In determining the appropriate fair value of warrant liabilities, we used Level 3 inputs for our valuation methodology. We applied the Black-Scholes model to value such warrant liabilities. See Note 7 for the inputs used in the Black-Scholes option valuation model.

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(e) PROPERTY AND EQUIPMENT

We state property and equipment at cost. We state equipment under capital leases at the present value of the minimum lease payments. We calculate depreciation using the straight-line method, based upon the following estimated useful lives:

Furniture and Fixtures: 5 Years

Computer Equipment: 5 Years

When we retire or dispose of items, we charge or credit income for the difference between the net book value of the asset and the proceeds realized thereon.

We charge expenditures for maintenance and repairs to operations as incurred while we capitalize renewals and betterments.

We have pledged as collateral all property and equipment, along with all other of our assets, for a line of credit from The RHL Group, a related party (see Note 3 - Related Party Note Payable).

Intangible assets are comprised of website and software development costs, domain names and patents. We account for website and software development costs in accordance with ASC 350-50, Website Development Costs, and ASC 985-20, Costs of Software to Be Sold, Leased or Marketed. Pursuant to ASC 350-50 and 985-20, we capitalize internally developed website and software costs when the website or software under development has reached technological feasibility. We amortize these costs, typically over an estimated life of five years, using the larger of the amount calculated using the straight-line method or the amount calculated using the ratio between current period gross revenues and the total of current period gross revenues and estimated future gross revenues. At each balance sheet date, we evaluate the unamortized capitalized website and software costs compared to the net realizable value. We then write off the amount by which the unamortized capitalized website costs exceed its net realizable value. During the three months ended March 31, 2012 and 2011, there were no impairment charges recorded.

We account for domain names and patents in accordance with ASC 350-30, General Intangibles Other than Goodwill. We capitalize patent costs representing legal fees associated with filing patent applications and amortize them on a straight-line basis. We are in the process of evaluating our patents' estimated useful lives and will begin amortizing the patents when they are brought to the market or otherwise commercialized. We amortize identifiable intangible assets over their estimated useful lives as follows:

Website and Software Development Costs: 5 Years

Domain Names: 5 Years

Patents: 20 Years

We account for long-lived assets, which include property and equipment, and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with ASC 350-30. ASC 350-30 requires that we review long-lived assets for impairment whenever events or changes in circumstances indicate that we may not recover the carrying amount of an asset. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amount of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. We had no impairment charges during the three months ended March 31, 2012 and 2011.

We generate our revenues from services, which are comprised of providing electronic access to consumer medical records and other vital documents, and from the licensing of our intellectual property and services. We recognize revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and we are reasonably assured of collectability of the resulting receivable.

Our subscriber revenues consist of annual and monthly recurring retail subscriptions and usage-based fees, which are primarily paid in advance by credit card, and corporate accounts that are based on either an access-fee or actual number of users, and in each case billed in advance at the beginning of each month of service. We defer the portions of annual recurring subscription fees collected in advance and recognize them on a straight line basis over the subscription period.

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We grant exclusive licenses for the sale and marketing of our services in international territories in consideration of an up-front license fee and an ongoing royalty. The royalty fee is usually a percentage of revenue earned by the licensee and there are usually certain minimum guarantees. We defer the recognition of license fee revenues received in advance from international licensees for the grant of the license and recognized them over the period covered by the agreement. We defer the recognition of minimum guaranteed royalty payments received in advance and recognize them over the period to which the royalty relates. We include all such revenues under "License Fees." In those cases where a license agreement contains multiple deliverables, we account for the agreement in accordance with ASC 605-25, Revenue Recognition - Multiple-Element Arrangements.

We recognize revenue on sales of our MMRPro system in accordance with ASC 605-25, Revenue Recognition, Multiple- Element Arrangements. We have also adopted Accounting Standards Update ("ASU") 2009-13, "Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force" effective January 1, 2010.

Our multiple-deliverable arrangements consist solely of our MMRPro product. Significant deliverables within these arrangements include sophisticated scanning equipment, various licenses to use third party software, a license to use our proprietary MMRPro application software, installation and training, dedicated telephone lines, secure online storage and warranties.

We determined all elements to be separate units of accounting as they have standalone value to the customers and/or they are sold by other vendors on a standalone basis. Delivery of the hardware and certain software elements of these arrangements occur at the inception of the agreement. We deliver installation and training at the inception of the agreement. We provide other software licenses, telephone lines and online secure storage over the three year term of the agreement. We include warranties in the arrangements, however the third party product manufacturer, and not us, is obligated to fulfill such warranties. The third-party warranty contracts are paid in advance and are not refundable.

We allocate the revenue derived from these arrangements among all the deliverables. We base such allocation on the relative selling price of each deliverable. With the exception of our proprietary MMRPro application software, we use third party evidence to set the selling prices used for this allocation. In all such cases, third parties sell the same or very similar products. For the MMRPro application software, we estimate the selling price based on recent discussions regarding licensure of that particular application on a standalone basis. To date, we have not licensed this software on a standalone basis.

We recognize the allocated revenue for each deliverable in accordance with SEC Staff Accounting Bulletin ("SAB") No. 104, Topic 13: Revenue Recognition. Under this guidance, we recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable and collectability is reasonably assured. This results in us recognizing revenue for the hardware, certain software and the warranties upon delivery to the customer, for the installation and training upon completion of these services, and ratably over the contract period for the software licenses, telephone lines and online secure storage.

Revenue from the licensing of our biotech assets may include non-refundable license and up-front fees, non-refundable milestone payments that are triggered upon achievement of a specific event, and future royalties or lump-sum payments on sales of related products. For agreements that provide for milestone payments, such as our agreement with Celgene, we adopted ASC 605-28-25, Revenue Recognition, Milestone Method.

We account for income taxes in accordance with ASC 740-10, Income Taxes. We recognize deferred tax assets and liabilities to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. We classify interest and penalties as a component of interest and other expenses. To date, we have not been assessed, nor have we paid, any interest or penalties.

We measure and record uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.

We expense advertising costs as we incur them. Advertising expense for the three months ended March 31, 2012 and March 31, 2011 amounted to $0 and $27,468, respectively.

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(k) SHARE-BASED COMPENSATION

We account for share-based compensation in accordance with ASC 718-20, Awards Classified as Equity. We apply ASC 718-20 in accounting for stock-based awards issued to employees under the recognition of compensation expense related to the fair value of employee share-based awards, including stock options and restricted stock. Determining the fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the expected dividends. Judgment is required in estimating the amount of share-based awards expected to be forfeited prior to vesting. If actual forfeitures differ significantly from these estimates, share-based compensation expense could be materially impacted.

We account for options and warrants issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. We treat options and warrants issued to non-employees the same as those issued to employees with the exception of determination of the measurement date. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Options and warrants granted to consultants are valued at their respective measurement dates, and recognized as an expense based on the portion of the total consulting services provided during the applicable period. As further consulting services are provided in future periods, we will revalue the associated options and warrants and recognize additional expense based on their then current values.

We estimate the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. We determine assumptions relative to volatility and anticipated forfeitures at the time of grant. We valued grants of stock options and warrants during the three months ended March 31, 2012 and 2011 using the following assumptions.

We base the assumptions used in the Black-Scholes models upon the following data: (1) our use of the contractual life of the underlying non-employee warrants as the expected life; the expected life of the employee options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on historical exercise experience; (2) in the absence of an extensive public market for our shares, the expected stock price volatility of the underlying shares over the expected term of the option or warrant was taken at approximately the mid-point of the range for similar companies at the various grant dates; (3) we base the risk free interest rate on published U.S. Treasury Department interest rates for the expected terms of the underlying options or warrants; (4) we base expected dividends on historical dividend data and expected future dividend activity; and (5) we base the expected forfeiture rate on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.

We apply the guidance of ASC 260-10, Earnings Per Share for calculating the basic and diluted loss per share. We calculate basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding. We compute diluted loss per share similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential shares had been issued and if the additional shares were dilutive. We exclude common equivalent shares from the computation of net loss per share if their effect is anti-dilutive.

We excluded all potential common shares from the computation of diluted net loss per common share for the three months ended March 31, 2012 and 2011 because they were anti-dilutive due to our net loss position. Stock options and warrants excluded from the computation totaled 107,834,242 shares for the three months ended March 31, 2012 and 86,487,431 shares for the three months ended March 31, 2011.

We expense research, development and engineering costs as incurred and presented as technology development in the accompanying consolidated statements of operations. We capitalize and amortize costs for software development relating to our website incurred subsequent to establishing technological feasibility, in the form of a working model, over their estimated useful lives.

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(n) RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB issued ASU No. 2010-6, "Improving Disclosures About Fair Value Measurements," that amends existing disclosure requirements under ASC 820 by adding required disclosures about items transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. This ASU became effective during the first quarter of 2010, except for the requirement to provide level 3 activities of purchases, sales, issuances, and settlements on a gross basis, which becomes effective beginning the first quarter of 2011. The adoption of this standard didn't have a material impact on our financial statements.

On April 29, 2011, we, The RHL Group and Robert H. Lorsch entered into a Fifth Amended and Restated Secured Promissory Note, or the Fifth Amended Note, and we agreed to guaranty MMR's obligations under the Fifth Amended Note (the "Guaranty"). The Fifth Amended Note amends and restates the April 29, 2010 Fourth Amended and Restated Secured Promissory Note Agreement. The Fifth Amended Note matured April 29, 2012, and bears interest at the lesser of 10% or the highest rate then permitted by law, and is secured by the Security Agreement. The reserve credit line of the Fifth Amended Note remains at $3,000,000. In connection with the Fifth Amended Note, The RHL Group received a $200,000 loan origination fee ("Fee") that was due and payable immediately. The RHL Group exercised warrants to purchase 1,600,000 shares of our common stock with an exercise price of $0.125 in consideration for the loan origination fee. In addition, the RHL Group received a warrant to purchase up to 2,796,566 shares of our common stock at an exercise price of $0.051 per share. This warrant is fully vested and is exercisable either in cash or on a cashless basis at any time prior to the fourth anniversary of the warrant's issuance.

The Fifth Amended Note had a balance of $1,648,472 at March 31, 2012. The components of the Fifth Amended Note and the related balance sheet presentation as of March 31, 2012 are as follows: $1,119,207, which are included in the line of credit, related party; and $279,265, which is related to deferred salary and other expenses and $250,000, which is related to consulting fees, are included in related party payables. We recorded the loan origination fees mentioned above as a note discount and we are amortizing them over the Fifth Amended Note maturity period. As of March 31, 2012, the remaining unamortized origination fee was $16,667.

Total interest expense on this note for the three months ended March 2012 and 2011 amounted to $38,304 and $28,628 respectively. The unpaid interest balances as of March 31, 2012 and December 31, 2011 were $7,145 and $24,145, respectively.

In conjunction with the Fifth Amended Note, we were required to maintain certain financial covenants, including the requirement that we have at least $200,000 in cash in our bank accounts or such other amount as necessary to maintain operations through the subsequent thirty (30) days and timely pay any obligations due respecting payroll and all associated payroll taxes on and after March 31, 2012. As of March 31, 2012, we were in the process of renewing the Fifth Amended Note, which was due to mature on April 29, 2012. As part of that process we received a waiver from the RHL Group for the covenants until May 31, 2012, at which time we expect to have the renewal completed.

Additional information regarding the Fifth Amended and Restated Note is contained in our Quarterly Report on Form 10-Q filed with the SEC on May 26, 2011.

Under ASC 740-270, Income Taxes - Interim Reporting, we are required to adjust our effective tax rate each quarter to be consistent with the estimated annual effective tax rate. We are also required to record the tax impact of certain discrete items, unusual or infrequently occurring, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, we exclude jurisdictions with a projected loss for the year or a year-to-date loss where we cannot recognize a tax benefit from our estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.

As a result of the implementation of certain provisions of ASC 740, Income Taxes, (formerly FIN 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109), the Company performed an analysis of its previous tax filings and determined that there were no positions taken that it considered uncertain. Therefore, there were no unrecognized tax benefits as of March 31, 2012.

MMR, in its capacity as the operating company taking over our income tax positions in addition to its own positions after January 27, 2009 (see Note 1), has estimated its annual effective tax rate to be zero. MMR has based this on an expectation that the combined entity will generate net operating losses in 2012, and it is not likely that those losses will be recovered using future taxable income. Therefore, no provision for income tax has been recorded as of and for the three months ended March 31, 2012.

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NOTE 5 - COMMITMENTS AND CONTINGENCIES

Leases

We lease certain facilities and equipment under non-cancelable capital and operating leases, which expire at various dates through 2013. Effective September 1, 2010, we entered into a lease agreement to lease office space in Los Angeles, California. The lease requires a monthly payment of $5,500 commencing in September 2010. Effective November 1, 2010, the Company entered into a lease agreement to lease additional space adjacent to the current office space in Los Angeles, California. The lease requires an additional monthly payment of $3,193 commencing in November 2010. Both leases expire on August 31, 2013 unless renewed. Total rent expense for the three months ended March 31, 2012 and 2011 was $27,729 and $17,386, respectively. Future minimum lease payments as of March 31, 2012, under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments are as follows:

On May 6, 2011, the RHL Group agreed to guarantee up to $250,000 in payments to a vendor for future services to be rendered. In consideration of this guarantee, the RHL Group received (i) a warrant to purchase 625,000 shares of our common stock, at an exercise price of $0.046 per share, which was the closing price of our common stock on the date of the transaction, and (ii) 125,000 shares of our common stock priced as of the same date. In the event that the RHL Group has to perform on this guarantee, interest on any outstanding balance paid to the vendor by the RHL Group will be added to the balance of the Fifth Amended Note or any subsequent renewals. Additionally, any balances due to this vendor at any given time will reduce the amount available under the Fifth Amended Note or any subsequent renewals. The warrants and shares were issued on November 11, 2011 to the RHL Group.

On March 5, 2012, Robert Lorsch agreed to guarantee a note with a principal amount of $235,000 plus interest and expenses to a lender who provided a bridge loan to the Company. In consideration of this guarantee, Mr. Lorsch received (i) a warrant to purchase 470,000 shares of our common stock, and (ii) 470,000 shares of our common stock, both with a price of $0.0319 per share.

For the three months ended March 31, 2012, our largest customer (Celgene $100,000) accounted for approximately 58% of our total revenue.

For the three months ended March 31, 2011, our largest customer (Celgene $500,000) accounted for approximately 87.4% of our total revenue.

From time to time, we are involved in various legal proceedings generally incidental to our business. While the result of any litigation contains an element of uncertainty, our management presently believes that the outcome of any known, pending or threatened legal proceeding or claim, individually or combined, will not have a material adverse effect on our financial statements.

On July 31, 2011, Ropers, Majeski, Kohn and Bentley ("Ropers"), a national firm with offices in San Francisco, Redwood City, San Jose, Los Angeles, New York and Boston, filed a civil complaint on behalf of MyMedicalRecords.com ("MMR- US") in the Superior Court For the State of California, County of Los Angeles. Named as defendants in that case are Taylor Armstrong, Russell Armstrong and a corporation known as NuWay Digital Systems. Among other things, the Complaint alleges that Taylor Armstrong and her husband Russell Armstrong breached a 2007 settlement agreement between themselves and MMR-US. The settlement agreement entitles MMR-US to liquidated damages of $1,000,000 for the first such breach and $250,000 for each ensuing breach. To date, three breaches have been alleged. Ropers continues to investigate and will amend the Complaint in the event that additional breaches are uncovered. The complaint has been served on Ms. Armstrong individually, and she has answered. The pre- trial discovery process has commenced. Trial is set in July 2012. The parties have engaged in an extensive mediation; however, it would be premature to conclude that the matter will be fully settled prior to trial.

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On January 26, 2012, we filed a complaint against certain a former officer of pre-merger Favrille, Inc., and other potential defendants (the "Favrille Defendants") that the Company believes may have committed wrongful acts relating to the misappropriation of Favrille's intellectual and personal property. Information leading to the decision to file the lawsuit was discovered as a result of the filing of a lawsuit by The RHL Group, Inc., a creditor of MMRGlobal. MMRGlobal's board of directors consented to having the law firm that represented The RHL Group, Inc. represent MMRGlobal in this matter.

MMR has recently asked Ropers to substitute in as counsel of record in the lawsuit that is now pending in San Diego County, California against the Favrille Defendants. In the complaint, MMR seeks damages for unauthorized removal and conversion of MMR assets including tissue and other samples that were wrongfully converted by the defendants. Damages may be as high as $5,000,000. Some of MMR's damage may be covered by first party insurance. The matter is in the initial stages of the litigation process. No trial date is set and discovery has yet to commence.

At this time the potential recovery for damages is unknown. There is no attorneys' fees provision, so if the lawsuit ends unfavorably for us, we will be responsible for the payment of attorneys' fees, costs and expenses incurred by us for its representation and could be required to indemnify the Favrille Defendants pursuant to certain provisions in the Agreement and Plan of Merger and Reorganization between Favrille and MMR. The matter is currently in the early stages of litigation and counsel does not have enough facts at this time to predict the possibilities of either a favorable or unfavorable outcome.

On December 9, 2011, MyMedicalRecords, Inc. entered into a Non-Exclusive Settlement and Patent License Agreement (the "Agreement") with Surgery Center Management LLC ("SCM"). In consideration for the rights granted under the Agreement and in consideration of a settlement and release agreement, SCM contracted to pay MMR an initial payment of $5 million, payable on December 23, 2011, and additional payments of $5 million per year for five consecutive years. After numerous attempts to collect the past due amount of $5 million, on January 19, 2012, MMR filed a lawsuit in the Superior Court of the State of California for the County of Los Angeles for breach of contract. The contract contains an arbitration clause. The Company has demanded arbitration for the total $30 million allegedly due under the Agreement and is awaiting response. This matter is currently in the initial pleading stages and counsel does not have enough facts at this time to predict the chances of either a favorable or unfavorable outcome, nor does counsel have any facts upon which to base any information regarding collectability.

MMR is facing one claim from Sunil Singhal, a former employee. Mr. Singhal was employed as Executive Vice President of Technology and Product Development at MMR. He was placed on a 30-day administrative leave on February 13, 2012, and was given a 30-day notice of termination as approved by the Board of Directors of MMRGlobal on February 29, 2012. On March 30, 2012, Mr. Singhal was officially terminated. No lawsuit has been filed and defense of the claim has been tendered to MMR's insurance carrier.

The Company has 5,000,000 shares of preferred stock authorized. As of March 31, 2012, and December 31, 2011, there were no shares of preferred stock issued and outstanding.

As of March 31, 2012, we are authorized to issue 650,000,000 shares of common stock.

On August 5, 2010, the Company filed a Form S-1 related to the offer and resale of up to 60,000,000 shares of our common stock, by the selling stockholder, Dutchess Opportunity Fund, II, LP ("Dutchess"). Dutchess has agreed to purchase all 60,000,000 shares pursuant to the investment agreement dated September 15, 2009, as amended on May 7, 2010, or the Investment Agreement, between Dutchess and the Company, and an additional 230,800 shares were issued to Dutchess in partial consideration for the preparation of the documents for its investment. Subject to the terms and conditions of the Investment Agreement, the Company had the right to put up to $10 million in shares of our common stock to Dutchess. As of March 31, 2012, the amount available under the equity line facility was $7.9 million, however that amount could be reduced based on the market price of our stock at the time any shares are sold.

As of March 31, 2012, the total shares of our common stock issued and outstanding amounted to 374,096,882.

On January 21, 2010, our Board of Directors approved an increase to the number of shares authorized for issuance under our 2001 Equity Incentive Plan (the "Plan") from 12,000,000 to 27,000,000 shares as we determined that the number of shares remaining under the Plan was inadequate to retain our key directors, executives and managers. Our stockholders approved the increase to the Plan on June 15, 2010.

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The Plan expired on June 5, 2011 and no options were issued under that plan since that date. On September 1, 2011, our Board of Directors approved the adoption of a new plan to replace the Plan under the same general terms. The Company plans to file an S-8 to register the new plan which will be put out for shareholder approval in the next Annual Shareholder Meeting to be held on June 20, 2012.

A summary of option activity for the three months ended March 31, 2012 is presented below. Options granted by MMR prior to the date of the Merger have been retroactively restated to reflect the conversion ratio of MMR to MMRIS shares.

The aggregate intrinsic value in the table above is before applicable income taxes and is calculated based on the difference between the exercise price of the options and the quoted price of the common stock as of the reporting date.

Total stock option expenses recorded during the years ended December 31, 2011 and 2010 were $1,111,937 and $1,689,141, respectively, and is reflected in operating expenses in the accompanying consolidated statements of operations.

Total stock option expense recorded for the three months ended March 31, 2012 and 2011 amounted to $194,450 and $416,795, respectively. The following table summarizes information about stock options outstanding and exercisable at March 31, 2012.

On February 17, 2012, the Company issued a warrant to purchase 105,000 shares of common stock in connection to the issuance of a Convertible Promissory Note to an unrelated third-party for a principal amount of $35,000. The term of the warrant was one day and the exercise price was equal to the product of fifty percent (50%) multiplied by the arithmetic average of the volume- weighted average trading price of the Common Stock for the ten (10) consecutive trading days ending on the day that was three (3) trading days prior to the applicable investment date. This warrant vested at commencement and had an aggregate value of $1,785. On the date of investment, the holder converted the promissory notes and exercised the attached warrants.

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On March 21, 2012, we granted a third-party two warrants to purchase up to 175,000 shares of our common stock to as payment for serving on our advisory board. These warrants had an exercise price of $0.06 and $0.08 per share, respectively, with a contractual life through March 21, 2017. These warrants vest annually over two years and have an aggregate value of $10,500 and $14,000, of which $513 and $493 were recorded as operating expenses during the three months ended March 31, 2012, respectively.

A summary of the activity of the Company's warrants for the three months ended March 31, 2012 is presented below:

The following summarizes the total warrants outstanding and exercisable as of March 31, 2012.

During the three months ended March 31, 2012, we issued 591,250 shares of common stock with a value of $53,499 to non- employees and charged to the appropriate accounts for the following reasons:

The 591,250 shares were not contractually restricted, however as they have not been registered under the Act, they are restricted from sale until the requirements of Rule 144 under the Securities Act, as amended, permit such sale. All such shares were issued at the trading closing price on the date of issuance and such value was calculated therefrom.

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Restricted Stock Program

Under the Restricted Stock Program, a restricted stock award is an offer by the Company to sell to an eligible person shares that are subject to restrictions relating to the sale or transfer of the shares. A committee appointed by the Board to administer the program or the Board itself shall determine to whom an offer will be made, the number of shares the person may purchase, the price to be paid and the restriction to which the shares shall be subject. The offer must be accepted by the eligible person within thirty days from the date of the offer evidenced by the Restricted Stock Purchase Agreement. The purchase price of shares shall not be less than 85% of the fair market value of such shares on the issue date, with the provision that the purchase price for a 10% stockholder shall not be less than 110% of such fair market value. Shares are either fully and immediately vested upon issuance, or may vest in installments upon attainment of specified performance objectives.

Under the Stock Bonus Program, shares are issued as a bonus for past services rendered pursuant to the Stock Bonus Agreement. Stock bonuses may be awarded upon satisfaction of specified performance goals pursuant to the Performance Stock Bonus Agreement. No shares were issued under the Stock Bonus Program during the three months ended March 31, 2012.

On April 15, 2011, the Company issued a Restated Convertible Promissory Note to an unrelated third-party with a principal amount of $167,387 which included a 7% closing discount in the amount of $10,951. This Note replaced and terminated a promissory note originally issued to a related third-party on July 26, 2010 for $150,000 plus accrued interest of $6,436. The Restated Note was convertible at the option of the holder into common stock at a variable conversion price of seventy percent (70%) multiplied by the lower of the arithmetic average of the volume-weighted average trading price (VWAP) of the Common Stock for the ten (10) consecutive trading days ending on the date of the applicable conversion date, or the closing bid on the applicable conversion date. As of June 30, 2011, the conversion price was to be permanently fixed based on the calculation stated above with June 30, 2011 being the 10^th day. The whole note was ratably converted on April 15, May 16, and June 22, 2011. The Company recognized $147,057 as interest expense related to these conversions. In addition, the Note was treated as derivative due to the variable nature of the conversion price for the period from April 15 through June 30. As a result, the Company also recognized a loss of $37,798 as a change in derivative liability as of June 30, 2011.

On July 19, 2011, the Company issued a Restated Convertible Promissory Note to an unrelated third-party with a principal amount of $168,442 which included a 7% closing discount in the amount of $11,020. This Note replaced and terminated a portion of a promissory note originally issued to a related third-party on September 21, 2010 for $150,000 plus accrued interest of $7,422. The Restated Note is convertible at the option of the holder into common stock at a variable conversion price of seventy percent (70%) multiplied by the lower of the arithmetic average of the volume-weighted average trading price (VWAP) of the Common Stock for the ten (10) consecutive trading days ending on the date of the applicable conversion date, or the closing bid on the applicable conversion date. As of September 30, 2011, the conversion price was to be permanently fixed based on the calculation stated above with September 30, 2011 being the 10^th day. In addition, the Note was treated as derivative due to the variable nature of the conversion price for the period from July 19, 2011 through September 30, 2011. The derivative liability related to this conversion feature was calculated at $108,481. On August 12, 2011, $50,000 or 30% of the note was converted into common stock; the Company valued the contract again using the Black-Scholes option valuation model and recorded the difference between the value at July 19, 2011 of $108,481 and the value at August 12, 2011 of $115,167, as a loss on change in value of derivatives of $6,686. The Company also relieved $34,186 or 30% of the derivative value upon the 30% of the note conversion. On September 30, 2011, the Company re-valued the derivative with the assumptions used and calculated an increase in value of the derivative of $17,210. Per the contract, the note conversion price became fixed at September 30, 2011; therefore, the Company reclassified the entire remaining derivative value of $98,192 to equity on September 30, 2011. There is no derivative liability at March 31, 2012.

We did not designate any of the derivatives liabilities as hedging instruments.

The inputs used for the Black-Scholes option and warrant valuation model were as follows.

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NOTE 8 - NOTES PAYABLE

Notes payable consisted of the following.

From time to time we enter into Convertible Promissory Notes ("Note(s)"). As of March 31, 2012, a total of $872,708 in Notes remained outstanding and the investors had not chosen to convert their Note balances into shares of our common stock.

On February 17, 2012, we entered into a Convertible Promissory Note (the "Note") with one unrelated third-party for a principal amount totaling $35,000. Under the terms of the agreement, the principal amount owed under the Note became due and payable six months from the investment date provided that, upon ten (10) days' prior written notice to the Holder, we may, in our sole discretion, extend the maturity date for an additional six month term. The Note had a stated interest rate of 12% per annum payable in cash or shares of common stock, or a combination of cash and shares of common stock, at the election of the Company. The Note was convertible at the option of the holder into common stock at a fixed conversion price ("Fixed Conversion Price") of seventy-five percent (75 %) multiplied by the arithmetic average of the volume-weighted average trading price of the common stock for the ten (10) consecutive trading days ending on the day that was three (3) trading days prior to the applicable investment date, subject to anti-dilution and other customary adjustments. In connection with the Note, the Company also issued a warrant to purchase an aggregate of 105,000 shares of common stock. The term of the warrant was one day and the exercise price was the product of fifty percent (50%) multiplied by the arithmetic average of the volume-weighted average trading price of the common stock for the ten (10) consecutive trading days ending on the day that was three (3) trading days prior to the applicable grant date, subject to anti-dilution and other customary adjustments.

We derived the fair value of the warrant issued with the Note(s) during the first quarter of 2012 using the Black-Scholes option valuation model, resulting in a fair value of $45,000. The $35,000 note proceed was allocated to the relative fair value of the note without the warrant and of the warrants itself on the investment date. The remainder of the proceeds is allocated to the note portion of the transaction, resulting in a discount. We then calculated the intrinsic value of the conversion feature on the investment date and allocated the portion of the proceeds equal to the intrinsic value of this feature of $12,712 to paid-in capital. The initial value ascribed to the Note of $32,288 is being accreted to their face value over the initial term of the Notes using the interest method. Upon conversion, the entire unamortized discount from the face value of the Note was recognized as interest expense due to the beneficial nature of the conversion feature.

The total interest expense attributed to the Notes and related warrants (see above) for the three months ended March 31, 2012 and 2011 was $65,256 and $305,862 respectively.

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NOTE 10 - RESTRUCTURING ACTIVITIES

From May 29, 2008 to November 7, 2008, Favrille, Inc. had provided notices under the federal Worker Adjustment and Retraining Notification Act to 142 employees, including six members of senior management, that it planned to conduct a workforce reduction at its facility in San Diego, California and that their employment was expected to end on various dates between June 6, 2008 to November 7, 2008. Immediately prior to the date of the Merger on January 27, 2009, the total severance liability relating to former Favrille employees amounted to $1,682,416. On January 27, 2009, immediately prior to the Merger, as part of the 9,999,992 warrants issued to creditors (see Note 9), the Company issued warrants as settlement of $985,020 of these amounts. In addition, the Company signed promissory notes with certain former executives totaling $76,783, which notes are payable in full on August 31, 2009 (see Note 10).

As of March 31, 2012, the total remaining severance liabilities amounted to $620,613, which is reflected as severance liability on the accompanying consolidated balance sheets. This consists of $571,362 payable to former non-executive employees in 18 monthly installments starting on July 27, 2009, as well as $49,251 in estimated payroll tax. No payments were made during the three months ended March 31, 2012 on these severance liabilities.

During the period from January 27, 2009 through June 30, 2009, the Company entered into a series of settlement agreements with certain vendors of Favrille pursuant to the Creditor Plan, pursuant to which the Company settled $302,982 of its outstanding accounts payable for an aggregate settlement amount of $214,402, including promissory notes of $139,355 payable in 18 monthly installments starting on July 27, 2009 (see Note 8).

Our Chairman and Chief Executive Officer, Robert H. Lorsch, is also the Chief Executive Officer of The RHL Group, Inc. and has full voting power over all of the capital stock of The RHL Group, Inc. Mr. Lorsch directly, and indirectly through The RHL Group, Inc., beneficially owns approximately 17.3% our total outstanding voting stock. The RHL Group, Inc. has loaned us money pursuant to the Fifth Amended Note and any predecessor notes. See Note 3 - Related Party Note Payable above.

The RHL Group is an investment holding company which provides consulting, operational and technical services to the Company, which we refer to as the RHL Services. As part of the RHL Services, The RHL Group provides the Company with unrestricted access to its internal business and relationship contact database of more than 10,000 persons and entities, which includes clients of The RHL Group and other individuals which may hold value to the Company. The RHL Group also provides infrastructure support to the Company, including allowing the Company unlimited access to its facilities, equipment, and data, information management and server systems. In addition to allowing the Company the use of its office support personnel, The RHL Group has also consented to allow the Company to utilize the full-time services of Mr. Lorsch as the Company's President, Chairman and Chief Executive Officer, which requires substantial time and energy away from his required duties as The RHL Group's Chairman and Chief Executive Officer. In addition, The RHL Group has made its President, Kira Reed, available as the Company's spokesperson. Ms. Reed, who is Mr. Lorsch's spouse, also manages the Company's social networking activities.

In consideration for the above, The RHL Group, Inc. has a consulting arrangement with MMR. A copy of the consulting agreement is filed as an Exhibit in our current report on Form 8-K filed with the SEC on May 4, 2009 and is hereby incorporated by reference.

We incurred $12,500 during the three months ended March 31, 2012 and 2011, respectively, toward marketing consulting services from Bernard Stolar, a director. We included $140,945 and $122,695 in related party payables as of March 31, 2012 and December 31, 2011, respectively, in connection with these services.

We also incurred $12,500 during the three months ended March 31, 2012 and 2011, respectively, toward marketing consulting services from Hector Barreto, a former director and member of our Advisory Board. We included in related party payables as of March 31, 2012 and December 31, 2011 of $21,167 and $8,667, respectively, in connection with these services. In the first quarter of 2009, we entered into an agreement with The Latino Coalition, a non-profit organization in which Mr. Barreto is also the Chairman, to market our product to its members. On May 4, 2010, we granted to Latino Coalition 92,593 shares of common stock, valued at $24,908 in consideration for marketing services. We did not pay any amounts to the Latino Coalition in both 2012 and 2011. Mr. Barreto ceased to be a related party upon his departure from the Board of Directors on September 30, 2011.

MMR also had a consulting agreement, as amended, with The Rebensdorf Group, Inc., or TRGI, whose owner and Chief Executive Officer is our former director George Rebensdorf. Pursuant to the agreement, TRGI provided financial advisory services and assisted in negotiations in connection with our efforts to raise funds through private placement transactions. In addition to the initial retainer fee of $30,000 we paid upon execution of the original letter agreement, we agreed to pay TRGI (a) a $4,167 monthly retainer (commencing May 1, 2009), (b) for transactions with parties introduced by TRGI, a success fee equal to 8% of the value (payable 4% in cash, 4% in warrants), (c) for material assistance in closing transactions with parties not introduced by TRGI, an advisory fee equal to 2% of the value (payable in cash), and (d) an annual grant of 100,000 options, vesting monthly over two-years from the grant date, with an exercise price equal to fair market value on the grant date. Payment of the monthly retainer may be deferred, in which case it would be payable to TRGI pro rata upon payment of any other deferred management or consulting fees. The letter agreement, as amended, was terminated effective July 31, 2011.

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We also incurred $0 and $12,500 during the three months ended March 31, 2012 and 2011, respectively, for finder's fees and consulting services from George Rebensdorf of The Rebensdorf Group and a former director. We included in related party payables as of March 31, 2012 and December 31, 2011 of $0, in connection with these services. Any Agreement for these services has been terminated.

We also have an agreement with our current director Jack Zwissig to provide individual executive coaching services to our management team on an as needed basis. Mr. Zwissig receives compensation in the form of stock as determined by our Board of Directors commensurate with the services performed. The agreement with Mr. Zwissig is on a month-to-month basis and continues until terminated by either party.

We also incurred $394 and $6,000 during the three months ended March 31, 2012 and 2011, respectively, for consulting services from Jack Zwissig, a director. We included in related party payables as of March 31, 2012 and December 31, 2011 of $46,278 and $41,885, respectively, in connection with these services.

We contract with a significant vendor for the development and maintenance of the software applications necessary to run our MyMedicalRecords PHR, MyEsafeDepositBox and MyMedicalRecords Pro products. Our outside developer supports our software development needs through a team of software engineers, programmers, quality control personnel and testers, who work with our internal product development team on all aspects of application development, design, integration and support of our products. This vendor is also a stockholder. For the three months ended March 31, 2012 and 2011, the total expenses relating to this stockholder amounted to $126,117 and $103,257, respectively. In addition, we capitalized $36,346 of software development costs for the three months ended March 31, 2012. As of March 31, 2012 and December 31, 2011, the total amounts due to the stockholder and included in related party payables amounted to $432,429 and $306,312, respectively.

On September 15, 2009, we entered into a five year agreement with E-Mail Frequency, LLC and David Loftus, Managing Partner of E-Mail Frequency, LLC, a significant stockholder of the Company. We licensed an existing 80 million person direct-marketing database of street addresses, cellular phone numbers, e-mail addresses and other comprehensive data with E-Mail Frequency. The agreement allows us to market, through the use of the Database, our MyMedicalRecords Personal Health Record, MyEsafeDepositBox virtual vault, and MMRPro document management system to physicians and their patients. Under the terms of the Agreement, we paid $250,000 to David Loftus as a one-time consulting fee in the form of 2,777,778 shares of our common stock. We recorded the $250,000 one-time licensee fee as a prepaid consulting fee and included in the prepaid expenses and other current assets as of December 31, 2009, less amortization of $12,500 included in operating expensed for the year ended December 31, 2009. Amortization expense for the three months ended March 31, 2012 and 2011 was $12,500 each. In addition, we incurred a total of $6,939 and $1,997 during the three months ended March 31, 2012 and 2011, toward business development services from E-Mail Frequency and Mr. Loftus. We included in related party payables at March 31, 2012 and December 31, 2011 of $28,626 and $21,687, respectively, in respect to these services. Furthermore, Mr. Loftus is a value-added-reseller of MMRPro systems. During 2011, we recognized $140,000 in revenue from E-Mail Frequency for the development and integration of our MyMedicalRecords.com product with their customer's website.

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NOTE 12 - SUBSEQUENT EVENTS

On April 5, 2012, we learned of an inadvertent omission, due to a formatting error, of the Item 9A information required in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, timely filed with the Securities and Exchange Commission ("SEC") on March 30, 2012 (the "10-K"). Due to the omission, an "E" symbol was placed on our ticker symbol by the OTC Bulletin Board (the "OTCBB"). In addition, the OTCBB informed us in a letter dated April 5, 2012, which we received on April 9, 2012, that we had 30 days to correct the omission. On April 6, 2012, we amended the Form 10-K to include the omitted information, placing us back in compliance with all periodic reporting requirements of the SEC. After extensive discussions with the OTCBB and representatives of the SEC, we were informed by the OTCBB that the Amendment properly corrected the omission, we were in compliance with respect to our periodic reporting requirements and the "E" symbol was removed from the Company's ticker symbol, effective at the open of markets on April 12, 2011.

On April 16, 2012, we entered into a Continuous Investment Agreement (the "Investment Agreement") with Granite State Capital, LLC (the "Investor"). Pursuant to the Investment Agreement, the Investor committed to purchase up to $15,000,000 of our common stock (the "Common Stock"), over the course of thirty-six months (the "Facility"). We may draw on the Facility from time to time, as and when we determine appropriate, by providing the Investor a draw notice in accordance with the terms and conditions of the Investment Agreement (a "Draw Notice"). A maximum of 100 million shares may be issued under the Facility, at per share prices set at ninety-five percent (95%) of the lowest daily volume weighted average price of our common stock during the five (5) consecutive trading day period beginning on the trading day immediately following the date of delivery of the applicable draw notice (such five-day period, the "Pricing Period").

We may draw in any Draw Notice an amount up to either (i) two hundred percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the three (3) trading days prior to the applicable Draw Notice, multiplied by the average of the three (3) daily closing prices immediately preceding the date of the Draw Notice or (ii) five hundred thousand dollars ($500,000) (each a "Draw"). The purchase price shall be set at ninety-five percent (95%) of the lowest daily volume weighted average price of our common stock during the Pricing Period. However, we have the option to specify a floor ("Suspension Price") for each Draw Notice. If, on any trading day during a Pricing Period, the price of the Common Stock falls below the Suspension Price specified by us in the applicable Draw Notice, the Draw shall be temporarily suspended and shall resume at such time as the Common Stock is above the Suspension Price, provided the Pricing Period is still valid. Any shares above the Suspension Price will be settled at the Suspension Price (with no discount). We shall not be entitled to deliver a new Draw Notice to the Investor until the prior Pricing Period has closed.

The Investor will not be obligated to purchase shares if the Investor's total number of shares beneficially held would exceed 4.99% of the number of shares of the Company's common stock as determined in accordance with Rule 13d-1 of the Securities Exchange Act of 1934, as amended. In addition, we are not permitted to draw on the facility unless there is an effective registration statement (as further explained below) to cover the resale of the shares.

The Investment Agreement further provides that the Investor and the Company are each entitled to indemnification from the other for any losses or liabilities suffered as a result of any breach by the other of any provisions of the Investment Agreement or Registration Rights Agreement (as defined below), as well as certain other potential losses and liabilities customarily included in similar types of agreements.

The Investment Agreement also contains representations and warranties of each of the Company and the Investor. The assertions embodied in those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and limitations agreed to by the respective parties in connection with negotiating the terms of the Investment Agreement. In addition, certain representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what a stockholder or investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts. Investors should read the Investment Agreement together with the other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange Commission (the "SEC").

Pursuant to the terms of a Registration Rights Agreement ("Registration Rights Agreement") dated April 16, 2012, between the Company and the Investor, we are obligated to file one or more registration statements with the SEC to register the resale by the Investor of shares of common stock issued or issuable under the Investment Agreement. In addition, we are obligated to use all commercially reasonable efforts to have the initial registration statement declared effective by the SEC within ninety (90) days after the closing date. The registration statement was filed with the SEC on May 8, 2012 and we are awaiting approval by the SEC.

The foregoing description of each of the Investment Agreement and the Registration Rights Agreement is qualified in its entirety by reference to the full text of the Investment Agreement and the Registration Rights Agreement, which were filed with the SEC on April 18, 2012 as Exhibits 10.1 and 10.2, respectively, on Form 8-K and incorporated herein by reference.

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Unis JV Application Approval

On April 20, 2012 we were notified that the Administration of Industry and Commerce ("AIC") approved our application for the establishment of the Unis Tonghe MMR International Health Management Service Co., Ltd. Joint Venture and we are planning on filing the application for the registration of the Unis JV by May 18, 2012.

This Quarterly Report on Form 10-Q contains certain forward-looking statements. The words "anticipate," "expect," "believe," "plan," "intend," "will" and similar expressions are intended to identify such statements. Although the forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements are subject to various risks and uncertainties, including but not limited to the following:

• Our ability to obtain financing to fund our operations;
• Our inability to generate sufficient cash flow to service our debt obligations;
• The ability to generate subscribers for our products and services given the current competitive landscape;
• Our ability to adapt our products to conform to any technical specifications necessary to benefit from stimulus package funding;
• Our ability to raise dilutive and non-dilutive capital in order to meet our financial obligations and invest in our business to grow revenues, including risks related to our trading in the Over the Counter market;
• Our ability to launch new products or to successfully commercialize our existing or planned products;
• Managing costs while building an effective sales and service delivery organization for our products with our small management team;
• Our ability to maximize our legacy biotechnology assets and otherwise protect our intellectual property assets;
• Our ability to enter into marketing arrangements with large membership and affinity organizations for our products and maintain and grow subscribers from such arrangements, such as those noted above, particularly after the initial introductory period; and
• The possible invalidity of the underlying assumptions and estimates related to our business and market;
• Conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors and legislative, judicial and other governmental authorities and officials;
• Possible changes or developments in economic, business, industry, market, legal and regulatory circumstances;

Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Any of such assumptions could be inaccurate. You should not place undue reliance on these forward-looking statements, which are based on our current views and assumptions. In evaluating these statements, you should specifically consider various factors, including the foregoing risks and those outlined under "Risk Factors" in Item 1A of the 10-K. Our forward-looking statements represent estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

An appraisal of MMR's health IT patent portfolio reported in January 2012 by The MichaelBass Group projected that the range of value for these patents could reach $300-800 million based on very conservative estimates that the market will reach the full GDP value of $19 billion (for a copy of the full report, please go to: http://michaelbass.com/PDF/JAN20MMRF.pdf).

On January 4, 2010, we announced the completion of a definitive Joint Venture Agreement ("the "Unis JV") with Unis- Tonghe Technology (Zhengzhou) Co., Ltd., or Unis, to form a joint venture to build a customized version of MMR's proprietary PHR services and professional document imaging and management solutions in China. Pursuant to requests from the Chinese Government, the Company has continued to respond to requests for changes in the Unis JV including changes as recent as March 27, 2012. On April 20, 2012 we were notified that the Administration of Industry and Commerce ("AIC") approved our application for the establishment of the Unis Tonghe MMR International Health Management Service Co., Ltd. Joint Venture and we are planning on filing the application for the registration of the Unis JV by May 18, 2012.