effect on our business, financial condition and results of operations. In addition, since the attention of our management could be partially allocated to this expansion strategy, the failure to become profitable in such opportunities could have a material adverse effect on our ability to execute our existing business plan and in a timely fashion.

 

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RISKS RELATED TO REGULATORY MATTERS

 

If we fail to obtain and maintain necessary FDA clearances for our systems and indications, if clearances for future products and indications are delayed, not issued or rescinded or if there are federal or state level regulatory changes, our commercial operations would be harmed .

 

Our systems are medical devices that are subject to extensive regulation in the United States by the FDA for manufacturing, labeling, sale, promotion, distribution and shipping. Before a new medical device, or a new use of or claim for an existing product, can be marketed in the United States, it must first receive either 510(k) clearance or premarket approval from the FDA, unless an exemption applies. Either process can be expensive and lengthy. The FDA’s 510(k) clearance process usually takes from three to six months from the time the application is filed with the FDA, but it can take significantly longer. The process of obtaining premarket approval is much more costly and uncertain than the 510(k) clearance process, and it generally takes from one to three years, or even longer, from the time the application is filed with the FDA.

 

Medical devices may be marketed only for the indications for which they are approved or cleared. We have obtained the 510(k) clearance to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device. In addition, we have not yet applied for the 510(k) clearance Green TM Lasers. We are unable to predict if or when we would obtain such clearance and, even if we do obtain clearance, it can be subject to a recall if unexpected safety or operational problems arise. After the 510(k) clearance, we are also subject to Medical Device Reporting regulations, which require us to report to the FDA if our product causes or contributes to a death or serious injury, or malfunctions in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. Our products are also subject to state regulations which are, in many instances, in flux. Changes in state regulations may impede sales. For example, federal regulations allow our systems to be sold to, or on the order of, “licensed practitioners,” as determined on a state-by-state basis. As a result, in some states, non-physicians may legally purchase and operate our systems. However, a state could change its regulations at any time, disallowing sales to particular types of end users. We cannot predict the impact or effect of future legislation or regulations at the federal or state levels.

 

The FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following sanctions:

 

  warning letters, fines, injunctions, consent decrees and civil penalties;
     
  repair, replacement, refunds, recall or seizure of our products;
     
  operating restrictions or partial suspension or total shutdown of production;
     
  refusing our requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to our existing products;
     
  withdrawing 510(k) clearance or premarket approvals that have already been granted; and
     
  criminal prosecution.

 

If any of these events were to occur, our business could be harmed.

 

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If we modify our FDA-cleared devices, we may need to seek and obtain new clearances, which, if not granted, would prevent us from selling our modified product or require us to redesign our product.

 

If we decide to make any modification to an FDA-cleared device that would significantly affect its safety or effectiveness or that would constitute a change in its intended use, we would be required to submit a new 510(k) clearance or possibly a premarket approval. We may not be able to obtain any 510(k) clearances or premarket approvals for modifications to, or additional indications for, our existing products, if any, in a timely fashion, or at all. Delays in obtaining clearances on modifications to our current products for which we have a 510(k) clearance or submission would adversely affect our planned business and ability to introduce future products in a timely manner, which in turn would harm our revenue and potential future profitability.

 

If we or our suppliers and subcontractors fail to comply with the QSR, our business would suffer.

 

When we begin to manufacture and sell our FDA cleared products, we and our suppliers and subcontractors will be required to demonstrate and maintain compliance with the QSR. The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. The FDA enforces the QSR through periodic inspections. We anticipate that we and our suppliers will be subject to such inspections in the future. Our failure, or the failure of our suppliers and subcontractors, to take satisfactory corrective action in response to an adverse QSR inspection could result in enforcement actions, including a public warning letter, a shutdown of our manufacturing operations, a recall of our products, civil or criminal penalties or other sanctions, which would cause our sales and business to suffer.

 

RISKS RELATED TO OUR COMMON STOCK

 

Our current officer and director owns a substantial amount of our common stock, which gives him significant control.

  

Our current sole officer, sole director and principal founding stockholder, Bruce Schoengood, beneficially owns approximately 20.61% of the outstanding shares of our common stock and 100% of our Series A Preferred shares which carry super voting rights, which, when combined with his common stock holdings, constitutes approximately 99.42% of the voting rights of the Company. So long as this control is concentrated in the hands of Mr. Schoengood, he will continue to have significant control over electing our directors and determining the outcome of votes by our stockholders on corporate matters, including mergers, sales of all or substantially all of our assets, charter amendments and other matters requiring stockholder approval. This significant interest may have a negative impact on the market price of our common stock by discouraging third-party investors. In addition, such control by Mr. Schoengood will allow him to establish his own compensation and other benefits and perquisites in an amount and manner that would have a negative impact on our net income which in turn could negatively impact the market price, if any, of our common stock.

   

We may need to obtain additional capital, which additional funding may dilute our existing stockholders.

 

We may need additional funding to carry out all of our development plans. If we are unable to obtain sufficient capital on a timely basis, the development of our current or any future product candidates is likely to be delayed, and we could be forced to reduce the scope of our projects or otherwise limit or terminate our operations altogether.

 

We have not identified the sources for the additional financing that we will require, and we do not have commitments from any third parties to provide this financing. Certain investors may be unwilling to invest in our securities since we are quoted on the OTC Markets and not on a national securities exchange, particularly if there is only limited trading in our common stock on the OTC Markets at the time we seek financing. The volume and frequency of such trading has been limited to date. Sufficient funding through a financing may not be available to us at acceptable terms or at all. Any additional funding that we obtain in a financing is likely to reduce the percentage ownership of us held by our existing security holders. The amount of this dilution may be substantially increased if the trading price of our common stock has declined at the time of any financing from its current levels.

 

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Our articles of incorporation allow for our board to create a new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our Common Stock.

 

Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors have the authority to issue up to 1,000,000 shares of our preferred stock terms of which may be determined by the Board without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of Common Stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our Common Stock. In addition, our Board of Directors could authorize the issuance of a series of preferred stock that has greater voting power than our Common Stock, as it has with the Company’s Series A Preferred Stock or that is convertible into our Common Stock, as it has with the Company’s Series B Preferred Stock and Series C Preferred Stock, which could significantly decrease the relative voting power of our Common Stock or result in dilution to our existing stockholders.

 

You may experience dilution of your ownership interests because of the future issuance of additional shares of common stock.

 

In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our shareholders. We may also issue additional shares of our securities that are convertible into or exercisable for Common Stock, as the case may be, in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of Common Stock may create downward pressure on the value of our securities. There can be no assurance that we will not be required to issue additional shares of Common Stock, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which our shares may be valued or are trading in a public market.

 

There is currently limited market for our common stock, but if a sufficient market for our common stock does develop, our stock price may be volatile.

 

Our common stock currently quoted on the OTC Markets and there is a limited market for our common stock. Accordingly, trading of our stock is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for stockholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including:

 

  our actual or anticipated operating and financial performance;
     
  quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and cash flows, or those of companies that are perceived to be similar to us;
     
  changes in revenue, cash flows or earnings estimates or publication of reports by equity research analysts;
     
  speculation in the press or investment community;
     
  public reaction to our press releases, announcements and filings with the SEC;
     
  the limited amount of our freely tradable common stock available in the public marketplace;
     
  general financial market conditions;
     
  the realization of any of the risk factors presented in this annual report;
     
  the recruitment or departure of key personnel;
     
  changes in market valuations of companies similar to ours; and
     
  domestic and international economic, legal and regulatory factors unrelated to our performance.

 

In addition, future sales of our common stock by our stockholders could cause our stock price to decline and we cannot predict the effect, if any, that market sales of shares of the our common stock or the availability of shares for sale will have on the market price prevailing from time to time.

 

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We do not expect to pay dividends for the foreseeable future.

 

For the foreseeable future, it is anticipated that earnings, if any, that may be generated from our operations will be used to finance our operations and that cash dividends will not be paid to holders of our common stock.

  

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

 

As a public company, we are incurring significant legal, accounting and other expenses. As of July 8, 2015, the date we filed a Form 8-A for registration of our common stock, we are subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. Accordingly we are required to file reports with the Securities and Exchange Commission, including annual, quarterly and current reports with respect to our business and financial condition. We are also required to establish and maintain effective disclosure and financial controls and corporate governance practices. Compliance with the Exchange Act and the rules and regulations under the Exchange Act have substantially increased our legal and financial compliance costs and made some activities more time-consuming and costly. Our management and other personnel devote a substantial amount of time to these compliance initiatives. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance. We estimate that we will incur significant expenses in response to these requirements and will require additional funding to cover such costs.

 

There are legal restrictions on the resale of our shares of common stock offered, including penny stock regulations under the U.S. federal securities laws. These restrictions may adversely affect the ability of investors to resell their shares .

 

We anticipate that our common stock will continue to be subject to the penny stock rules under the Securities Exchange Act of 1934, as amended. These rules regulate broker/dealer practices for transactions in “penny stocks.”  Penny stocks are generally equity securities with a price of less than $5.00. The penny stock rules require broker/dealers to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker/dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our shares. These additional penny stock disclosure requirements are burdensome and may reduce all of the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, holders of our common stock may find it more difficult to sell their shares.

  

Some of our stockholders may have rescission rights with respect to their original purchases of our common stock.

 

If one of our stockholders were to allege that the original offering of our common stock was not made in compliance with applicable federal and/or states securities laws and regulations, and if a court were to agree with such an allegation, the stockholders may have the right to rescind their purchase of our common stock. In such an event, we would be required to offer to refund the original purchases made by the stockholders. Because we have only limited funds, such a refund could have an adverse impact on our financial situation. Furthermore, our involvement with any claim by a stockholder of revision rights may divert the attention of our management and force us to expend resources to defend against such claims.

 

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

Statements contained in this Annual Report on Form 10-K may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Annual Report on Form 10-K, including the risks described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in this Annual Report on Form 10-K and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to:

 

  ☐      our ability to raise funds for general corporate purposes and operations, including our clinical trials;
     
  ☐      the commercial feasibility and success of our technology;
     
  ☐      our ability to recruit qualified management and technical personnel;
     
  ☐      the success of our clinical trials;
     
  ☐      our ability to obtain and maintain required regulatory approvals for our products; and
     
  ☐      the other factors discussed in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K.

 

Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this current report.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

There are no unresolved staff comments.

 

ITEM 2. PROPERTIES

 

Our corporate address is located at 4400 Route 9 South, Suite 1000, Freehold NJ 07728 and our telephone number is (732) 786-8044. Our administrative office, which as a lease ending 2021, is located at 9 South Main Street, Suite 9, Marlboro NJ 07746. The office space is leased at a monthly cost of approximately $2,075. There are currently no proposed programs for the renovation, improvement or development of the facilities currently used. We believe these existing facilities are adequate for the foreseeable future. 

 

ITEM 3. LEGAL PROCEEDINGS

 

We are not currently a party to any legal or administrative proceedings. Our current sole officer and director has not been convicted in a criminal proceeding nor has he been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

  

  16

 

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is currently quoted under the symbol “MFST” on the OTC Markets. Our common stock began trading on the OTC Bulletin Board on September 14, 2012. The following table sets forth the quarterly high and low sales prices of our common stock since we began trading. Such prices are inter-dealer quotations without retail mark-ups, mark-downs or commissions, and may not represent actual transactions.

 

Fiscal Year Ending December 31, 2019            
Quarter Ended   High $     Low $  
March 31, 2019     0.15       0.0265  

 

Fiscal Year Ending December 31, 2018            
Quarter Ended   High $     Low $  
December 31, 2018     0.144       0.031  
September 30, 2018     0.40       0.0336  
June 30, 2018     0.60       0.30  
March 31, 2018     0.70       0.30  

  

Fiscal Year Ending December 31, 2017            
Quarter Ended   High $     Low $  
December 31, 2017     1.60       0.40  
September 30, 2017     2.70       1.30  
June 30, 2017     9.65       1.80  
March 31, 2017     12.00       2.70  

 

Our common stock is subject to Rule 15g-9 of the Exchange Act, known as the Penny Stock Rule which imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, brokers/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction prior to sale. The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in that security is provided by the exchange or system. The Penny Stock Rules requires a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements have the effect of reducing the level of trading activity in the secondary market for our common stock. As a result of these rules, investors may find it difficult to sell their shares.

 

As of April 12, 2019, we had 5,808,883 shares of common stock issued and outstanding and 65 stockholders of record.

  

Dividend Policy

 

We have not paid any cash dividends on our common stock. It is anticipated that our future earnings will be retained to finance our continuing development. The payment of any future dividends will be at the discretion of our board of directors and will depend upon, among other things, future earnings, any contractual restrictions, success of business activities, regulatory and corporate law requirements and our general financial condition.

 

  17

 

 

Recent Sales of Unregistered Securities

 

During the period covered by this report, we issued and sold the following securities without registration under the Securities Act.

 

Common Stock :

 

During the fiscal year ended December 31, 2018, the Company issued 1,913,850 shares of Common Stock upon conversions of an aggregate principal amount equal to approximately $284,020 outstanding convertible promissory notes.

 

During the fiscal year ended December 31, 2018, the Company issued an aggregate -0- shares of Common Stock upon conversion of an aggregate of -0- shares of Series B Preferred.

 

During the fiscal year ended December 31, 2018, the Company issued an aggregate of 719,553 shares of restricted Common Stock for consulting services.  

 

Subsequent to the fiscal year ended December 31, 2018, the Company issued an aggregate of -0- shares of restricted Common Stock for consulting services.

 

Subsequent to the fiscal year ended December 31, 2018, the Company issued 2,049,043 shares of Common Stock upon conversions of an aggregate principal amount equal to approximately $34,038 outstanding convertible promissory notes.

 

Preferred Stock:

 

On June 16, 2017, the Company issued 450,000 shares of the Company’s Series A Preferred Stock (the “Series A Preferred”) to the Company’s Chief Executive Officer, Bruce Schoengood, increasing his holdings to 500,000 shares. The Series A Preferred are not convertible into any series or class of stock of the Company, are not entitled to receive dividends and are not entitled to distribution from the assets of the Company in the event of any liquidation, dissolution, or winding up of the Company. Each record holder of Series A Preferred have the right to vote on any matter with holders of the Company’s common stock and other securities entitled to vote, if any, voting together as one (1) class. Each record holder of Series A Preferred has that number of votes equal to two thousand (2,000) votes per share of Series A Preferred held by such holder.

 

On March 8, 2019, the Company issued sixty (60) shares of its Series C Preferred to Bruce Schoengood. Each share of Series C Preferred has a $100.00 stated value but are not entitled to dividend rights. Subject to a beneficial ownership limitation equal to 4.99% and a prohibition on conversions within the first sixty days of its issuance, each share of Series C Preferred is convertible into 25,000 shares of Common Stock. Holders of Series C Preferred are entitled to vote, on an as-converted basis, together with holders of Common Stock on all actions to be taken by the shareholders of the Company. These shares were granted to Mr. Schoengood as a reward for Mr. Schoengood’s efforts and an incentive for Mr. Schoengood’s continued efforts in expanding the Company’s offerings and businesses in the medical pain management markets.

 

Promissory Notes :

 

On March 8, 2016, in connection with its entry into a Product and Know-How License Agreement with Medical Lasers Manufacturer, Inc., a Florida corporation doing business as Laser Lab Corp., the Company issued a promissory note in principal amount of $150,000 and bearing interest at 10% per annum. The Company and the holder of the Promissory Note entered into certain amendments and extensions to change the maturity date to September 8, 2019 and to allow the holder of the Promissory Note to convert principal and interest under the Promissory Note at a conversion price per share equal to 50% of the lowest quoted trading price of the Company’s common stock for the twenty trading days prior to the date of such conversion election. At December 31, 2018, the remaining principal balance of the Promissory Note was equal to $51,005. See Section entitled “Transactions with related persons, promoters and certain control persons” under Item 13 of this Annual Report.

 

On May 1, 2017, the Company issued a convertible promissory note in principal amount equal to $131,250, which promissory note matures on May, 1, 2018 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $15,250.

 

  18

 

 

On June 7, 2017, the Company issued a convertible promissory note in principal amount equal to $125,000, which promissory note matures on June 7, 2018 and accrues interest at a rate of 8 % per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $125,000.

 

On July 10, 2017, the Company issued a convertible promissory note in principal amount equal to $125,000, which promissory note matures on July 10, 2018 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $125,000.

 

On August 2, 2017, the Company issued a convertible promissory note in principal amount equal to $50,000, which promissory note matures on August 2, 2021 and accrues interest at a rate of 5% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $42,200.

 

On August 15, 2017, the Company issued a convertible promissory note in principal amount equal to $125,000, which promissory note matures on August 15, 2018 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $125,000.

 

On January 25, 2018, the Company issued a convertible promissory note in principal amount equal to $78,750, which promissory note matures on January 25, 2019 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $78,750.

 

On May 26, 2018, the Company issued a convertible promissory note in principal amount equal to $20,000, which promissory note matures on September 15, 2017 and accrues interest at a rate of 10% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 50% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $16,650.

 

On June 4, 2018, the Company issued a convertible promissory note in principal amount equal to $52,500, which promissory note matures on June 4, 2019 and accrues interest at a rate of 8 % per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $52,500.

 

On October 5, 2018, the Company issued a convertible promissory note in principal amount equal to $58,000, which promissory note matures on April 5, 2020 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $58,000.

 

On November 19, 2018, the Company issued a convertible promissory note in principal amount equal to $65,000, which promissory note matures on May 11, 2020 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $65,000.

 

  19

 

 

On January 24, 2019, the Company issued a convertible promissory note in principal amount equal to $43,000, which promissory note matures on July 20, 2020 and accrues interest at a rate of 12% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $43,000.

 

On February 4, 2019, the Company issued a convertible promissory note in principal amount equal to $38,000, which promissory note matures on August 30, 2020 and accrues interest at a rate of 12% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $38,000.

 

On February 20, 2019, the Company issued a convertible promissory note in principal amount equal to $54,000, which promissory note matures on August 20, 2020 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $54,000.

 

On February 25, 2019, the Company issued a convertible promissory note in principal amount equal to $65,000, which promissory note matures on February 25, 2020 and accrues interest at a rate of 12% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 35% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $65,000.

 

On February 27, 2019, the Company issued a convertible promissory note in principal amount equal to $51,500, which promissory note matures on August 27, 2020 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 45% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $51,500.

 

On March 22, 2019, the Company issued a convertible promissory note in principal amount equal to $43,000, which promissory note matures on August 21, 2020 and accrues interest at a rate of 8% per annum.  The promissory note is convertible into shares of Common Stock at a conversion price equal to a 35% discount to certain market derived per share pricing.  After taking into account any and all repayments and conversions made under the promissory note, the remaining principal amount is equal to $43,000.

   

All of the previously described issuances of securities were made pursuant to the exemption from registration at Section 4(a)(2) and/or Rule 506 of Regulation D under the Securities Act for either transactions not involving a public offering or for transactions with an “accredited investor” as defined under the Securities Act. Common Stock issued upon the exercise of conversion rights were made pursuant to Section 3(a)(9) of the Securities Act for securities exchanged by an issuer with its existing security holders exclusively.

 

  20

 

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

We did not purchase any of our shares of common stock or other securities during our fiscal years ended December 31, 2017 and 2018.

        

Equity Compensation Plan Information

 

We have the following stock-based compensation plans: the 2016 Equity Incentive Plan, the MFST Equity Incentive Plan, the 2017 Equity Incentive Plan, the 2018 Equity Incentive Plan and the 2019 Equity Incentive Plan. As of April 12, 2019, there were no shares available for issuance under the 2016 Equity Incentive Plan and the MFST Equity Incentive Plan and there were 17,000 share available for issuance under the 2017 Equity Incentive Plan and there were 170,500 share available for issuance under the 2018 Equity Incentive and there were 4,723,000 share available for issuance under the 2019 Equity Incentive Plan.

 

ITEM 6. SELECTED FINANCIAL DATA

 

We are a smaller reporting company, as defined by Rule 229.10(f)(1) and therefore are not required to provide the information required by this Item.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

This section must be read in conjunction with the Audited Financial Statements included in this Annual Report.

 

Plan of Operation  

 

Medifirst Solutions, Inc. (“Medifirst” and the “Company”) was incorporated in Nevada in November 2010. Our principal executive office is located at 4400 U.S. 9 South, Suite 1000, Freehold NJ, 07726, and our telephone number is (732) 786-8044. Our website address is www.medifirstsolutions.com. The Company began as a development stage company focused on developing products within the healthcare market for both consumer and professional applications. Medifirst has had several different products and related distribution and sales services which include: its own line of disposable electronic cigarettes (“e-cigs”), Light Therapy for therapeutic healthcare use and home water machines which made water from air. In 2015, the Company made a strategic decision to add laser technology to its health and wellness division and discontinue its efforts with other products and divisions. Management believed that it was in the best interest of the Company and its shareholders to narrow its focus and business to developing its laser technology, which lasers are expected to target professionals that treat pain and inflammation, as well as cosmetic and skincare related conditions. In connection with the changed focus, the Company began to develop a product that if successfully cleared by the U.S. Food and Drug Administration (“FDA”), would be the first in a series of proprietary medical devices for the Company. The Company entered into an exclusive manufacturing agreement to produce what is now its hand-held mobile laser system known as “The Time Machine Program” for which the Company purchased the registered trademark. Furthermore, the Company purchased inventory from the developer of the lasers.

  

Additionally, Medifirst, through its wholly-owned subsidiary Medical Laser Manufacturer, Inc., entered into a Product and Know-How License Agreement (the “License Agreement”) with Laser Lab Corp to license the use of various intellectual property in connection with seeking regulatory approval for and marketing, distributing and selling The Time Machine Series Lasers (“TM Lasers”). The License Agreement grants a license to the Company to use various technology, trade secrets, invention records, research records, reports and data, test results, clinical studies, engineering and technical data, designs, production specifications, processes, methods, procedures, facilities and know-how related to the inventions identified in the License Agreement, which inventions include the infrared laser in the TM Lasers for which the Company previously filed a Premarket Notification 510(k) submission with the FDA. Although the License is not exclusive, Laser Lab Corp may not license the know-how or inventions to a third party and may only directly, or through its wholly-owned subsidiary, use the know-how and inventions. In addition to the license granted to the Company, the License Agreement provides for an option to license other fields of use of the infrared laser in the TM Lasers, as well as additional wavelengths and colors, allowing the Company to develop a broader range of product offerings in the future. Furthermore, Laser Lab Corp granted the Company a right of first refusal to consider matching any bona fide offer to license other technologies of Laser Lab Corp.

 

  21

 

 

After having received clearance to market the infrared laser in the TM Lasers, the Company has completed its internal controls and procedures as required by the FDA and has initiated its sales division, which has begun soliciting sales in both the U.S. and overseas.

 

During fiscal year 2015, we submitted to the FDA a Premarket Notification 510(k) for two of our lasers in the TM Lasers, which submission noted the intended use of the lasers to treat specific skin conditions, including Vascular and Pigmented Lesions, as well as relief of muscle and joint pain, muscle spasms and inflammation. On July 8, 2016, we received clearance from the FDA to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device.

 

Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve (12) months. Our auditors’ opinion is based on the uncertainty of our ability to establish profitable operations. The opinion results from the fact that we have not generated significant revenues.  Accordingly, we must raise cash from operations or from investments by others in the Company to continue our operations.

 

Our sole officer and director is responsible for our managerial and organizational structure, which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, he will be responsible for the administration of the controls. Should he not have sufficient experience, he may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the SEC which ultimately could cause you to lose your investment.

   

Results of Operations

 

Fiscal Year Ended December 31, 2018

 

Revenues  

 

During the year ended December 31, 2018 and 2017, we generated $29,175 and 29,995 in revenues, respectively. The company is still in developmental stage and does not generate significant revenue. We have been working to secure affiliations and consultants for international markets and the Company anticipates initiating registration for several Latin American countries as well as securing a distributor in South East Asia in 2019. Additionally, if the company is successful in further fund raising or garnishing more revenue, more resources will be allotted to US marketing and sales.

 

Expenses

 

For the year ended December 31, 2018 and 2017, expenses were $792,544 and $980,508, respectively. The reason for the decrease in expenses was primarily due to decreases in advertising and promotion, consulting fees, professional fees, and lab testing. As more funds are secured either by revenue or fund raising, The Company anticipates a more aggressive approach to R&D and marketing and promotions.

  

Legal and Accounting

 

For the year ended December 31, 2018 and 2017, professional fees were $130,821 and $224,286, respectively.

 

The substantial decrease was due to reduced accounting, consulting and professional fees incurred for year 2018. Our legal fees are directly related to business opportunities including distribution, affiliations, partnerships and fund raising.

 

This is no exact flow or timetable when these possible ventures and expenses occur. Regarding accounting expenses, as the business increases and grows we do expect to see an increase in expenses.

 

Other Income/(Expense)

 

For the year ended December 31, 2018 and 2017, other expenses were ($680,909) and ($606,265), respectively consisting of interest expense and changes in fair value of derivatives. These changes due are due to the changes in fair value of derivatives and interest expense on debt, amortization of original issue discount, amortization of deferred financing costs, and derivative discount amortization. For the year ended December 31, 2018, other income in the amount of $376,501 included gain on the extinguishment of debt, interest income and changes in fair value of derivatives.

 

Net Income/(Loss)

 

For the year ended December 31, 2018 and 2017 the company had a net loss of ($1,068,534) and ($1,557,836).

 

  22

 

 

Liquidity and Capital Resources

 

Since incorporation, we have financed our operations through the private placement of our common stock to selected accredited investors and periodic borrowings from investors. At December 31, 2018 and 2017, our principal sources of liquidity included cash and cash equivalents of $83,387 and $287,569, respectively.

 

As of December 31, 2018, we did not have any significant commitments for capital expenditures.

 

If we do not generate sufficient cash flow to support our operations over the next twelve (12) months, in order to continue as a going concern we may need to raise additional capital by issuing capital stock in exchange for cash.  There are no formal or informal agreements to attain such financing.  The Company’s ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: investors’ perception of, and demand for, securities of companies in our industry; conditions of the U.S. and other capital markets in which we may seek to raise funds; future results of operations, financial condition and cash flow. Therefore, the Company’s management cannot assure that financing will be available in amounts or on terms acceptable to the Company, or if at all. Any failure by the Company’s management to raise additional funds on terms favorable to the Company could have a material adverse effect on the Company’s liquidity and financial condition.

 

Critical Accounting Policies

 

Our significant accounting policies are summarized in Note 1 of our consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

 

Off Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements.

 

Recently Adopted Accounting Pronouncements

 

Please see Note 1 of our consolidated financial statements that describe the impact, if any, from the adoption of Recent Accounting Pronouncements.

  

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company, as defined by Rule 229.10(f)(1) and are not required to provide the information required by this Item.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The Company’s consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

 

It is the opinion of management that the audited consolidated financial statements for the calendar year ended December 31, 2018 include all adjustments necessary in order to ensure that the audited consolidated financial statements are not misleading.

 

  23

 

  

MEDIFIRST SOLUTIONS, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2018 and 2017

  

TABLE OF CONTENTS

 

Financial Statements   
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2017 and December 31, 2018 F-3
   
Consolidated Statements of Operations for the years ended December 31, 2017 and 2018 F-4
   
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017 and 2018 F-5
   
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2018  F-6
   
Notes to Consolidated Financial Statements F-7 - F-25

 

F- 1

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of Medifirst Solutions, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Medifirst Solutions, Inc. (“the Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company has incurred significant, recurring losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 11 of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

 

We have served as the Company’s auditor since 2015.  

Spokane, Washington

April 12, 2019    

 

F- 2

 

  

Medifirst Solutions, Inc.

Consolidated Balance Sheets

December 31, 2018 and December 31, 2017

  

    December 31, 2018     December 31, 2017  
ASSETS            
             
Current Assets:            
Cash   $ 83,387     $ 287,569  
Inventory     32,677       33,435  
Prepaid items     -       -  
Total current assets     116,064       321,004  
                 
Property, Plant and Equipment, net     592       1,232  
                 
Other Assets                
Security Deposit     650       650  
Intangible Asset -License Agreement, net     101,252       116,252  
Total other assets     101,902       116,902  
                 
                 
Total Assets   $ 218,558     $ 439,138  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
Liabilities                
Accounts payable and accrued expenses   $ 221,770     $ 97,621  
Accrued expenses - officer’s compensation     388,981       401,079  
Due to related party     8,921       8,921  
Loans payable - stockholders     8,375       14,499  
Note Payable for license agreement     -       -  
Convertible notes payable     522,446       280,351  
Convertible notes payable - related party     51,005       133,750  
Derivative Liabilities     263,468       251,886  
Total current liabilities     1,464,966       1,188,107  
                 
Commitments & Contingencies (Note 8)     -       -  
                 
Stockholders’ Equity:                
Series A preferred stock, $0.0001 par value; 1,000,000 shares authorized, 500,000 and 500,000 shares issued and outstanding, respectively     50       50  
Series B convertible preferred stock, $0.0001 par value; 50,000 shares authorized, 8,000 and 8,000 shares issued and outstanding, respectively     1       1  
Series C convertible preferred stock, $0.0001 par value; 5,000 shares authorized, 177 and -0- shares issued and outstanding, respectively     -       -  
Common stock, $0.0001 par value; 4,000,000,000 shares authorized, 3,482,840 and 849,437 shares issued and outstanding, respectively     348       85  
Additional paid in capital     3,486,856       2,916,024  
Accumulated deficit     (4,733,663 )     (3,665,129 )
Total Stockholders’ Equity     (1,246,408 )     (748,969 )
                 
Total Liabilities & Stockholders’ Equity   $ 218,558     $ 439,138  

 

F- 3

 

 

Medifirst Solutions, Inc.

Consolidated Statements of Operations

For the Years Ended December 31, 2018 and 2017

  

    2018     2017  
             
Product sales, net     6,550       29,995  
Consulting Income     22,625       -  
      29,175       29,995  
Cost of goods sold     757       1,058  
Gross income     28,418       28,937  
                 
Expenses:                
Officer’s compensation     150,000       112,500  
Advertising and promotion     5,001       63,548  
Computer and internet     3,357       4,130  
Consulting fees     363,208       435,589  
Professional fees     130,821       224,286  
Rent     30,930       20,713  
Travel     7,494       12,903  
Lab testing     -       7,107  
Dues and subscriptions     2,269       3,720  
General and administrative     99,464       96,012  
Total operating expenses     792,544       980,508  
                 
Net loss from Operations before other income, expenses     (764,126 )     (951,571 )
                 
Other income and (expense)                
Interest expense     (680,909 )     (405,144 )
Interest income     2       -  
Gain on extinguishment of debt     34,235       -  
Change in fair value -derivatives     342,264       (201,121 )
                 
Net loss before provision for income tax   $ (1,068,534 )   $ (1,557,836 )
                 
Provision for income taxes     -       -  
                 
Net Loss   $ (1,068,534 )   $ (1,557,836 )
                 
Loss per common share - Basic and fully diluted   $ (0.61 )   $ (2.82 )
                 
Weighted average number of shares outstanding - Basic and fully diluted     1,763,061       551,556  

 

F- 4

 

  

Medifirst Solutions, Inc.

Consolidated Statement of Stockholders’ Equity

For the Years Ended December 31, 2018 and 2017

 

    Common Stock     Preferred Class A     Preferred Class B     Preferred Class C     Additional Paid in     Accumulated     Total Stockholders’  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     Equity  
Balance - January 1, 2017     225,848       23       50,000       5       26,100       3                                      1,232,996       (2,107,293 )     (874,266 )
                                                                                         
Issuance of common shares upon conversions of notes payable     426,539       43                                                       505,996               506,039  
Issuance of common shares for services rendered     188,000       19                                                       474,180               474,199  
Issuance of 450,000 shares of Series A Preferred Stock                     450,000       45                                                       45  
Issuance of common shares upon conversion of 18,100 shares of Series B Preferred Stock     9,050       1                       (18,100 )     (2 )                                     (1 )
Additional paid in capital from derivative liability on debt conversion                                                                     617,991               617,991  
Adjustment for reverse stock split                                                                     84,861                  
Net Loss                                                                             (1,557,836 )     (1,557,836 )
Balance - December 31, 2017     849,437       85       500,000       50       8,000       1       -       -       2,916,024       (3,665,129 )     (748,969 )
Issuance of common shares upon conversions of notes payable     1,913,850       191                                                       131,769               131,960  
Issuance of common shares for services rendered     719,553       72                                                       82,062               82,134  
Issuance of preferred shares for services rendered                                                     177       -       204,182               204,182  
Additional paid in capital from derivative liability on debt conversion                                                                     152,819               152,819  
Net Loss                                                                             (1,068,534 )     (1,068,534 )
Balance - December 31, 2018     3,482,840       348       500,000       50       8,000       1       177       -       3,486,856       (4,733,663 )     (1,246,408 )

 

F- 5

 

 

Medifirst Solutions, Inc.

Consolidated Statement of Cash Flows

For the Years Ended December 31, 2018 and 2017

 

    2018     2017  
             
Cash flows from operating activities:            
Net loss   $ (1,068,534 )   $ (1,557,836 )
Adjustments to reconcile net loss to net cash used by operating activities:                
Depreciation & amortization expense     15,640       21,890  
Gain on debt settlement     (34,235 )     -  
Stock Based Compensation     286,315       493,025  
Change in assets and liabilities                
Accounts payable and accrued expenses     112,051       84,811  
Change in fair value - derivatives     (342,264 )     201,121  
Amortization of debt discount & other financing costs     610,511       321,983  
Related party and stockholder’s loan     (6,124 )     -  
Prepaid expenses     -       15,720  
Inventory     758       (19,412 )
Net cash used by operating activities     (425,882 )     (438,698 )
                 
Cash flows from investing activities:                
None     -       -  
Net cash used by investing activities     -       -  
                 
Cash flows from financing activities:                
Proceeds from stockholder loan     -       5,000  
Principal payments on debt     (32,550 )     -  
Proceeds from sale of Convertible notes payable     254,250       556,250  
Net cash provided by financing activities     221,700       561,250  
                 
Net increase (decrease) in cash     (204,182 )     122,552  
Cash at beginning of period     287,569       165,017  
Cash at end of period   $ 83,387     $ 287,569  
                 
Supplemental cash flow information:                
Cash paid during the period for:                
Income taxes   $ 1,169     $ 1,826  
                 
Non-cash investing and financing activities:                
Common stock issued for convertible debt-related party   $ 30,195     $ -  
                 
Common stock issued for note interest and note conversions   $ -     $ 5,230  
                 
Derivative liability extinguished upon conversion   $ 152,820     $ 617,990  
                 
Common stock issued for convertible debt with derivatives   $ 109,224     $ 544,323  
                 
Preferred stock exchanged for common stock   $ -     $ 905  
                 
Accounts Payable exchanged for promissory note   $ -     $ 15,000  
                 
New discounts associated with derivatives on convertible debt   $ 328,666     $ 505,607  
                 
Related party note reclassified to promissory note   $ 20,000     $ -  

 

F- 6

 

 

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Medifirst Solutions, Inc. (“MSI” or the “Company”) was incorporated in Nevada in November 2010. The Company has not generated significant sales to date. The Company intends to have a diverse product line of consumer products. Since inception, the Company has been engaged in business planning activities, including researching the industry, identifying target markets for the Company’s products, developing the Company’s models and financial forecasts, performing due diligence regarding potential geographic locations most suitable for establishing the Company’s offices and identifying future sources of capital. At the present time, the Company is building products and affiliations in and related to the cosmetic healthcare industry. The company has started to hire a salesforce and sign distribution agreements in anticipation of future sales.

 

In July 2016, Medifirst, in response to its Premarket Notification 510(k) submission for “The Time Machine” Series Laser, received clearance from the U.S. Food and Drug Administration (“FDA”) to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device. The Company is actively putting together a sales and distribution team to offer our lasers in the US and foreign markets.

 

Pursuant to a sale and purchase agreement dated August 19, 2015 between the Company and the Company’s president, the Company acquired 100% of the equity interests in Medical Lasers Manufacturer, Inc. (“MLM”) with the total purchase price of 20,000 shares of the Company’s common stock at $0.001 per share (or $20). The fair value of the acquired entity was $20.

 

The transaction was considered as a business acquisition and accordingly the acquisition method of accounting has been applied. MLM had no assets at the date of the business combination.

 

On April 18, 2018, the Company incorporated Concierge Concepts Rx (CCRx), in the State of New Jersey, to be an 80% majority-owned subsidiary. In consideration for his contribution of know-how, CCRx’s co-founder, Walter Molokie, CCRx has agreed to issue a 20% minority interest in CCRx to Mr. Molokie and/or his designees. On July 1, 2018 the Company acquired 100% of the equity interest in Concierge Concepts Rx, Inc. (“CCRx”) with the total purchase price of $20. The fair value of the acquired entity was $20 since the entity was just recently formed and had no identifiable assets or liabilities. The $20 cash payment is for the purchase of CCRx common stock upon acquisition. Medifirst launched Concierge Concepts Rx, a new division focused on the pharmaceutical industry.CCRx that provides unique specialty drug consulting and niche billing services to independent pharmacies and retail pharmacy chains. This division commenced operations in the quarter ended September 30, 2018 with limited activity and is included in the accompanying consolidated financial statements.

 

The Consolidated financial statements include the accounts of MSI and its wholly owned subsidiaries, MLM and CCRx and its majority owned subsidiary, USA Pharma Corporation. All material intercompany balances and transactions have been eliminated in consolidation. There was no activity for USA Pharma Corporation for the year ended December 31, 2018.

 

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of Medifirst Solutions Inc. and its wholly owned subsidiaries (Medical Laser Manufactures, Inc. and Concierge Concepts Rx) and its majority owned subsidiary (USA Pharma Corporation) (collectively referred to as the “Company”). All material intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial position of the Company as of December 31, 2018 and 2017, the consolidated results of its operations for the years ended December 31, 2017 and 2018, and the consolidated cash flows for the years ended December 31, 2018 and 2017.

 

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

 

Effective July 23, 2018, the Company effected a 1-for-1,000 reverse stock split of its issued and outstanding common stock. The number of shares of common stock issued and outstanding post- reverse stock split is 1,404,073. All fractional shares have been rounded up to the next whole share. There is no reduction in the number of the Company’s shareholders of record. Unless otherwise noted, impacted amounts and share information included in the financial statements and notes thereto have been retroactively adjusted for the reverse stock split as if such reverse stock split occurred on the first day of the first period presented.

  

F- 7

 

  

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

Revenue Recognition

 

In general, the Company follows ASC 605 and records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenues streams of the Company:

 

Revenue is recognized at the time the product is delivered or services are performed. Provision for sales returns are estimated based on the Company’s historical return experience. Revenue is presented net of returns.

 

The Company also derives consulting revenue from its CCRx division. Such revenue is recognized at the time services are performed.

 

Accounts Receivable

 

The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining an allowance for potential credit losses. Accounts receivable is reported net of the allowance for doubtful accounts. The allowance is based on management’s estimate of the amount of receivables that will actually be collected. The Company has not recorded an allowance for doubtful accounts as of December 31, 2018 or 2017. There are no customer account receivables as of December 31, 2018 or 2017.

 

Inventory

 

Inventory consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value. Finished goods inventory includes hand held laser devices, their carrying cases and goggles.

 

Equipment

 

Equipment, consisting of computer equipment, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, of five years.

 

Long-Lived Assets

 

The Company reviews long-lived assets, such as equipment, for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds the estimated future cash flows, an impairment loss will be recorded by the amount the carrying value exceeds the fair value of the asset.

 

Intangible Asset- Licensing Agreement

 

On March 8th 2016 (with an effective date of October 1, 2015), the company, through its wholly-owned subsidiary (“Licensee”), entered into a Product and Know-How License Agreement (“Agreement”) with a Florida Corporation (“Licensor”) which is owned by a related party - the son of the Company’s CEO to license certain laser technology (the “Technology”). The license provides an irrevocable, nontransferable, royalty-bearing license, with a right of sublicense with respect to the Technology (the “License”), throughout the Territory in the Field of Use, whether or not under the Licensed Patent, to:

 

- use or submit or deliver the Technology and/or any Product to any regulatory body throughout the Territory for purposes of obtaining approval to make, Sell, offer for Sale, import, export and distribute the Technology or Products; and

 

- use or submit or deliver the Technology and/or any Product to any regulatory body throughout the Territory for purposes of obtaining approval to make, Sell, offer for Sale, import, export and distribute the Technology or Products; and

 

- use or copy the Technology and/or any Product; and

 

- market, make, have made, Sell, offer for Sale, import and distribute Products; and

 

- sublicense the Technology; and

 

- prepare, or have prepared on its behalf, modifications, enhancements and/or derivative works of the Technology.

 

In connection with the license granted, Licensor hereby grants to Licensee a license to the Licensed Patents, whether now existing or hereafter acquired.

 

F- 8

 

  

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

The consideration for the licensing agreement consisted of the issuance of 25,000 Series B Preferred stock shares to the Licensor (at par) plus a $150,000 promissory note issued by the Company to the licensor. On September 15, 2017 the Note was amended to include provisions to allow conversion of the Note into common stock of the Company. On September 25, 2017, $16,250 in principal on this note was satisfied by the conversion into 25,000,000 shares of the Company’s common stock. During the quarter ended June 30, 2018, the original noteholder assigned $20,000 in principal to an unrelated third-party. The principal balance on this note as of December 31, 2018 is $51,005 to the original noteholder and $16,650 in principal balance to the new unrelated third-party noteholder. There were $32,550 in cash principal paydowns to the original noteholder during the year ended December 31, 2018. There were an additional $33,345 in conversions to common stock that took place on these two notes during the year ended December 31, 2018.

 

The last part of the consideration in this license agreement is the royalty payments which have not taken effect yet since they are based on sales for which the company has had only minimum thus far.

 

The licensing agreement is for a ten year period effective from October 1, 2015. The cost of the licensing agreement is being amortized over it’s ten-year period and charged to income on a straight-line basis.

   

Product Warranty

 

We generally provide a one-year warranty on our products. Currently no material evaluations or studies have been performed to obtain warranty data since there are so few sold products outstanding. As sales increase, the Company will estimate future warranty costs from historical data and trends of product reliability and costs of repairing and replacing defective products.

 

Debt Issue Costs and Debt Discount

 

The Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized over the life of the debt to interest expense. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts are immediately expensed. Beginning in 2015, the Company adopted ASU 2015-03: Simplifying the Presentation of Debt Issuance Costs and has reflected the deferred financing costs as a direct reduction of the related debt (See table included in Note 5 to Consolidated Financial Statements).

 

Original Issue Discount

 

For certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.

 

Derivative Liabilities

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. The Company assessed its securities for purposes of determining the proper accounting treatment and valuation as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37 Fair Value in Financial Instruments ; Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities ; and Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05.

 

In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once the derivative liabilities are determined, they are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Financial Instruments

 

The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and other accrued liabilities approximate their fair values.

 

Segment Information

 

The Company follows Accounting Standards Codification (“ASC”) 280, “Segment Reporting”. The Company currently operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

 

F- 9

 

  

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

Net Income (Loss) Per Common Share

 

The Company calculates net income (loss) per share based on the authoritative guidance. Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. As described in Note 5 to the financial statements, as of December 31, 2018, convertible debt can be converted into approximately 727,323 shares of common stock.

 

Income Taxes

 

The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

 

The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits as of December 31, 2018, and does not expect this to change significantly over the next 12 months.

 

Stock-Based Compensation

 

The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the issuance date.

 

Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2018, the Company had $83,387 in cash equivalents.

 

Recent Pronouncements

 

In May 2014, FASB and IASB issued a new joint revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition. The core principle of the standard is that revenue recognition should depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard is effective for the Company to annual reporting periods beginning after December 15, 2017 (that is, a public organization is required to apply the new revenue standard beginning in the first interim period within the year of adoption). Additionally, the Board decided to permit public organizations to adopt the new revenue standard early, but not before the original public organization effective date (that is, annual periods beginning after December 15, 2016). A public organization should apply the new revenue standard to all interim reporting periods within the year of adoption. The Company has evaluated the impact of this ASU on the consolidated financial statements and has determined, at this time, the ASU’s implementation would not have a material impact on revenue recognition. See below - Accounting Standards Update 2016-10 - Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing

 

In June 2018, the FASB issued Accounting Standards Update 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company will adopt the provisions of ASU 2018-07 in the quarter beginning January 1, 2019. The adoption of ASU 2018-07 is not expected to have any impact on the Company’s financial statement presentation or disclosures. The Company does not plan to have any equity instruments that will need revaluation under this new standard.

  

F- 10

 

 

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

In April 2016, the FASB issued Accounting Standards Update 2016-10 - Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.

 

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220)”. The objective of the ASU is to allow a reclassification from accumulated comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company will adopt the new standard on January 1, 2019 and use the effective date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the “package of expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification and initial direct costs. The Company does not expect to elect the use-of hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The new standard also provides practical expedients for the Company’s ongoing accounting. The Company currently expects to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also expects to elect the practical expedient to not separate lease and non-lease components for all of its leases other than leases of real estate. The Company expects the most significant change will be related to the recognition of right-of-use assets and lease liabilities on the Company’s balance sheet for real estate operating leases. The Company is currently in the process of evaluating the impact of ASU 2016-02 on the Company’s outstanding leases. The Company has not yet determined, as a result of the adoption of this guidance, how much right-of-use assets and lease liabilities will be recorded. The Company also expects that the adoption of this guidance will result in additional lease-related disclosures in the footnotes to its consolidated financial statements.

 

During the fiscal year ended December 31, 2018, Company was an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act and the extended transition period applies to all aforementioned ASUs, until such time as the Company is no longer an “emerging growth company”. However, as of January 1, 2019, the Company no longer meets the definition of an “emerging growth company” and for periods subsequent to December 31, 2018, the Company will cease to take advantage of the extended transition period applied to such ASUs.

 

F- 11

 

 

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

Note 2. PROPERTY, PLANT AND EQUIPMENT (NET)

 

Equipment is recorded at cost and consisted of the following at December 31, 2018 and December 31, 2017:

  

    December 31, 2018     December 31, 2017  
Computer equipment   $ 8,956     $ 8,956  
Less: accumulated depreciation     (8,365 )     (7,725 )
                 
    $ 592     $ 1,232  

  

Depreciation expense was $640 and $640, for the years ended December 31, 2018 and 2017 respectively.

  

Note 3. DUE TO RELATED PARTY

 

The Company was indebted to a related party through common management in the amount of $8,921 at December 31, 2018 and December 31, 2017, respectively. The loan bears no interest and is payable on demand. See Note 10 for additional related party transactions.

 

Note 4. LOANS PAYABLE - STOCKHOLDERS

 

During the periods ended December 31, 2018 and 2017 a stockholder of the Company advanced the Company $557 and $-0- respectively. The loan has a balance of $8,955 at December 31, 2018 and $8,398 at December 31, 2017, respectively. The loan bears no interest and is payable on demand.

 

In December 2012, the Company issued a promissory note to a stockholder in the amount of $5,000 with interest at 10% per annum. Principal and interest were due and payable on June 2, 2013. In April 2014, the note was amended to provide the note holder with the option to convert the note to the Company’s common stock at $0.0001 per share. Subsequently, in 2014, in a private transaction, the note holder transferred $2,500 of note principal to third parties and the new holders converted their holdings into 2,500 shares of the Company’s common stock. During 2015, the original note holder transferred an additional $2,400 of note principal to third parties who converted their holdings into 2,400 shares of the Company’s common stock. At December 31, 2018 and December 31, 2017, the loan balance was $100 and $100, respectively.

 

At December 31, 2018 and December 31, 2017, the Company was indebted to a stockholder in the amount of $1,000 and $1,500, respectively. The loan has an interest rate of 26.7%. In February 2017 the note was sold to another investor and that noteholder converted $500 in principal into 5,000 shares of common stock. Principal and accrued interest were due and payable on January 1, 2014.

   

F- 12

 

 

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

Note 5. CONVERTIBLE NOTES PAYABLE

 

Note Payable-BS

 

In March 2011, the Company issued $800 aggregate principal amount of 6% convertible notes due in January 2012. Interest on the notes accrue at the rate of 6% per annum and are payable when the notes mature. The notes matured prior to conversion but have not been repaid. Interest continues to accrue at the rate of 6% per annum.

 

The holder of one of the notes converted $110 of note principal into 1,100 shares of common stock as follows:

 

Date of Conversion   Principal Amount Converted     Conversion Rate     Shares Received  
June 2013   $ 70     $ 0.0001       700  
August 2013   $ 40     $ 0.0001       400  

 

In August 2013, in a private transaction, the same note holder transferred $330 of the remaining note principal plus $55 in accrued interest to a third party.

 

In August 2013, in a private transaction, the new note holder transferred $5 of the remaining note principal to a third party who then converted the note into 50 shares of common stock.

 

In September 2013, the new note holder converted $100 of note principal into 1,000 shares of common stock.

 

In September 2013, in a private transaction, the new note holder transferred $35 of the remaining note principal to a third party who then converted the note into 350 shares of common stock.

 

In November and December 2013, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock as follows:

  

Date of Conversion   Principal Amount Converted     Conversion Rate     Shares Received  
November 2013   $ 40     $ 0.0001       400  
December 2013   $ 50     $ 0.0001       500  

 

In March and April 2014, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock as follows:

 

Date of Conversion   Principal Amount Converted     Conversion Rate     Shares Received  
March 2014   $ 50     $ 0.0001       500  
April 2014   $ 40     $ 0.0001       400  

  

Subsequent to these conversions there remains $125 in note principal outstanding at December 31, 2018.

 

Note Payable-SF

 

In July 2013, the holder of the second note converted $240 of note principal into 400 shares of the Company’s common stock at $0.0006 per share. At December 31, 2018 and December 31 2017, the note had a remaining principal balance of $60 and $60, respectively.

 

At any time on or after the maturity date, the holders of the notes, have the option of converting any of the unpaid principal and interest into the Company’s common stock. The notes plus any accrued but unpaid interest are convertible at the rate of $0.0001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 347,936 shares at December 31, 2018 and 84,859 shares at December 31, 2017.

 

F- 13

 

 

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

  

Note Payable-RK

 

In May 2012, the Company issued a $25,000 6% per annum note that matured in November 2012. In December 2012 the note was amended to be a convertible note. Interest on the note accrues interest at 6% per annum and is payable when the note matures.

 

The holder of the $25,000 note had the option of converting it at any time prior to maturity. The note plus any accrued but unpaid interest were convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock.

 

The holder of the note converted $1,010 of note principal into 1,010 shares of common stock as follows:

 

Date of Conversion   Principal Amount Converted     Conversion Rate     Shares Received  
December 2012   $ 150     $ 0.001       150  
January 2013   $ 660     $ 0.001       660  
March  2013   $ 200     $ 0.001       200  

 

In July 2013, the Company retired $14,000 of note principal in payment for consulting services provided to the note holder.

 

In July 2013, the note holder converted $300 of note principal into 300 shares of the Company’s common stock.

 

In July 2013, in a private transaction, the note holder transferred the remaining note principal balance of $9,690 to a third party (See Note Payable-NW below).

 

Note Payable-NW

 

After receiving the transfer of the principal balance of $9,690 in July 2013 in the private transaction noted in Note Payable-RK above, in August 2013, in a private transaction, the new note holder of the aforementioned note transferred $4,475 of principal to a stockholder of the company.

 

In October 2013, the note holder converted $400 of note principal into 400 shares of the Company’s common stock at $0.001 per share.

 

In October 2014, the note holder converted $1,100 of note principal into 1,100 of the Company’s common stock.The note holder has the option of converting the balance at any time with the approval of the Board of Directors. The note plus any accrued but unpaid interest are convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock, or 347,936 shares at December 31, 2018 and 84,858,757 shares at December 31, 2017.

 

In August 2016, the note holder converted $3,000 of note principal into 3,000,000 shares of the Company’s common stock. At December 31, 2018 and December 31, 2017, the remaining principal balance on this portion of the note is $715 and $715 respectively.

 

Note Payable-MC #2

 

In April 2015, the Company issued a $3,000 8% per annum note that matures in October 2015. The holder of the note has the right to convert the principal into shares of the Company’s common stock at any time 180 days after the closing date at $0.0001 per share. Interest on the note accrues interest at 8% per annum and is payable when the note matures. During January 2017, the current noteholder converted $1,100 in principal balance into 11,000 shares of common stock. During the same period, the current noteholder transferred $600 of the remaining principal balance to another investor who then converted the entire principal balance he received into 6,000 shares of common stock. During April 2017, the current noteholder converted $410 of remaining principal into 6,000 shares of common stock. There remains $890 in principal balance at December 31, 2018 with the current noteholder and $890 in principal balance with the original noteholder at December 31, 2017.

 

F- 14

 

 

Medifirst Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

Convertible Note Payable-LGC (8%)

 

On January 7 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale of convertible redeemable notes in aggregate principal amount of $251,803. On January 7, 2016, the Company and the Investor conducted the first closing under the Purchase Agreement, pursuant to which the Company issued to the Investor (i) a convertible redeemable note in principal amount of $105,000 containing an original issue discount of $20,000 (the “$105K Note”); and (ii) a convertible redeemable note in principal amount of $50,000 (the “$50K Note” and together with the $105K Note, the “Notes”). Under the Purchase Agreement, on March 15, 2016 and June 15, 2016, the Company and the Investor conducted additional closings for the sale and purchase of additional notes having the same terms as the Notes in principal amounts equal to $50,000 and $46, 803, respectively (see Convertible Notes Payable-LGC (8%) BEN below). During the quarter ended March 31, 2017 the noteholder converted the entire principal balance into 62,068 shares of common stock and therefore there is no principle balance outstanding at December 31, 2018 and December 31, 2017.

 

Convertible Notes Payable-LGC (8%) BEN

 

In consideration for the issuance of the $105K Note, on January 13, 2016, the Company received net proceeds (after deducting the original issue discount and legal fees) in the amount of $75,697. In consideration for the issuance of the $50K Note, the Investor issued to the Company a $50,000 fully-collateralized secured promissory note (the “Investor Note”), pursuant to which the Investor agreed to pay the Company $50,000 on or before April 30, 2016. The Notes, which are due on January 7, 2017, bear interest at the rate of 8% per annum. Subject to a beneficial ownership limitation equal to 9.99%, principal and interest on the Notes is convertible into shares of the Company’s common stock (“Common Stock”) at a conversion price equal to 55% of the lowest trading price of Common Stock during the 20 trading day period prior to conversion.

 

In accordance with the terms of the Purchase Agreement, the investor and the Company closed on the two outstanding notes ($50,000 and $46,803) in May and June 2016 when the Company received the cash funding. During April 2017 the noteholder converted the entire principal balance of the $50,000 note into common stock of the Company. During June 2017 the noteholder converted $16,000 of the remaining principal of the $46,803 note into common stock of the Company. In July and September 2017 the noteholder converted the remaining $30,803 of the note’s principal balance into common stock. As a result, there is no principal balance remaining on either note as of December 31, 2018 and December 31, 2017.

 

Convertible Notes Payable-SO (8%)

 

On May 2, 2016, the Company issued to an Investor a convertible redeemable note in the principal amount of $57,750 (“the Note”). The Note, which matures on May 2, 2017, pays interest at the rate of 8% per annum. The note contains a 10% original issue discount. The holder of the note is entitled, at its option beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then outstanding into shares of the Company’s common stock at the price equal to 55% of the lowest trading price for the twenty prior trading days including the date of conversion. During the quarter ended March 31, 2017 the noteholder converted $32,298 of the principle balance into 23,490 shares of common stock thereby leaving a principal balance of $25,452 on the note at December 31, 2017. During the first quarter of 2018, the noteholder converted $23,000 of the principle balance into 122,727 shares of common stock thereby leaving a principal balance of $2,452 on the note at June 30, 2018. During the quarter ended September 30, 2018, the noteholder converted the remaining balance of the note into 148,316 shares on common leaving no balance due on the note as of December 31, 2018. There is $12,896 in accrued interest and penalty assessments on this note as of December 31, 2018 which is included in accrued expenses payable on the balance sheet.

 

Convertible Notes Payable-BBCG (9%)

 

On October 11, 2016, the Company issued to an Investor a convertible note in the principal amount of $157,895 (“the Note”). The Note, which matures on March 27, 2018, pays interest at the rate of 9% per annum. The note contains an original issue discount in the amount of $7,895. The holder of the note is entitled, at its option beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then outstanding into shares of the Company’s common stock at the price equal to 57.5% of the lowest trading price for the twenty prior trading days including the date of conversion. During April and June of 2017, the noteholder converted the entire remaining principal balance of the note into common stock of the Company. There is no principal balance remaining on the note as of December 31, 2018 and December 31, 2017.

 

F- 15

 

 

Medifirst Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

Convertible Notes Payable - Funding (8%)

 

On May 1 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale of 8 convertible redeemable notes in aggregate principal amount of $1,012,500. On May 1st, 2017 and June 2, 2017, the Company and the Investor conducted the first two closings under the Purchase Agreement, pursuant to which the Company issued to the Investor (i) a convertible redeemable note in principal amount of $131,250 (the “$131K Note”); and (ii) a convertible redeemable note in principal amount of $125,000 (the “$125K Note”). On July 10, 2017 and August 7, 2017, the Company and the Investor conducted the second two closings under the Purchase Agreement, pursuant to which the Company issued to the Investor two convertible redeemable notes each in the principal amount of $125,000; Under the Purchase Agreement, on January 1, 2018, February 2, 2018, March 10, 2018 and April 7, 2018 the Company and the Investor expected to conduct additional closings for the sale and purchase of additional notes having the same terms as the Notes in principal amounts equal to $131,250, $125,000, $125,000 and $125,000 respectively (the “back-end notes”). However, all these “back-end notes” were cancelled in early 2018 and will not fund. Accordingly, all the “back-end” notes were removed from the books at December 31, 2017 along with the associated investor notes receivable. In addition, all previously accrued interest expense and interest income as been removed on these “back-end notes” for the period ended December 31, 2017.

 

In consideration for the issuance of the $131K Note and the $125K Note, on May 1, 2017 and June 2, 2017 and for the two $125k Notes on July 10, 2017 and August 7, 2017, the Company received net proceeds (after deducting $25,000 in legal fees) in the amount of $481,250. In consideration for the issuance of the $131K and the three $125k Notes, the Investor issued to the Company a $131,250 fully-collateralized secured promissory note and three $125,000 fully-collateralized secured promissory notes (the “Investor Notes”), pursuant to which the Investor agreed to pay the Company $131,250 and $375,000 on or before January 1, 2018, February 2, 2018, March 10, 2018 and April 7, 2018 respectively. These Notes (often referred to as “back-end Notes”), bear interest at the rate of 8% per annum. However, all these “back-end notes” were cancelled in early 2018 and will not fund. According, all the “back-end” notes were removed from the books at December 31, 2017 along with the associated investor notes receivable. In addition, all previously accrued interest expense and interest income as been removed on these “back-end notes” for the period ended December 31, 2017.

 

The two notes issued May 1,2017 ($131,250) and June 2, 2017 ($125,000) became convertible on October 28, 2017 and December 4, 2017 respectively and required derivative treatment at that time. The embedded derivative was bifurcated and accounted for separately along with the derivative discount. The derivative liability is marked-to-market each quarter with the resulting gain or loss valuation being reported in the statement of operations.

 

During the quarter ended December 31, 2017 (after the six-month waiting period) the holder of the original note in the principal amount of $131,250 converted $21,500 and $15,350 of the note’s principal balance into 35,058 and 39,714 shares of the Company’s common stock, respectively. The principal balance remaining on this convertible note is $94,400 as of December 31,2017. During the quarter ended March 31, 2018 the holder of the original note converted, through four separate conversion transactions, a total of $38,870 of the note’s principal balance into total of 193,384 shares of the Company’s common stock. During the quarter ended June 30, 2018 the holder of the original note converted $10,030 of the note’s principal balance into total of 62,015 shares of the Company’s common stock. During the quarter ended September 30, 2018 the holder of the original note converted $2,200 of the note’s principal balance into total of 69,439 shares of the Company’s common stock. During the quarter ended December 31, 2018 the holder of the original note converted $10,640 of the note’s principal balance and $1,312 of accrued interest into total of 148,545 shares of the Company’s common stock. The principal balance remaining on this convertible note is $32,660 as of December 31, 2018.

 

Convertible Notes Payable - JR (5%)

 

On August 2, 2017 the Company issued a convertible note payable (promissory note) to an investor in the principal amount of $50,000. The note matures on August 2, 2018 and bears interest at 5%. The note holder has has the right at any time on or after the day that is six months from August 2, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock at a fixed price of .003 per share. The embedded derivative on the note was valued and bifurcated effective October 1, 2018. During the quarter ended December 31, 2018, $4,500 in principal on this note was satisfied by the noteholder converting such amount into 150,000 shares of the Company’s common stock. The remaining principal balance outstanding on the note is $45,500 as of December 31, 2018.

 

Convertible Notes Payable - MLM (10%)

 

As more fully described in Note 1 to the financial statements, on March 8th 2016 (with an effective date of October 1, 2015), the company, through it’s sole wholly-owned subsidiary (“Licensee”), entered into a Product and Know-How License Agreement (“Agreement”) with a Florida Corporation (“Licensor”) which is owned by a related party - the son of the Company’s CEO. The consideration for the licensing agreement consisted of the issuance of 25,000 Series B Preferred stock shares to the Licensor (at par) plus a $150,000 promissory note issued by the Company to the licensor. During the quarter-ended June 30, 2017, $18,986 in accrued interest was satisfied through the issuance of 17,273 shares of the Company’s common stock. On September 15, 2017 the Note was amended to include provisions to allow conversion of the Note into common stock of the Company. At such time the Note was valued with it’s embedded derivative and discount. On September 25, 2017, $16,250 in principal on this note was satisfied by the conversion into 25,000 shares of the Company’s common stock leaving a balance on the note of $133,750 at December 31, 2017. During the year ended December 31, 2018 the Company made cash paydowns to the noteholder in the total amount of $32,550. In addition, $30,195 in principal balance on the note was converted into 495,000 shares of the Company’s common stock. The ending principal balance on this note at December 31, 2018 is $51,005 to the original noteholder. During the year-ended December 31, 2018 the unrelated third-party noteholder converted $3,350 in principal balance into 120,000 shares of the Company’s common stock thereby leaving a principal balance to this unrelated noteholder in the amount of $16,650.

 

F- 16

 

 

Medifirst Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

Convertible Notes Payable - LG (8%) (Notes 5 & 6)

 

On January 25, 2018 the Company issued a convertible note payable (promissory note) to an investor in the principal amount of $78,750. The note matures on January 25, 2019 and bears interest at 8%. The note holder has has the right at any time on or after the day that is six months from January 25, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock. The entire principal balance of $78,750 is outstanding as of December 31, 2018.

 

On June 4, 2018 the Company issued a convertible note payable (promissory note) to an investor in the principal amount of $52,500. The note matures on June 4, 2019 and bears interest at 8%. The note holder has has the right at any time on or after the day that is six months from June 4, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock. The entire principal balance of $52,500 is outstanding as of December 31, 2018.

 

Convertible Notes Payable - PULG (8%) (Notes 1 & 2)

 

On October 1, 2018 the Company issued a convertible note payable (convertible promissory note PULG (8%) Note 1) to an investor in the principal amount of $58,000. The note matures on April 1, 2020 and bears interest at 8%. The note holder has has the right at any time on or after the day that is six months from October 1, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock. The entire principal balance of $58,000 is outstanding as of December 31, 2018.

 

On November 19, 2018 the Company issued a convertible note payable (convertible promissory note PULG (8%) Note 2) to an investor in the principal amount of $65,000. The note matures on May 19, 2020 and bears interest at 8%. The note holder has has the right at any time on or after the day that is six months from November 19, 2018 to convert any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock. The entire principal balance of $65,000 is outstanding as of December 31, 2018.

 

The Company’s convertible notes payable and the related derivative liabilities, derivative discount, deferred financing costs and original-issue discount are presented in the financial statements at December 31, 2018 as follows:

 

12/31/2018   Remaining     Original           Deferred     Total        
    Principal     Issue     Derivative     Financing     Convertible     Derivative  
Debt   Amount     Discount     Discount     Costs     Notes Payable     Liability  
                                     
Note Payable - BS   $ 125                                                   $ 125                
Note Payable - SF     60                               60          
Note Payable - SD     15,000                               15,000          
Note Payable - NW     715                               715          
Note Payable - MC #2     890                               890          
Convertible Note Payable - JR (5%)     45,500               (45,486 )             14       51,639  
Convertible Note Payable - HG  (10%)     16,650                               16,650          
Convertible Note Payable - CB (5%)     -                               -       1,431  
Convertible Notes Payable- SO (8%)     -                               -       -  
Convertible Note Payable - LGC (8%) 1     32,660                               32,660       15,356  
Convertible Note Payable - LGC (8%) 2     125,000               -               125,000       22,713  
Convertible Note Payable - LGC (8%) 3     125,000               -       -       125,000       22,743  
Convertible Note Payable - LGC (8%) 4     125,000               -       -       125,000       22,768  
Convertible Note Payable - MLM (10%) (Related party)     51,005               -               51,005       28,741  
Convertible Note Payable - LGC (8%) 5     78,750               (28,646 )     (462 )     49,642       8,354  
Convertible Note Payable - LGC (8%) 6     52,500               (26,803 )     (808 )     24,889       16,972  
Convertible Notes Payable- PULG (8%) 1     65,000               (63,610 )     (2,244 )     (854 )     35,933  
Convertible Notes Payable- PULG (8%) 2     58,000               (47,690 )     (2,655 )     7,655       36,818  
    $ 791,855     $ -     $ (212,235 )   $ (6,169 )   $ 573,451     $ 263,468  

 

As of December 31, 2018, the convertible notes payable can be converted into approximately 727,373 shares of common stock.

 

F- 17

 

 

Medifirst Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

Note 6. DERIVATIVES AND FAIR VALUE INSTRUMENTS

 

The Company applied paragraph 815-10-05-4 of the FASB Accounting Standards Codification to the 5% Convertible Notes Payable issued June 12th 2015 and the 8% Convertible Note payable issued June 25th 2015 and for the 8% Convertible Notes Payable issued January 7, 2016 and March 7, 2016, the 9% Convertible Note payable issued October 1, 2016 the 8% Convertible Notes Payable issued January 25, 2018 and June 4, 2018 and the 8% convertible notes payable issued October 1, 2018 and November 19, 2018. Based on the guidance in paragraph 815-10-05-4 of the FASB Accounting Standards Codification the Company concluded these instruments were required to be accounted for as derivatives on issuance date. The Company records the fair value of the Convertible Notes Payable and certain warrants that are classified as derivatives on issuance date and the fair value changes on each reporting date reflected in the consolidated statements of operations as “Change in Fair Value - derivatives.” These derivative instruments are not designated as hedging instruments under paragraph 815-10-05-4 of the FASB Accounting Standards Codification and are disclosed on the balance sheet under Derivative Liabilities.

 

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

Level 3 Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepayments and other current assets, accounts payable, and accrued expenses, approximate their fair values because of the short maturity of these instruments.

 

The Company’s Level 3 financial liabilities consist of the 5% Convertible Notes Payable issued June 12th 2015 and the 8% Convertible Note payable issued June 25th 2015 and for the 8% Convertible Notes Payable issued January 7, 2016 and March 7, 2016 and May 1, 2017 and June 2, 2017 and July 10, 2017 and August 15, 2017, the 9% Convertible Note payable issued October 1, 2016, The 8% Convertible note payable issued January 25, 2018, the 8% Convertible note payable issued June 4, 2018 and the 8% convertible notes payable issued October 1, 2018 and November 19, 2018 for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. We have valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a valuation consultant, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of issuance and December 31, 2018. The primary assumptions include: projected annual volatility of 145%-240%; the follow-on securities purchase option; the conversion feature as a percentage of Market; automatic/conditional conversions; market price trigger events.

 

As of December 31, 2018 the Company’s derivative financial instruments included:

 

1) Embedded derivatives associated with certain of the Company’s unsecured convertible notes payable. The Company’s 5% convertible notes payable and 8% convertible notes payable and 9% convertible note payable issued to unrelated investors is a hybrid instrument, which warrants separate accounting as a derivative instrument. The embedded derivative feature has been bifurcated from the debt host contract, referred to as the Derivative Liability, which resulted in a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes Payable. The unamortized discount is amortized to interest expense using the effective interest method over the life of the Notes. The embedded derivative feature includes the conversion feature within the notes and an early redemption option. The compound embedded derivatives within the convertible notes have been recorded at fair value at the date of issuance; and are marked-to-market each reporting period with changes in fair value recorded to the Company’s statement of operations as Change in fair value of derivative liabilities.

 

F- 18

 

 

Medifirst Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

The 5% Convertible Note Payable and the 8% Convertible Notes Payable and the 9% convertible note payable are valued at December 31,2018. The following assumptions were used for the valuation of the embedded derivative:

 

- The stock price (prior period reverse split 1,000:1) of $0.12 decreased to $0.0438 in this period (basis for the variable conversion prices) would fluctuate with the Company projected volatility

 

- An event of default for the Convertible Note would occur 0% of the time, increasing 1.00% per month to a maximum of 5.0%;

 

- Alternative financing for the Convertible Note would be initially available to redeem the note 0% of the time and increase monthly by 1% to a maximum of 10%;

 

- Capital raising events (a single financing at 1 month from the valuation date) was previously a factor for the VV Note but are no longer projected. The full reset events projected to occur based on future stock issuance (single event) result in a reset exercise price.

 

-The monthly trading volume would average $458,000 (rounded) as of 12/31/18 and would increase at 5% per month; ownership limits conversion across LG’s notes based on 4.99% with shares outstanding increasing monthly by 1%.

 

- The variable conversion price of 45% to 58% over 3 to 20 trading days would have effective rates of 34.36% to 53.40%;

 

- The Note Holders would automatically convert the notes early (and not hold to maturity) with variable conversion prices and full ratchet resets if the registration was effective and not in default;

 

- The projected annual volatility for each valuation period was based on the historical volatility of the Company in the range 230.9% to 415.0%.

 

The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuation.

 

F- 19

 

 

Medifirst Solutions, Inc.
Notes to Consolidated Financial Statements
December 31, 2018

 

The Company’s derivative liabilities on convertible notes payable are presented at market value in the financial statements at December 31, 2018 as follows:

 

12/31/2018         Original         Derivative     Quarter
Ended
    Quarter
Ended
    Ended
March 31,
    Derivative     Quarter
Ended
    Quarter
Ended
    Ended
June 30,
    Derivative     Quarter
Ended
    Quarter
Ended
    Ended
September 30,
    Derivative     Quarter
Ended
    Quarter
Ended
    Ended
December 31,
    Derivative  
Convertible    Derivative
Treatment
  Maturity   Principal
Note
    Original
Derivative
    Valuation
December 31,
    March 31,
2018
    March 31,
2018
    2018
Mark-to-
    Valuation
March 31,
    June 30,
2018
    June 30,
2018
    2018
Mark-to-
    Valuation
June 30,
    September 30,
2018
    September 30, 2018     2018
Mark-to-
    Valuation
September 30,
    December 31,
2018
    December 31,
2018
    2018
Mark-to-
    Valuation
December 31,
 
Note   Date   Date   Amount     Valuation     2017     Issuances     Conversions     Market     2018     Issuances     Conversions     Market     2018     Issuances     Conversions     Market     2018     Issuances     Conversions     Market     2018  
                                                                                                                           
8% Convertible Note Payable-issued 5/2/2016    10/1/2016    5/2/2017   $ 57,750     $ 58,355     $ 24,925                       $ (26,745 )   $ 5,123     $ 3,303                             $ (665 )   $ 2,638                $ (2,740 )   $ 102     $ -                                   $ -  
                                                                                                                                                                 
5 % Convertible Note- Payable -issued 6/12/2015   4/12/2016   1/7/2017     35,863       37,827     $ 832             $ -       305     $ 1,137                       (233 )   $ 904                       211     $ 1,115                       316     $ 1,431  
                                                                                                                                                                 
8% Convertible Notes Payable-issued May 1, 2016   10/28/2017   5/1/2018     131,250       103,294     $ 52,989             $ (31,013 )     8,541     $ 30,517             $ (9,148 )     17,439     $ 38,808             $ (1,605 )     (11,075 )   $ 26,128             $ (10,591 )     (181 )   $ 15,356  
                                                                                                                                                                 
8% Convertible Notes Payable-issued June 7, 2016   12/4/2017   6/7/2018     125,000       90,596     $ 64,458                       (14,452 )   $ 50,006                       55,818     $ 105,824                       (75,201 )   $ 30,623                       (7,815 )   $ 22,808  
                                                                                                                                                                 
10% Convertible Notes Payable-issued March 8, 2016   9/15/2017   9/8/2018     150,000       167,164     $ 108,682             $ (19,359 )     23,426     $ 112,749             $ (26,895 )     44,802     $ 130,656             $ (17,872 )     (70,817 )   $ 41,967             $ (34,169 )     20,943     $ 28,741  
                                                                                                                                                                 
8% Convertible Notes Payable-issued August 15, 2017   4/1/2018   8/15/2018     125,000       108,878     $ -                             $ -       108,878               (3,760 )   $ 105,118                       (74,541 )   $ 30,577                       (7,834 )   $ 22,743  
                                                                                                                                                                 
8% Convertible Notes Payable-issued July 10, 2017   4/1/2018   7/10/2018     125,000       108,061     $ -                             $ -       108,061               3,092     $ 111,153                       (80,625 )   $ 30,528                       (7,855 )   $ 22,673  
                                                                                                                                                                 
8% Convertible Notes Payable-issued January 25, 2018   4/1/2018   1/25/2019     78,750       65,896     $ -                             $ -       65,896               135     $ 66,031                       (44,217 )   $ 21,814                       (13,460 )   $ 8,354  
                                                                                                                                                                 
8% Convertible Notes Payable-issued June 4, 2017   6/4/2018   6/4/2018     52,500       42,755     $ -                             $ -       42,755               532     $ 43,287                       (14,084 )   $ 29,203                       (12,231 )   $ 16,972  
                                                                                                                                                                 
8% Convertible Notes Payable-issued August 2, 2017   10/1/2018   8/2/2020     50,000                                                                                                                     $ 99,234     $ (6,927 )     (40,668 )   $ 51,639  
                                                                                                                                                                 
8% Convertible Notes Payable-issued October 1, 2018   10/1/2018   4/1/2020     58,000                                                                                                                     $ 49,952               (13,134 )   $ 36,818  
                                                                                                                                                                 
8% Convertible Notes Payable-issued November 19, 2018   11/19/2018   5/19/2020     65,000                                                                                                                     $ 66,134               (30,201 )   $ 35,933  
                                                                                                                                                                 
            $ 1,054,113     $ 782,826     $ 251,886     $ -     $ (77,117 )   $ 22,943     $ 197,712     $ 325,590     $ (36,043 )   $ 117,160     $ 604,419     $    -     $ (22,217 )   $ (370,247 )   $ 211,955     $ 215,320     $ (51,687 )   $ (112,120 )   $ 263,468  

 

F- 20

 

 

Medifirst Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

The Company’s mark-to-market fair value adjustment ((income)/expense) for the year ended December 31, 2018 totaled ($342,264) as follows:

 

Mark-to market fair value adjustment for the quarter ended March 31, 2018   $ 22,943  
Mark-to market fair value adjustment for the quarter ended June 30, 2018     117,160  
Mark-to market fair value adjustment for the quarter ended September 30, 2018     (370,247 )
Mark-to market fair value adjustment for the quarter ended December 31, 2018     (112,120 )
Total mark-to market fair value adjustment for the year ended December 31, 2018   $ (342,264 )

 

Note 7. STOCKHOLDERS’ EQUITY

 

Effective July 23, 2018, the Company effected a 1-for-1,000 reverse stock split of its issued and outstanding common stock. The number of shares of common stock issued and outstanding post- reverse stock split is 1,404,073. All fractional shares have been rounded up to the next whole share. There is no reduction in the number of the Company’s shareholders of record. Unless otherwise noted, impacted amounts and share information included in the financial statements and notes thereto have been retroactively adjusted for the reverse stock split as if such reverse stock split occurred on the first day of the first period presented. As a result of the aforementioned reverse stock split, additional paid-in-capital was increased by $140,169 and $84,861 as of December 31, 2018 and December 31, 2017 respectively on the balance sheet with a corresponding decrease in the par value of common stock issued as of the same dates.

 

The Company has authorized 4,000,000,000 shares of common stock with a par value of $0.0001 per share. Effective September 19, 2017, the Company amended its Articles of Incorporation to increase its authorized Common Stock to 4,000,000,000 shares. There were 3,482,840 and 849,437 shares of common stock issued and outstanding at December 31, 2018 and December 31, 2017, respectively.

 

The Company has authorized 1,000,000 shares of Series A preferred stock with a par value of $0.0001 per share. At December 31, 2018 and December 31, 2017, there were 500,000 shares of Series A preferred stock issued and outstanding respectively. The preferred stock has preferential voting rights of 2,000 votes per outstanding share.

 

The Company has authorized 50,000 shares of Series B convertible preferred stock with a par value of $0.0001 per share. At December 31, 2016 there were 39,000 shares issued of which 12,900 shares of Series B preferred were converted into common stock in accordance with the terms of the Series B Preferred stock. Therefore; there were 26,100 shares outstanding at December 31, 2016. The Series B preferred stock has no voting rights. During the quarter ended March 31, 2017, 18,100 shares of Series B preferred shares were converted into common stock in accordance with the terms of the Series B preferred stock. As of result there were 8,000 shares of Series B preferred shares outstanding at December 31, 2018. The holders of the Series B convertible preferred stock have the right to convert the same into Common Stock of the Corporation at the ratio of one (1) share of Series B Convertible Preferred for five hundred (500) shares of Common Stock.

 

On October 12, 2018, the Company filed with the State of Nevada a certificate of designation pursuant to which the Company designated a new class of preferred stock as the Company’s Series C Convertible Preferred Stock (“Series C Preferred”) having a $100.00 stated value per share (“Stated Value”) and a par value equal to $0.0001 per share. The Company designated 5,000 shares of Series C Preferred. Subject to a beneficial ownership limitation equal to 4.99% and a prohibition on conversions within the first sixty days of its issuance, each share of Series C Preferred is convertible into 25,000 shares of the Company’s common stock. Holders of Series C Preferred are not entitled to receive dividends. In the event of any liquidation, dissolution or winding up of the Company, holders of Series C Preferred are entitled to distributions from the assets in an amount equal to, or if less, on a prorated basis, the Stated Value per share of Series C Preferred held by such holders. Holders of Series C Preferred are entitled to vote, on an as-converted basis, together with holders of Common Stock on all actions to be taken by the shareholder of the Company. During the quarter-ended December 31, 2018 the company issued 177 shares of Series C Convertible Preferred Stock for services provided to the company by various professionals. As of December 31, 2018 there are 177 shares issued and outstanding with a stated value of $17,700 and par value of $-0-. The preferred shares issued to professionals for their services were valued, in total, at $204,212 based upon a valuation using the underlying convertible feature of the company’s common stock and a Black-Scholes calculation methodology. 

 

The fair value of each issuance of Series C Preferred Stock on the date of issuance is estimated using the Black-Scholes option-pricing model reflecting the following assumptions:

 

Expected volatility   403% to 435%
Expected life   0.7
Risk free interest rate   2.75%
Dividend yield   0.00%

 

During the quarter ended March 31, 2017, the Company issued an aggregate 43,000 shares of common stock at prices ranging from $0.0028 to $0.0094 per share for services provided to the Company.