Notes
to Consolidated Financial Statements
June
30, 2018
Note
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Medifirst
Solutions, Inc. (“MSI” or the “Company”) was incorporated in Nevada in November 2010. The Company has not
generated significant sales to date. The Company intends to have a diverse product line of consumer products. Since inception,
the Company has been engaged in business planning activities, including researching the industry, identifying target markets for
the Company’s products, developing the Company’s models and financial forecasts, performing due diligence regarding potential
geographic locations most suitable for establishing the Company’s offices and identifying future sources of capital. At the present
time, the Company is building products and affiliations in and related to the cosmetic healthcare industry. The company has started
to hire a salesforce and sign distribution agreements in anticipation of future sales.
In
July 2016, Medifirst, in response to its Premarket Notification 510(k) submission for “The Time Machine” Series
Laser, received clearance from the U.S. Food and Drug Administration (“FDA”) to market its infrared Time Machine
TTML-8102000 Laser Thermal Therapeutic Device. The Company is actively putting together a sales and distribution team to
offer our lasers in the US and foreign markets.
Pursuant
to a sale and purchase agreement dated August 19, 2015 between the Company and the Company’s president, the Company acquired 100%
of the equity interests in Medical Lasers Manufacturer, Inc. (“MLM”) with the total purchase price of 20,000 shares
of the Company’s common stock at $0.001 per share (or $20). The fair value of the acquired entity was $20.
The
transaction was considered as a business acquisition and accordingly the acquisition method of accounting has been applied. MLM
had no assets at the date of the business combination.
The
Consolidated financial statements include the accounts of MSI and its only wholly owned subsidiary, MLM. All material intercompany
balances and transactions have been eliminated in consolidation.
Medifirst recently launched Concierge Concepts Rx, a new division
focused on the pharmaceutical industry. Concierge Concepts Rx (CCRx) provides unique specialty drug consulting and niche billing
services to independent pharmacies and retail pharmacy chains. This division has not yet commenced operations and no activity
is included in the accompanying financial statements for CCRx. CCRx is 100% owned by Medifirst.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding
to operationalize the Company’s current technology.
Basis
of Presentation
The unaudited interim consolidated financial statements include
the accounts of Medifirst Solutions Inc. and its wholly owned subsidiary (Medical Laser Manufactures, Inc., (collectively referred
to as the “Company”). All material intercompany balances and transactions have been eliminated in consolidation. The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions
to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which
are considered necessary for a fair presentation of the consolidated financial position of the Company as of June 30, 2018, the
consolidated results of its operations for the three-month period ended June 30, 2017 and 2018 and six-month period ended June
30, 2017 and 2018, and the consolidated cash flows for the six-month periods ended June 30, 2017 and 2018. The results of operations
for the three-month period ended June 30, 2018 are not necessarily indicative of the operating results for the full year. These
financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for
the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K for the year then ended.
Some items in the prior year financial statements were reclassified
to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.
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.
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The
following policies reflect specific criteria for the various revenues streams of the Company:
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.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2018
Accounts
Receivable
The
Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers,
maintaining an allowance for potential credit losses. Accounts receivable is reported net of the allowance for doubtful accounts.
The allowance is based on management’s estimate of the amount of receivables that will actually be collected. The Company has
not recorded an allowance for doubtful accounts as of June 30, 2018 or December 31, 2017. There are no customer account receivables
as of June 30, 2018 or December 31, 2017.
Inventory
Inventory
consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value. Finished goods inventory
includes hand held laser devices, their carrying cases and goggles.
Equipment
Equipment,
consisting of computer equipment, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, of five years.
Long-Lived
Assets
The
Company reviews long-lived assets, such as equipment, for impairment whenever events or changes in circumstances indicate the
carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of
an asset exceeds the estimated future cash flows, an impairment loss will be recorded by the amount the carrying value exceeds
the fair value of the asset.
In
August 2015, the Company’s wholly-owned subsidiary MLM, acquired a trademark for $20,000. Due to the uncertainty of future cash
flows from the trademark, management has deemed it to be impaired and recorded an impairment expense of $20,000 in 2015.
Intangible
Asset- Licensing Agreement
On
March 8th 2016 (with an effective date of October 1, 2015), the company, through it’s sole wholly-owned subsidiary (“Licensee”),
entered into a Product and Know-How License Agreement (“Agreement”) with a Florida Corporation (“Licensor”)
which is owned by a related party - the son of the Company’s CEO. The license provides with respect to the Technology, Licensor
hereby grants to Licensee an irrevocable, nontransferable, royalty-bearing license, with a right of sublicense (the “License”),
throughout the Territory in the Field of Use, whether or not under the Licensed Patent, to:
-use
or submit or deliver the Technology and/or any Product to any regulatory body throughout the Territory for purposes of obtaining
approval to make, Sell, offer for Sale, import, export and distribute the Technology or Products; and
-
|
use
or copy the Technology and/or any Product; and
|
-
|
market,
make, have made, Sell, offer for Sale, import and distribute Products; and
|
-
|
sublicense
the Technology; and
|
-
|
prepare,
or have prepared on its behalf, modifications, enhancements and/or derivative works of the Technology.
|
In
connection with the license granted, Licensor hereby grants to Licensee a license to the Licensed Patents, whether now existing
or hereafter acquired.
The consideration for the licensing agreement consisted of
the issuance of 25,000 Series B Preferred stock shares to the Licensor (at par) plus a $150,000 promissory note issued by the
Company to the licensor. On September 15, 2017 the Note was amended to include provisions to allow conversion of the Note
into common stock of the Company. On September 25, 2017, $16,250 in principal on this note was satisfied by the conversion
into 25,000 shares of the Company’s common stock. On January 31, 2018, $7,500 in principal on this note was satisfied
by the conversion into 30,000 shares of the Company’s common stock. On March 2, 2018, another $7,500 in principal on
this note was satisfied by the conversion into 30,000 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 June 30, 2018 is $80,250 to the original noteholder and $20,000 in principal balance to the new unrelated
third-party noteholder.
The
last part of the consideration in this license agreement is the royalty payments which have not taken effect yet since they are
based on sales for which the company has had only minimum thus far.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2018
The licensing agreement is for a ten-year period effective from
October 1, 2015. The cost of the licensing agreement is being amortized over its ten-year period and charged to income on a straight-line
basis.
Debt
Issue Costs and Debt Discount
The
Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible
debt. These costs are amortized over the life of the debt to interest expense. If a conversion of the underlying debt occurs,
a proportionate share of the unamortized amounts are immediately expensed. Beginning in 2015, the Company adopted ASU 2015-03:
Simplifying the Presentation of Debt Issuance Costs and has reflected the deferred financing costs as a direct reduction of the
related debt (See table included in Note 5 to Consolidated Financial Statements).
Original
Issue Discount
For
certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount
is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Derivative
Liabilities
Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. The Company assessed its securities for purposes of
determining the proper accounting treatment and valuation as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37
Fair Value in Financial Instruments
; Statement of Financial Accounting Standard ASC 815
Accounting for Derivative Instruments
and Hedging Activities
; and Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05.
In
assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible
debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional
convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once
the derivative liabilities are determined, they are adjusted to reflect fair value at each reporting period end, with any increase
or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the condensed consolidated balance sheets and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Financial
Instruments
The
carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and other accrued liabilities
approximate their fair values.
Segment
Information
The
Company follows Accounting Standards Codification (“ASC”) 280, “Segment Reporting”. The Company currently
operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2018
Net
Income (Loss) Per Common Share
The
Company calculates net income (loss) per share based on the authoritative guidance. Basic earnings (loss) per share is calculated
by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss)
per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock
equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered,
as their effect would be anti-dilutive.
Income
Taxes
The
Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and
liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and
liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to
reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will
not be realized.
The
Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a
tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold,
the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority.
For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and
penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits
as of June 30, 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 June
30, 2018, the Company had $172,848 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.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 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.
Note
2. PROPERTY, PLANT AND EQUIPMENT (NET)
Equipment
is recorded at cost and consisted of the following at June 30, 2018 and December 31, 2017:
|
|
March
31,
2018
|
|
|
December 31,
2017
|
|
Computer
equipment
|
|
$
|
8,956
|
|
|
$
|
8,956
|
|
Less:
accumulated depreciation
|
|
|
(8,045
|
)
|
|
|
(7,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
912
|
|
|
$
|
1,232
|
|
Depreciation
expense was $319 and $319, for the six months ended June 30, 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 June 30, 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 June 30, 2018 and 2017 a stockholder of the Company advanced the Company $-0- and $-0- respectively. The loan
has a balance of $8,955 at June 30, 2018 and December 31, 2017, respectively. The loan bears no interest and is payable on demand.
In December 2012, the Company issued a promissory note to
a stockholder in the amount of $5,000 with interest at 10% per annum. Principal and interest were due and payable on June 2,
2013. In April 2014, the note was amended to provide the note holder with the option to convert the note to the
Company’s common stock at $0.0001 per share. Subsequently, in 2014, in a private transaction, the note holder
transferred $2,500 of note principal to third parties and the new holders converted their holdings into 2,500 shares of the
Company’s common stock. During 2015, the original note holder transferred an additional $2,400 of note principal to
third parties who converted their holdings into 2,400 shares of the Company’s common stock. At June 30, 2018 and
December 31, 2017, the loan balance was $100 and $100, respectively.
At June 30, 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.
In
February 2016, the Company issued a promissory note to a stockholder in the amount of $7,000 with interest at the rate of 6% per
annum. On September 6, 2016 the note holder converted the entire principal balance and accrued interest into common stock and
therefore at June 30, 2018 there is no principal balance remaining on the note.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2018
Note
5. CONVERTIBLE NOTES PAYABLE
Note
Payable-BS
In
March 2011, the Company issued $800 aggregate principal amount of 6% convertible notes due in January 2012. Interest on the notes
accrue at the rate of 6% per annum and are payable when the notes mature. The notes matured prior to conversion but have not been
repaid. Interest continues to accrue at the rate of 6% per annum.
The
holder of one of the notes converted $110 of note principal into 1,100,000 shares of common stock as follows:
Date
of Conversion
|
|
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 shares of common stock as follows:
Date
of Conversion
|
|
Principal
Amount Converted
|
|
|
Conversion
Rate
|
|
|
Shares
Received
|
|
March
2014
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500
|
|
April
2014
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400
|
|
Subsequent
to these conversions there remains $125 in note principal outstanding at June 30, 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 June 30, 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 140,166 shares at June 30, 2018 and 84,859 shares at
December 31, 2017.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 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 140,166 shares at June 30, 2018 and 84,859 shares at December 31, 2017.
In August 2016, the note holder converted $3,000 of note
principal into 3,000 shares of the Company’s common stock. At June 30, 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 June 30, 2018 with the current noteholder and $890 in principal
balance with the original noteholder at December 31, 2017.
Medifirst Solutions,
Inc.
Notes to Consolidated
Financial Statements
June 30, 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 June 30, 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 June 30, 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.
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
Convertible
Notes Payable-BBCG (9%)
On
October 11, 2016, the Company issued to an Investor a convertible note in the principal amount of $157,895 (“the Note”).
The Note, which matures on March 27, 2018, pays interest at the rate of 9% per annum. The note contains an original issue discount
in the amount of $7,895. The holder of the note is entitled, at its option beginning on the 6-month anniversary, to convert all
or any of the principal face amount of the Note then outstanding into shares of the Company’s common stock at the price
equal to 57.5% of the lowest trading price for the twenty prior trading days including the date of conversion. During April and
June of 2017, the noteholder converted the entire remaining principal balance of the note into common stock of the Company. There
is no principal balance remaining on the note as of June 30, 2018 and December 31, 2017.
Convertible
Notes Payable - Funding (8%)
On
May 1 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited
investor (the “Investor”) for the sale of 8 convertible redeemable notes in aggregate principal amount of $1,012,500.
On May 1st, 2017 and June 2, 2017, the Company and the Investor conducted the first two closings under the Purchase Agreement,
pursuant to which the Company issued to the Investor (i) a convertible redeemable note in principal amount of $131,250 (the “$131K
Note”) ; and (ii) a convertible redeemable note in principal amount of $125,000 (the “$125K Note”). On July
10, 2017 and August 7, 2017, the Company and the Investor conducted the second two closings under the Purchase Agreement, pursuant
to which the Company issued to the Investor two convertible redeemable notes each in the principal amount of $125,000; Under the
Purchase Agreement, on January 1, 2018, February 2, 2018, March 10 ,2018 and April 7, 2018 the Company and the Investor expected
to conduct additional closings for the sale and purchase of additional notes having the same terms as the Notes in principal amounts
equal to $131,250, $125,000, $125,000 and $125,000 respectively (the “back-end notes”). However, all these “back-end
notes” were cancelled in early 2018 and will not fund. Accordingly, all the “back-end” notes were removed from
the books at December 31, 2017 along with the associated investor notes receivable. In addition, all previously accrued interest
expense and interest income has been removed on these “back-end notes” for the period ended December 31, 2017.
In
consideration for the issuance of the $131K Note and the $125K Note, on May 1, 2017 and June 2, 2017 and for the two $125k Notes
on July 10, 2017 and August 7, 2017, the Company received net proceeds (after deducting $25,000 in legal fees) in the amount of
$481,250. In consideration for the issuance of the $131K and the three $125k Notes, the Investor issued to the Company a $131,250
fully-collateralized secured promissory note and three $125,000 fully-collateralized secured promissory notes (the “Investor
Notes”), pursuant to which the Investor agreed to pay the Company $131,250 and $375,000 on or before January 1, 2018, February
2, 2018, March 10, 2018 and April 7, 2018 respectively. These Notes (often referred to as “back-end Notes”), bear interest
at the rate of 8% per annum. However, all these “back-end notes” were cancelled in early 2018 and will not fund. According,
all the “back-end” notes were removed from the books at December 31, 2017 along with the associated investor notes receivable.
In addition, all previously accrued interest expense and interest income 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. The principal balance remaining on this convertible note is $45,500
as of June 30, 2018.
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
Convertible
Notes Payable - JR (5%)
On August 2, 2017 the Company issued a convertible note payable
(promissory note) to an investor in the principal amount of $50,000. The note matures on August 2, 2018 and bears interest at 5%.
The note holder has the right at any time on or after the day that is six months from August 2, 2018 to convert any part or all
of the outstanding unpaid principal balance into shares of the Company’s common stock at a fixed price of .003 per share.
The entire principal balance of $50,000 is outstanding as of June 30, 2018 and December 31, 2017
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 its embedded derivative and discount. On September 25,
2017, $16,250 in principal on this note was satisfied by the conversion into 25,000 shares of the Company’s common stock
leaving a balance on the note of $133,750 at December 31, 2017. During the quarter-ended March 31, 2018, $15,000 in principal on
this note was satisfied by the conversion into 60,000 shares of the Company’s common stock. During the quarter-ended June
30, 2018, $7,500 in principal on this note was converted into 30,000 shares of the company’s common stock. In addition, on
May 26, 2018, the original note holder sold $20,000 in principal to an unrelated third-party investor with the same terms as the
original note thereby leaving a balance on the original note of $80,250 at June 30, 2018 and a balance of $20,000 to the new third-party
noteholder.
Convertible
Notes Payable - LG (8%) (Notes 5 & 6)
On January 25, 2018 the Company issued a convertible note payable
(promissory note) to an investor in the principal amount of $78,750. The note matures on January 25, 2019 and bears interest at
8%. The note holder has the right at any time on or after the day that is six months from January 25, 2018 to convert any part
or all of the outstanding unpaid principal balance into shares of the Company’s common stock. The entire principal balance
of $78,750 is outstanding as of June 30, 2018. The embedded derivative and related derivative discount on this convertible note,
although not convertible during the six months ended June 30, 2018, has nonetheless been valued and recorded on the books as of
April 1, 2018 in accordance with ASC 815.
On June 4, 2018 the Company issued a convertible note payable
(promissory note) to an investor in the principal amount of $52,500. The note matures on June 4, 2019 and bears interest at 8%.
The note holder has the right at any time on or after the day that is six months from June 4, 2018 to convert any part or all of
the outstanding unpaid principal balance into shares of the Company’s common stock. The entire principal balance of $52,500
is outstanding as of June 30, 2018. The embedded derivative and related derivative discount on this convertible note, although
not convertible during the six months ended June 30, 2018, has nonetheless been valued and recorded on the books as of June 4,
2018 in accordance with ASC 815.
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 June 30, 2018 as follows:
6/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Remaining
Principal
|
|
|
Original
Issue
|
|
|
Derivative
|
|
|
Deferred
Financing
|
|
|
Convertible
Notes
|
|
|
Derivative
|
|
Debt
|
|
Amount
|
|
|
Discount
|
|
|
Discount
|
|
|
Costs
|
|
|
Payable
|
|
|
Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable
- BS
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
Note Payable - SF
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
Note Payable - SD
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
Note Payable - NW
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
715
|
|
|
|
|
|
Note Payable - MC #2
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890
|
|
|
|
|
|
Convertible Note Payable
- JR (5%)
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
Convertible Note Payable
- HG (10%)
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
Convertible Note Payable
- CB (5%)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
904
|
|
Convertible
Notes Payable - SO (8%)
|
|
|
2,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,452
|
|
|
|
2,638
|
|
Convertible Note Payable
- LGC (8%) 1
|
|
|
45,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,500
|
|
|
|
38,808
|
|
Convertible Note Payable
- LGC (8%) 2
|
|
|
125,000
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
125,000
|
|
|
|
105,824
|
|
Convertible Note Payable
- LGC (8%) 3
|
|
|
125,000
|
|
|
|
|
|
|
|
(97,259
|
)
|
|
|
(120
|
)
|
|
|
27,621
|
|
|
|
111,685
|
|
Convertible Note Payable
- LGC (8%) 4
|
|
|
125,000
|
|
|
|
|
|
|
|
(98,271
|
)
|
|
|
(599
|
)
|
|
|
26,130
|
|
|
|
105,118
|
|
Convertible Note Payable
- MLM (10%) (Related party)
|
|
|
80,250
|
|
|
|
|
|
|
|
(48,400
|
)
|
|
|
|
|
|
|
31,850
|
|
|
|
130,656
|
|
Convertible Note Payable
- LGC (8%) 5
|
|
|
78,750
|
|
|
|
|
|
|
|
(58,646
|
)
|
|
|
(2,332
|
)
|
|
|
17,772
|
|
|
|
66,031
|
|
Convertible
Note Payable - LGC (8%) 6
|
|
|
52,500
|
|
|
|
|
|
|
|
(41,500
|
)
|
|
|
(2,315
|
)
|
|
|
8,685
|
|
|
|
42,755
|
|
|
|
$
|
721,242
|
|
|
$
|
-
|
|
|
$
|
(344,076
|
)
|
|
$
|
(5,366
|
)
|
|
$
|
371,800
|
|
|
$
|
604,
419
|
|
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
As
of June 30, 2018, the convertible notes payable can be converted into approximately 826,747 shares of common
stock.
Note
6. DERIVATIVES AND FAIR VALUE INSTRUMENTS
The
Company applied paragraph 815-10-05-4 of the FASB Accounting Standards Codification to the 5% Convertible Notes Payable issued
June 12th 2015 and the 8% Convertible Note payable issued June 25th 2015 and for the 8% Convertible Notes Payable issued January
7, 2016 and March 7, 2016 and the 9% Convertible Note payable issued October 1, 2016. Based on the guidance in paragraph 815-10-05-4
of the FASB Accounting Standards Codification the Company concluded these instruments were required to be accounted for as derivatives
on issuance date. The Company records the fair value of the Convertible Notes Payable and certain warrants that are classified
as derivatives on issuance date and the fair value changes on each reporting date reflected in the consolidated statements of
operations as “Change in Fair Value - derivatives.” These derivative instruments are not designated as hedging instruments
under paragraph 815-10-05-4 of the FASB Accounting Standards Codification and are disclosed on the balance sheet under Derivative
Liabilities.
The
Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for
disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value
in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
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 and the 8% Convertible note payable issued June 4, 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 June 30, 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 June 30, 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.
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
The
5% Convertible Note Payable and the 8% Convertible Notes Payable and the 9% convertible note payable are valued at June 30, 2017
.
The following assumptions were used for the valuation of the embedded derivative:
-
|
The
post reverse split (1,000:1) stock price of $0.50 decreased to $0.40 in this period (basis for the variable conversion price)
would fluctuate with the Company projected volatility;
|
-
|
An
event of default for the Convertible Note would occur 0% of the time, increasing 1.00% per month to a maximum of 5.0%;
|
-
|
Alternative
financing for the Convertible Note would be initially available to redeem the note 0% of the time and increase monthly by 1% to
a maximum of 10%;
|
-
|
Capital
raising events (a single financing at 1 month from the valuation date) are a factor for the VV Convertible Note. The full reset
events projected to occur based on future stock issuance (single event) resulting in a reset exercise price.
|
-
|
The monthly trading
volume would average $579,941 (rounded) as of 6/30/2018 and would increase at 5% per month; ownership limits
conversion across LG’s notes based on 4.99% with shares outstanding increasing monthly by 1%.
|
-
|
The
variable conversion price of 50% to 58% over 3 to 20 trading days would have effective rates of 45.89% to 55.04%;
|
-
|
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:
|
3/31/2018
|
|
|
240
|
%
|
|
4/18/2018
|
|
|
205
|
%
|
4/1/2018
|
|
|
232
|
%
|
|
4/30/2018
|
|
|
216
|
%
|
4/1/2018
|
|
|
207
|
%
|
|
5/11/2018
|
|
|
212
|
%
|
4/6/2018
|
|
|
198
|
%
|
|
5/16/2018
|
|
|
210
|
%
|
4/13/2018
|
|
|
145
|
%
|
|
5/21/2018
|
|
|
212
|
%
|
4/14/2018
|
|
|
205
|
%
|
|
6/27/2018
|
|
|
179
|
%
|
|
|
|
|
|
|
6/30/2018
|
|
|
204
|
%
|
The
foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the
probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuation.
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
The
Company’s derivative liabilities on convertible notes payable are presented at market value in the financial statements
at June 30, 2018 as follows:
6/30/2018
Convertible
Note
|
|
Derivative
Treatment Date
|
|
Maturity
Date
|
|
Principal
Note Amount
|
|
|
Original
Derivative Valuation
|
|
|
Derivative
Valuation December 31, 2017
|
|
|
Quarter
Ended March 31, 2018 Issuances
|
|
|
Quarter
Ended March 31, 2018 Conversions
|
|
|
Ended
March 31,
2018 Mark-to- Market
|
|
|
Derivative
Valuation March 31, 2018
|
|
|
Quarter
Ended June 30,
2018 Issuances
|
|
|
Quarter
Ended June 30,
2018 Conversions
|
|
|
Ended
June 30,
2018 Mark-to- Market
|
|
|
Derivative
Valuation June 30,
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
% Convertible Note- Payable- issued 6/12/2015
|
|
4/12/2016
|
|
1/7/2017
|
|
|
35,863
|
|
|
|
37,827
|
|
|
$
|
832
|
|
|
|
|
|
|
$
|
-
|
|
|
|
305
|
|
|
$
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
(233
|
)
|
|
$
|
904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9%
Convertible Notes Payable- issued 10/01/2016
|
|
3/26/2017
|
|
3/27/2018
|
|
|
157,895
|
|
|
|
56,956
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
105,000
|
|
|
|
87,287
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
50,000
|
|
|
|
15,803
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued March 7, 2016
|
|
3/7/2016
|
|
3/7/2017
|
|
|
50,000
|
|
|
|
87,538
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued March 7, 2016
|
|
3/7/2016
|
|
1/7/2017
|
|
|
46,803
|
|
|
|
82,115
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued May 1, 2016
|
|
10/28/2017
|
|
5/1/2018
|
|
|
131,250
|
|
|
|
103,294
|
|
|
$
|
52,989
|
|
|
|
|
|
|
$
|
(31,013
|
)
|
|
|
8,541
|
|
|
$
|
30,517
|
|
|
|
|
|
|
$
|
(9,148
|
)
|
|
|
17,439
|
|
|
$
|
38,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued August 15, 2017
|
|
4/1/2018
|
|
8/15/2018
|
|
|
125,000
|
|
|
|
108,878
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
108,878
|
|
|
|
|
|
|
|
(3,760
|
)
|
|
$
|
105,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued July 10, 2017
|
|
4/1/2018
|
|
7/10/2018
|
|
|
125,000
|
|
|
|
108,061
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
108,061
|
|
|
|
|
|
|
|
3,092
|
|
|
$
|
111,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued January 25, 2018
|
|
4/1/2018
|
|
1/25/2019
|
|
|
78,750
|
|
|
|
65,896
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
65,896
|
|
|
|
|
|
|
|
135
|
|
|
$
|
66,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
Convertible Notes Payable- issued June 4, 2017
|
|
6/4/2018
|
|
6/4/2018
|
|
|
52,500
|
|
|
|
42,755
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
42,755
|
|
|
|
|
|
|
|
532
|
|
|
$
|
43,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,290,811
|
|
|
$
|
1,112,525
|
|
|
$
|
251,886
|
|
|
$
|
-
|
|
|
$
|
(77,117
|
)
|
|
$
|
22,943
|
|
|
$
|
197,712
|
|
|
$
|
325,590
|
|
|
$
|
(36,043
|
)
|
|
$
|
117,160
|
|
|
$
|
604,419
|
|
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
The Company’s mark-to-market fair value adjustment ((income)/expense)
for the quarter ended June 30, 2018 totaled $117,160.
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 June 30, 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 1,403,063 and 849,437 shares of common stock
issued and outstanding at June 30, 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 June 30, 2018 and December 31, 2017, there were 500,000 shares and 500,000 shares of Series A preferred stock were issued
and outstanding respectively. The preferred stock has preferential voting rights of 2,000 votes per outstanding share.
The Company has authorized 50,000 shares of Series B convertible
preferred stock with a par value of $0.0001 per share. At December 31, 2016 there were 39,000 shares issued of which 12,900 shares
of Series B preferred were converted into common stock in accordance with the terms of the Series B Preferred stock. Therefore;
there were 26,100 shares outstanding at December 31, 2016. The Series B preferred stock has no voting rights. During the quarter
ended March 31, 2017, 18,100 shares of Series B preferred shares were converted into common stock in accordance with the terms
of the Series B preferred stock. As of result there were 8,000 shares of Series B preferred shares outstanding at June 30, 2018.
The holders of the Series B convertible preferred stock have the right to convert the same into Common Stock of the Corporation
at the ratio of one (1) share of Series B Convertible Preferred for five hundred (500) shares of Common Stock.
During the quarter ended March 31, 2017, the Company issued
an aggregate 43,000 shares of common stock for services provided to the Company.
During the quarter ended March 31, 2017, the Company issued
an aggregate 112,498 shares of common stock as partial conversion of notes.
During the quarter ended March 31, 2017, the Company issued
an aggregate 9,050 shares of common stock for conversion of 18,100 shares of Preferred Series B stock.
During the quarter ended June 30, 2017, the Company issued an
aggregate 33,000 shares of common stock for services provided to the Company.
During the quarter ended June 30, 2017, the Company issued an
aggregate 177,073 shares of common stock as partial conversion of notes and accrued interest.
During
the quarter ended June 30, 2017, the Company issued an aggregate 450,000 shares of Preferred Series A stock at par of $.0001.
During the quarter ended September 30, 2017, the Company issued
an aggregate 41,000 shares of common stock for services provided to the Company.
During the quarter ended September 30, 2017, the Company issued
an aggregate 62,196 shares of common stock as partial conversion of notes and accrued interest.
During the quarter ended December 31, 2017, the Company issued
an aggregate 71,000 shares of common stock for services provided to the Company.
During the quarter ended December 31, 2017, the Company issued
an aggregate 74,772 shares of common stock as partial conversion of notes and accrued interest.
During the quarter ended March 31, 2018, the Company issued
an aggregate 18,000 shares of common stock for services provided to the Company.
During the quarter ended March 31, 2018, the Company issued
an aggregate 376,111 shares of common stock as partial conversion of notes and accrued interest.
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
During the quarter ended June 30, 2018, the Company issued an
aggregate 67,500 shares of common for services provided to the Company.
During the quarter ended June 30, 2018, the Company issued an
aggregate 92,015 shares of common stock as partial conversion of notes and accrued interest.
Note
8. COMMITMENTS AND CONTINGENCIES
The Company currently has three office
locations. It rents offices on a month-to-month basis from the Company’s President and stockholder for $525 per month
which amounted to $1,575 or the quarter ended June 30, 2018. The Company also has ready-to-go office space available to be
used for meetings etc. at a nominal cost of approximately $100 per month with no commitment. The cost of this space for the
quarter ended June 30, 2018 was $297. On September 12th 2016 the Company entered into a commercial lease agreement for office
premises at an original cost of $650 per month for a one-year term with the option to renew for one extended term of three
years. In July 2017 the Company leased additional space at this location thereby increasing the monthly rent to $1,550. The
cost of this space for the quarter ended June 30, 2018 was $4,650. A new lease was signed in March 2018 for the same space.
The following are the minimum required lease payments under the lease for the next four years:
2018
|
|
-
|
|
$
|
17,200
|
|
2019
|
|
-
|
|
$
|
24,600
|
|
2020
|
|
-
|
|
$
|
24,600
|
|
2021
|
|
-
|
|
$
|
4,100
|
|
Total
rent expense for the six months ended June 30, 2018 and 2017 was $12,344 and $7,644 respectively. In March 2018, the Company prepaid
four months of rent totaling $6,200 of which $1,550 is still prepaid and on the balance sheet at June 30, 2018.
The Company has agreements
with consultants for ongoing services to be rendered with the following commitments:
|
|
Commitment
|
|
Term
|
Consultant - FDA requirements and compliance
|
|
$2,000 per month
|
|
12 Months
|
Consultant - capital formation and market services
|
|
Various equity percentage issuances of restricted stock for fundings
|
|
6 Months
|
Consultant - tradeshow attendance, strategy and collaboration, coordination regarding FDA compliance,
manufacturing operations, sales and marketing, other related services
|
|
$10,000 per month (payable quarterly in cash or common stock from the 2016/2017 Equity Incentive Plan)
|
|
12 Months
|
Note
9. INCOME TAXES
The
Company accounts for income taxes under the asset and liability approach. Deferred tax assets and liabilities are recognized for
the expected future tax consequences attributed to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to reverse.
The
Company’s deferred tax asset consists primarily of carryforward net operating losses (NOLs). The Company believes that, at this
time, it is more likely than not that the benefit of the NOLs will not be realized. As of June 30, 2018, the Company had provided
a valuation allowance to fully reserve its net operating loss carryforwards and other items giving rise to deferred tax assets,
primarily as a result of anticipated net losses for income tax purposes and has therefore recorded a full valuation allowance.
Note
10. RELATED PARTY TRANSACTIONS
In
August 2015, the Company acquired 100% of the issued and outstanding common stock of Medical Lasers Manufacturer, Inc. (“MLM”)
from a stockholder and officer of the Company for 20,000 common shares which were valued at $0.001 per share. All intercompany
transactions were eliminated during consolidation.
As
more fully described in Note 3 to the Consolidated Financial Statements, the Company owed the following amounts to related parties
as of the following:
|
|
30-Jun
|
|
|
December 31
|
|
|
|
2018
|
|
|
2017
|
|
Due to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
Due to officer/stockholder
|
|
|
8,955
|
|
|
|
8,398
|
|
Due to other stockholders
|
|
|
6,100
|
|
|
|
6,790
|
|
Total Related Party Obligations
|
|
$
|
23,976
|
|
|
$
|
24,109
|
|
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
The company has entered into an employment agreement with its Chief Executive Officer (CEO) for the five
year period beginning January 1, 2012. The agreement provides for base compensation, annual bonus, benefits, vacation and reimbursements.
Under this agreement, the base compensation of the Company’s CEO is $100,000 per annum which has been accrued for the years
ended December 31, 2015 and 2014. In mid-year 2016 the Company commenced payroll and is paying the CEO for current wages in this
manner. During the year ended December 31, 2016, $18,974 in accrued compensation was paid. Accrued compensation in the amount of
$30,000 was converted to shares of common stock during 2015. In the quarter ended June 30, 2017, $45 in accrued CEO compensation
was converted to Series A Preferred shares. During the quarter ended September 30, 2017, $25,500 in accrued compensation was paid
to the CEO. Effective October 1, 2017, the employment agreement between the Company and its CEO was amended to increase the annual
salary to $150,000. During the quarter ended December 31, 2017 $44,673 in accrued compensation was paid to the CEO. As of June
30, 2018, the company owes accrued compensation to its CEO in the amount of $394,905.
As more fully described in Note 1-Intangible
Asset-Licensing Agreement, on March 8th 2016 (with an effective date of October 1, 2015) the Company entered into a Licensing
Agreement with a Florida Corporation (Licensor) that is owned by a related party. The Company issued 25,000 shares of Series
B Preferred stock to the Licensor as partial consideration for the Licensing agreement plus a $150,000 promissory note to the
Licensor for the balance of the consideration. During the quarter-ended March 31, 2016, 3,400 shares of Series B Preferred
stock were converted into 1,700,000 shares of common stock in accordance with the terms of the Series B Preferred stock.
During the quarter ended March 31, 2017, 18,100 shares of Series B preferred stock was converted into 9,050 shares of common
stock in accordance with the terms of the Series B Preferred stock.
As more fully described in Note 1 and Note 5 to
the financial statements, $18,986 in accrued interest on the $150,000 note was satisfied through the issuance of 17,273
shares of the Company’s common stock. On September 15, 2017 the Note was amended to include provisions to allow
conversion of the Note into common stock of the Company. At such time the Note was valued with its embedded derivative and
discount. On September 25, 2017, $16,250 in principal on this note was satisfied by the conversion into 25,000 shares of
the Company’s common stock. During the quarter ended March 31, 2018, $15,000 in principal on this note was satisfied by
the conversion into 60,000 shares of the Company’s common stock. During the quarter ended June 30, 2018, $7,500 in
principal on this note was satisfied by the conversion into 30,000 shares of the Company’s common stock. During the
quarter ended June 30, 2018 the original related-party noteholder sold $20,000 in principal on this note to an unrelated
third-party investor thereby leaving $80,250 in principal balance due to the related party original noteholder and $20,000 in
principal due to the unrelated third-party investor.
Note
11. BASIS OF REPORTING - GOING CONCERN
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the recoverability of assets and the satisfaction of liabilities in the normal course of business.
The
Company has incurred losses from inception of approximately $4,386,853 which, among other factors, raises substantial doubt about
the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon
management’s plans to raise additional capital from the sale of stock and to receive additional financing and to commence sales
of its flagship product and create revenue. The accompanying financial statements do not include any adjustments that might be
required should the Company be unable to continue as a going concern. Management believes the Company’s present cash and
cash equivalents will not enable it to meet its obligations for twelve months from the date these financial statements are available
to be issued unless the Company received additional funding.
Note
12. STOCK COMPENSATION - EQUITY INCENTIVE PLAN
In July 2016, the Company adopted the Medifirst Solutions,
Inc. 2016 Equity Incentive Plan (the “Plan”) pursuant to which the Company may grant stock options, restricted
stock purchase offers and other equity-based awards up to an aggregate of 20,000 shares of common stock. The Plan is designed
to retain directors, executives and selected employees and consultants and reward them for making contributions to the
success of the Company. These objectives are accomplished by making long-term incentive awards under the Plan thereby
providing Participants with a proprietary interest in the growth and performance of the Company.
On December 6th, 2016 the company amended the terms of the Plan
and filed an S-8 Registration Statement with the Securities and Exchange Commission (“SEC”) increasing the number of
shares permitted to be issued under the Plan to 32,000.
During the quarter ended March 31, 2017, the Company
issued from the Plan a total of 27,100 shares of common stock to non-employees for services rendered. As of March 31, 2017
there is a balance of -0- shares available for future issuance under the Medifirst Solutions, Inc. 2016 Equity Incentive
Plan.
Medifirst
Solutions, Inc.
Notes to Consolidated
Financial Statements
June 30, 2018
In May 2017, the Company adopted the Medifirst
Solutions, Inc. 2017 Equity Incentive Plan (the “2017 Plan”) pursuant to which the Company may grant stock
options, restricted stock purchase offers and other equity-based awards up to an aggregate of 125,000 shares of common stock.
The Plan is designed to retain directors, executives and selected employees and consultants and reward them for making
contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the
Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company. During the year
ended December 31, 2017, the Company issued from the Plan 108,000 shares to non-employees for services rendered. As of
December 31, 2017 there is a balance of 17,000 shares available for future issuance under the Medifirst Solutions, Inc. 2017
Equity Incentive Plan.
In January 2018, the Company adopted the Medifirst
Solutions, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) pursuant to which the Company may grant stock
options, restricted stock purchase offers and other equity-based awards up to an aggregate of 175,000 shares of common stock.
The Plan is designed to retain directors, executives and selected employees and consultants and reward them for making
contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the
Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company.
During the quarter ended March 31, 2018, the Company
issued from the 2018 Plan a total of 4,000 shares of common stock to non-employees for services rendered. As of March 31,
2018 there is a balance of 188,000 shares available for future issuance under the Medifirst Solutions, Inc. 2018 Equity
Incentive Plan.
During the quarter ended June 30, 2018, the Company issued
from the 2018 Plan a total of 17,500 shares of common stock to non-employees for services rendered. As of June 30, 2018 there
is a balance of 170,500 shares available for future issuance under the Medifirst Solutions, Inc. 2018 Equity Incentive
Plan.
Note
13. SUBSEQUENT EVENTS
Effective
July 23, 2018, the Company completed 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.
The Company’s trading symbol will be MFSTD. The symbol will revert back to MFST twenty (20) business days after the
effective date. 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 June 30, 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.
Subsequent
to the quarter ended June 30, 2018 and after the above referenced reverse stock-split, the Company issued an aggregate of 82,188
shares of Common Stock for services rendered by consultants and professionals.
Subsequent
to the quarter ended June 30, 2018 and after the above referenced reverse stock-split, the Company issued an aggregate 139,439
shares of Common Stock upon conversions of an aggregate principal amount equal to $4,300 outstanding convertible promissory notes
and $217 in accrued interest.