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EXCEL - IDEA: XBRL DOCUMENT - MMRGlobal, Inc.Financial_Report.xls
EX-32.2 - CEO 906 CERTIFICATE - MMRGlobal, Inc.exh32-1.htm
EX-32.2 - CFO 906 CERTIFICATE - MMRGlobal, Inc.exh32-2.htm
EX-31.2 - CFO 302 CERTIFICATE - MMRGlobal, Inc.exh31-2.htm
EX-31.1 - CEO 302 CERTIFICATE - MMRGlobal, Inc.exh31-1.htm
EX-10.1 - NON-EXCLUSIVE LICENSE AGREEMENT (THE "AGREEMENT") WITH WHOLE FOODS MARKET, MEDICAL AND WELLNESS CENTERS INC DATED FEBRUARY 26, 2013. - MMRGlobal, Inc.exh10-1.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

   

SECURITIES EXCHANGE ACT OF 1934

     
   

For the quarterly period ended March 31, 2013

     
   

OR

     

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

   

SECURITIES EXCHANGE ACT OF 1934

     
   

For the transition period from ______________ to ________________

Commission file number: 000-51134

MMRGLOBAL, INC.
(Exact name of Registrant as Specified in Its Charter)

DELAWARE

 

33-0892797

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

     

4401 WILSHIRE BLVD., SUITE 200
LOS ANGELES, CA

 

90010

(Address of Principal Executive Offices)

 

(Zip Code)

(310) 476-7002
(Registrant's Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

                  Yes x       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

                  Yes x       No o

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

Large accelerated filer o             Accelerated filer o    
Non-accelerated filer o (Do not check if a smaller reporting company)             Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of April 22, 2013, the issuer had 592,177,879 shares of common stock outstanding.



TABLE OF CONTENTS

                          Page
Part I.   FINANCIAL INFORMATION                     1
                           
Item 1.   Consolidated Financial Statements                     1
                           
    Consolidated Balance Sheets at March 31, 2013 (unaudited) and December 31, 2012                     1
                           
    Consolidated Statements of Operations - Three Months Ended March 31, 2013 (unaudited) and March 31, 2012 (unaudited)                     2
                           
    Consolidated Statements of Cash Flows - Three Months Ended March 31, 2013 (unaudited) and March 31, 2012 (unaudited)                     3
                           
    Notes to Consolidated Financial Statements (unaudited)                     4
                           
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations                     14
                           
Item 3.     Quantitative and Qualitative Disclosures About Market Risk                     23
                           
Item 4.   Controls and Procedures                     23
                           
Part II.   OTHER INFORMATION                     23
                           
Item 1.     Legal Proceedings                     23
                           
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                     24
                           
Item 6.   Exhibits                     25
                           
Signatures                         26

i


PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MMRGLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

          March 31,         December 31,
      2013     2012
      (Unaudited)      
             
ASSETS
             
Current assets:            
     Cash and cash equivalents   $ 70,966    $ 36,655 
     Accounts receivable, less allowances of $80,000 in 2013 and 2012     459,542      404,024 
     Inventory     114,818      2,865 
     Prepaid expenses and other current assets     111,045      108,360 
          Total current assets     756,371      551,904 
             
Long-term investments            
     Investment in equity securities, at cost         56,000 
          Total long-term investments         56,000 
             
Property and equipment, net      50,133      20,301 
Deposits     3,370      3,370 
Intangible assets, net     1,441,847      1,347,859 
          Total assets   $ 2,251,721    $ 1,979,434 
             
LIABILITIES AND STOCKHOLDERS' DEFICIT
             
Current liabilities:            
     Line of credit, related party   $ 1,053,946    $ 1,045,947 
     Related party payables     1,236,245      1,328,533 
     Compensation payable     243,176      206,548 
     Severance liability     620,613      620,613 
     Accounts payable and accrued expenses     4,451,649      3,985,741 
     Deferred revenue     19,878      24,531 
     Convertible notes payable     762,607      763,857 
     Notes payable, current portion     365,343      375,343 
     Notes payable, related party     262,921      242,921 
     Capital leases payable, current portion     13,222     
          Total current liabilities     9,029,600      8,594,034 
             
Capital leases payable, less current portion     15,759     
          Total liabilities     9,045,359      8,594,034 
             
Commitments and contingencies (See Note 9)            
             
Stockholders' deficit:            
     Preferred stock - $0.001 per value, 5,000,000 shares authorized, 0 issued and outstanding.         
     Common stock, $0.001 par value, 950,000,000 shares authorized, 574,963,491             
     and 522,152,225 shares issued and outstanding as of March 31, 2013             
     and December 31, 2012, respectively     574,956      522,144 
     Additional paid-in capital     48,278,505      46,998,534 
     Accumulated deficit     (55,647,099)     (54,135,278)
          Total stockholders' deficit     (6,793,638)     (6,614,600)
          Total liabilities and stockholders' deficit   $ 2,251,721    $ 1,979,434 

The accompanying notes are an integral part of these condensed consolidated financial statements

1


MMRGLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

        Three Months Ended
        March 31,
        2013     2012
        (Unaudited)     (Unaudited)
               
Revenues              
Subscriber     $ 25,380    $ 44,846 
MMR Pro       32,238      21,580 
License fees       3,000      100,000 
Other income       61,410      6,372 
     Total revenues       122,028      172,798 
Cost of revenues       26,143      174,849 
     Gross profit (loss)       95,885      (2,051)
General and administrative expenses       889,562      933,766 
Sales and marketing expenses       559,023      452,644 
Technology development       23,973      69,977 
     Loss from operations       (1,376,673)     (1,458,438)
Interest and other finance charges, net       (135,148)     (125,763)
Net loss     $ (1,511,821)   $ (1,584,201)
               
               
Net loss available to common shareholders per share:              
Basic and diluted     $ (0.00)   $ (0.01)
               
Weighted average common shares outstanding:              
Basic and diluted       544,838,595      366,241,123 

The accompanying notes are an integral part of these condensed consolidated financial statements

2


MMRGLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

          Three Months Ended March 31,
          2013     2012
          (Unaudited)     (Unaudited)
Operating activities:                
Net loss       $ (1,511,821)   $ (1,584,201)
Adjustments to reconcile net loss to net cash                 
     used in operating activities:                
     Depreciation and amortization         56,403      60,312 
     Warrants issued for services         24,645     
     Stock-based compensation         63,532      194,450 
     Common stock issued for services         235,280      53,499 
     Accrued related party payables         (110,629)    
     Amortization of loan discount         73,500      73,798 
     Loan commitment fee amortization              918 
          Subtotal - Non-cash adjustments         342,731      382,977 
Effect of changes in:                
     Accounts receivable         (105,099)     114,688 
     Inventory         (62,372)    
     Prepaid expenses and other current assets         (2,685)     56,244 
     Accounts payable and accrued expenses         511,387      112,665 
     Related party payables         18,341      260,072 
     Compensation payable          36,628      23,706 
     Deferred revenue         (4,653)     (3,129)
          Subtotal - net change in operating assets & liabilities         391,547      564,246 
          Net cash used in operating activities         (777,543)     (636,978)
                 
Investing activities:                
     Purchase of property and equipment             (555)
     Filing of patents         (142,894)     (94,695)
     Costs of continuing MMRPro and website development         (3,500)     (51,993)
          Net cash used in investing activities         (146,394)     (147,243)
                 
Financing activities:                
     Net proceeds from convertible notes         493,750      36,995 
     Net proceeds from warrant exercises             50,458 
     Proceeds from equity line of credit         487,898      350,126 
     Proceeds from note payable         40,000      235,000 
     Payments of note payable         (30,000)     (125,000)
     Payments of line of credit         (28,552)    
     Payments of capital lease         (4,848)    
          Net cash provided by financing activities         958,248      547,579 
Net increase (decrease) in cash         34,311      (236,642)
Cash, beginning of period         36,655      311,103 
Cash, end of period       $ 70,966    $ 74,461 
                 
Supplemental disclosures of cash flow information:                
     Cash paid for interest       $ 12,906    $ 368 
     Cash paid for income taxes       $ 1,600    $ 4,844 
Supplemental disclosure of non-cash investing and financing activities:                
     Conversion of convertible notes into common stocks       $ 493,750    $ 147,561 
     Cancellation of investment in equity securities       $ 56,000    $
     Acquisition of assets through capital lease       $ 33,829    $
     Payment of accounts payable and related party payables through issuance of common stock       $   $ 53,499 
     Reclassification of derivative liabilities and creation of note discounts       $   $ 16,492 

The accompanying notes are an integral part of these condensed consolidated financial statements

3


MMRGLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2013

NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

MMRGlobal Inc. (referred to herein, unless otherwise indicated, as "MMR," the "Company," "we," "us," and "our") was originally incorporated as Favrille, Inc. ("Favrille") in Delaware in 2000, and since its inception and before the Merger (as defined below), operated under a different management team as a biopharmaceutical company focused on the development and commercialization of targeted immunotherapies for the treatment of cancer and other diseases of the immune system. In May 2008, Favrille's ongoing Phase 3 registration trial for its lead product candidate failed to show a statistically significant improvement in the treatment of patients with follicular B-cell Non-Hodgkin's lymphoma.

On January 27, 2009, the Company, through MyMedicalRecords, Inc. ("MMR Inc."), which is now our wholly-owned operating subsidiary, conducted a reverse merger with Favrille. We refer to this transaction as the "Merger". Pursuant to the terms of the Merger, all of the outstanding common and preferred stock of MMR Inc. were cancelled and the former stockholders of MMR Inc. received an aggregate of 79,812,116 shares of Favrille common stock. On February 9, 2009, following the completion of the Merger, we changed our corporate name to MMR Information Systems, Inc. In addition, we assumed the obligations of MMR Inc., under its outstanding stock options and warrants, which, pursuant to the terms of the Merger, represented the right to receive an aggregate of 12,787,080 shares of our common stock at the effective time of the Merger. In connection with the Merger, MMR became our wholly-owned subsidiary, with the former stockholders of MMR Inc. collectively owning shares of our common and preferred stock representing approximately 60.3% of the voting power of our outstanding capital stock. Effective June 15, 2010, we changed our corporate name to MMRGlobal, Inc., which we believe more accurately reflects our global imprint.

For accounting purposes, the Merger was treated as a reverse acquisition with MMR Inc. being the accounting acquirer. Accordingly, the historical financial results prior to the Merger are those of MMR Inc. The results of operations for MMR are included in the Company's consolidated financial results beginning on January 27, 2009.

The presentation of consolidated statements of stockholders' equity (deficit) reflects the historical stockholders' equity (deficit) of MMR through January 26, 2009. The effect of the issuance of shares of MMRGlobal's common stock in connection with the Merger and the inclusion of MMRGlobal's outstanding shares of common stock at the time of the Merger is reflected in the accompanying consolidated financial statements.

Through our wholly-owned operating subsidiary MMR Inc., we provide secure and easy-to-use online Personal Health Records ("PHR") and MyEsafeDepositBox storage solutions, serving consumers, healthcare professionals, employers, insurance companies, financial institutions, and professional organizations and affinity groups. Our PHR, marketed both directly via our website at www.mymedicalrecords.com and as a private-label service, enables individuals and families to access their medical records and other important documents, such as birth certificates, passports, insurance policies and wills, anytime from anywhere using an Internet- connected device. The MyMedicalRecords PHR is built on proprietary, patented and patent-pending technologies to allow documents, images and voicemail messages to be transmitted and stored in the system using a variety of methods, including fax, phone, or file upload without relying on any specific electronic medical record platform to populate a user's account.

The Company's professional offering, MMRPro, is an end-to-end electronic document management and imaging system designed to give physicians' offices, community hospitals and surgery centers an easy and cost-effective solution to digitizing paper-based medical records and sharing them with patients in a timely manner through an integrated patient portal, MMRPatientView. The MMR Stimulus Program is offered with the MMRPro product offerings to help healthcare professionals recoup some or all of the cost of digital conversion of patient charts when they upgrade patients from the free MMRPatientView portal to a full-featured MyMedicalRecords PHR. In addition, in January 2009, as a result of the Merger, we acquired biotech assets and other intellectual property including anti- CD20 antibodies and data and samples from its FavId/Specifid vaccine clinical trials for the treatment of B-cell Non- Hodgkin's lymphoma.

Since 2005, MMR Inc. began filing for patent protection for its products and services. Through the most recent quarter, the Company had received three major patents covering the transmission of electronic medical records. The Company believes these patents represent a foundational patent portfolio which could have significant ramifications to healthcare professionals and vendors of Health IT products and services. As a result of the issuance of these patents, and certain requirements affecting the use of Health IT products and services, the Company's business is evolving to include both an operating entity and a licensor of intellectual property.

On March 8, 2011, we formed a subsidiary, which we named MMR Life Sciences Group, Inc., exclusively to maximize the value of our biotech assets including the company's anti-CD 20 antibodies and related FavID vaccine technologies acquired by MyMedicalRecords, Inc. through the merger with Favrille. As of this date the assets have not been transferred to the subsidiary.

The Company (formerly Favrille) was incorporated in Delaware in 2000, MMR Inc. was incorporated in Delaware in 2005, and both are headquartered in Los Angeles, CA.

Principles of Consolidation

The consolidated financial statements include the accounts of MMRGlobal, and its wholly-owned subsidiaries MMR and MMR Life Sciences Group, Inc. All intercompany transactions and balances are eliminated upon consolidation.

Basis of Presentation

We have prepared MMRGlobal's accompanying consolidated unaudited financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial statements and with instructions to Form 10-Q pursuant to the rules and regulations of Securities and Exchange Act of 1934, as amended, or the Exchange Act and Article 8-03 of Regulation S-X promulgated under the Exchange Act. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, we have included all adjustments considered necessary (consisting of normal recurring adjustments) for a fair presentation. Operating results for the three months ended March 31, 2013 are not indicative of the results that may be expected for the fiscal year ending December 31, 2013. You should read these unaudited condensed consolidated financial statements in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012.

4


Going Concern and Management's Plan

As of March 31, 2013, our current liabilities exceeded our current assets by $8.27 million. Furthermore, during the three months ended March 31, 2013, we incurred losses of $1.51 million, as further explained in Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in Item 2 of Part I of in this Quarterly Report on Form 10-Q.

At March 31, 2013 and December 31, 2012, we had $70,966 and $36,655, respectively, in cash and cash equivalents. Historically, we issued capital stock, sold debt and equity securities and received funds from The RHL Group, Inc. (a significant stockholder that is wholly-owned by our Chairman and Chief Executive Officer, Robert H. Lorsch) to operate our business. Although we received additional funding from The RHL Group pursuant to the Seventh Amended and Restated Note effective July 30, 2012 (the "Line of Credit"), we will still be required to obtain additional financing in order to meet installment payment obligations and the previously existing obligations under the Line of Credit, which had a balance of $1,532,451 at March 31, 2013 and a total Unpaid Balance (as defined in the Line of Credit) of $2,726,099, which includes amounts borrowed under the Line of Credit, unpaid interest fees, any amounts guaranteed by The RHL Group, and other obligations due the RHL Group pursuant to the terms of the Seventh Amended and Restated Note and the First Amended Security Agreement dated June 26, 2012 (the "Security Agreement"). As a result of the above, we express uncertainty about our ability to continue as a going concern. The components of the RHL Group Note payable and the related balance sheet presentation as of March 31, 2013 are as follows: $1,053,946, which is included in the line of credit, related party; and $478,505 related to other obligations due to The RHL Group which are included in related party payables.

Management's plan regarding this matter is to, amongst other things, continue to utilize the Line of Credit. At March 31, 2013, there was approximately $1,773,901 available under the Line of Credit. Furthermore, we plan to utilize portions of our standby equity facility with Granite State Capital LLC ("Granite") as needed. Finally, the Company plans to continue to sell additional debt and equity securities, continue to settle its existing liabilities through the issuance of equity securities, explore other debt financing arrangements, continue to increase its existing subscriber and affiliate customer base, sell MMRPro products, and collect licensing fees from parties infringing upon the Company's intellectual property to obtain additional cash flow over the next twelve months. There can be no assurance that funds from these sources will be available when needed or, if available, will be on terms favorable to us or to our stockholders. If additional funds are raised by issuing equity securities, the percentage of ownership of our stockholders will be reduced, stockholders will experience additional dilution and/or such equity securities may provide for rights, preferences or privileges senior to those of the holders of our common stock. If we are unable to utilize our Line of Credit, our equity facility with Granite, obtain suitable alternative debt or equity financing, or increase sales of our products, our ability to execute our business plan and continue as a going concern may be adversely affected.

These matters raise substantial doubt about our ability to continue as a going concern. These financial statements were prepared under the assumption that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of that uncertainty.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) MANAGEMENT'S USE OF ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowances for doubtful accounts, the valuation of deferred income taxes, tax contingencies, long-lived and intangible assets, valuation of derivative liabilities and stock-based compensation. These estimates are based on historical experience and on various other factors that management believes to be reasonable under the circumstances, although actual results could differ from those estimates.

(b) CASH AND CASH EQUIVALENTS

We consider cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of 90 days or less at the purchase date. We maintain our cash in bank deposit accounts that, at times, may exceed federally insured limits. We have not experienced any losses in such accounts and believe that we are not exposed to any significant credit or deposit risk on our cash. We had cash and cash equivalents of $70,966 and $36,655 as of March 31, 2013 and December 31, 2012, respectively.

(c) TRADE AND OTHER RECEIVABLES

Receivables represent claims against third parties that will be settled in cash. The carrying value of receivables, net of an allowance for doubtful accounts, if any, represents their estimated net realizable value. We estimate the allowance for doubtful accounts, if any, based on historical collection trends, type of customer, the age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, we give further consideration to the collectability of those balances and the allowance is adjusted accordingly. We write off past due receivable balances when collection efforts have been unsuccessful in collecting the amount due.

(d) INVENTORY

Inventory is stated at the actual cost, using the first-in, first-out method. On an on-going basis, the Company evaluates inventory for obsolescence. This evaluation includes analysis of sales levels, sales projections, and purchases by item. If future demand or market conditions are different than the Company's current estimates, an inventory adjustment may be required, and would be reflected in cost of goods sold in the period the revision is made.

(e) FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820-10, Fair Value Measurements and Disclosures, requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2013 and December 31, 2012, the carrying value of accounts receivable, deposits, related party payables, compensation payable, severance liabilities, and accounts payable and accrued expenses approximates fair value due to the short-term nature of such instruments. The carrying value of short-term debt approximates fair value as the related interest rates approximate rates currently available to us.

We utilize ASC 820-10 for valuing financial assets and liabilities measured on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and generally accepted accounting principles, and expands disclosures about fair value measurements. This standard applies in situations where other accounting pronouncements either permit or require fair value measurements. ASC 820-10 does not require any new fair value measurements.

5


Accounting guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1:

Quoted prices in active markets for identical or similar assets and liabilities.

 

Level 2:

Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.

 

Level 3:

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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.

(f) IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES

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. Our assessment of the undiscounted future cash flows indicated that the carrying amount of the long-lived and intangible assets are recoverable, therefore, we had no impairment charges during the three months ended March 31, 2013 and 2012.

(g) REVENUE RECOGNITION

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.

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.

6


(h) 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, 2013 and 2012 using the following assumptions.

    March 31, 2013   March 31, 2012
    (Unaudited)   (Unaudited)
         
Expected life in years   0 - 5 Years    0 - 5 Years 
Stock price volatility   123.47% - 124.21%   144.34% - 148.34%
Risk free interest rate   0.35% - 0.46%   0.35%
Expected dividends   None   None 
Forfeiture rate   0%   0%

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.

(i) NET INCOME/LOSS PER SHARE

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, 2013 and 2012 because they were anti-dilutive due to our net loss position. Stock options, warrants and convertible notes excluded from the computation totaled 180,502,737 shares for the three months ended March 31, 2013, and 116,605,087 shares for the three months ended March 31, 2012, respectively.

(j) RECENT ACCOUNTING PRONOUNCEMENTS

During July 2012, FASB issued ASU no. 2012-02, "Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment". Under the amendments in Update 2012-02, entities have the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. The amendments in this Update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.

NOTE 3 - RELATED PARTY PAYABLES, LINE OF CREDIT AND NOTE PAYABLE

On April 29, 2011, we entered into a Fifth Amended and Restated Secured Promissory Note (the "Fifth Amended Note"), with The RHL Group 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.

On June 22, 2012, the Company and The RHL Group entered into a Sixth Amended and Restated Promissory Note, or the Sixth Amended Note. The Sixth Amended Note amended and restated the Fifth Amended Note by extending the maturity date of the Existing Note for one year to April 29, 2013 based on the original maturity date of April 29, 2012. The Six Amended Note does not materially alter the terms of the Fifth Amended Note other than for the fact that there were no loan origination fees charged by The RHL Group on this renewal. In connection with the Sixth Amended Note, the Company issued The RHL Group warrants to purchase 2,852,200 shares of the Company common stock at $0.02 per share. Such warrants are fully vested and are exercisable either in cash or on a cashless basis at any time prior to the fifth anniversary of the date of issuance.

On July 30, 2012, the Company and The RHL Group amended and restated the Sixth Amended and Restated Note by entering into that certain Seventh Amended and Restated Promissory Note (the "Seventh Amended Note"), effective as of July 30, 2012. The Seventh Amended Note amends and restates the Sixth Amended Note and together with its predecessor notes and the Seventh Amended Note, the "Credit Facility" or the "Line of Credit"), by: (i) increasing the amount available under the Credit Facility from $3,000,000 to $4,500,000 to accommodate additional financing needs of the Company and/or MMR Inc.; and (ii) granting The RHL Group the right to convert, at any time following the date of the Seventh Amended Note, up to an aggregate of $500,000 in outstanding principal of the Credit Facility into shares of the Company's Common Stock at a conversion price of $0.02 per share. The amendment did not change the maturity date of the Sixth Amended Note which is due to mature on April 29, 2013. There were no loan origination fees charged by, or warrants issued to, The RHL Group with respect to the Seventh Amended Note. Except as set forth above, the Seventh Amended Note does not materially alter the terms of the Sixth Amended Note.

7


The Seventh Amended Note had a balance of $1,532,451 at March 31, 2013. The components of the Seventh Amended Note and the related balance sheet presentation as of March 31, 2013 are as follows: $1,053,946, which is included in the line of credit, related party; and $478,505 for other obligations due to The RHL Group, which is included in related party payables.

Total interest expense on the Line of Credit for the three months ended March 31, 2013 and 2012 amounted to $36,551 and $38,304 respectively. The unpaid interest balances as of March 31, 2013 and December 31, 2012 were $43,450 and $35,451, respectively.

In conjunction with the Seventh Amended Note, we were required to maintain certain financial covenants, including the requirement that we have at least $200,000 of 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, 2013. Since we weren't able to meet the covenants as of March 31, 2013, we received a waiver from The RHL Group until May 31, 2013.

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

Additional information regarding the Sixth Amended Note and Seventh Amended Note are contained in our current report on Form 10-Q filed with the SEC on August 14, 2012.

NOTE 4 - INCOME TAXES

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, 2013.

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 ended March 31, 2013.

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 2014. Effective September 1, 2010, we entered into a lease agreement to lease office space in Los Angeles, California. The lease currently requires a monthly payment of $6,655. 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 currently requires an additional monthly payment of $3,512. Both leases expire on August 31, 2013 unless renewed. Total rent expense for the three months ended March 31, 2013 and 2012 were $30,503 and $27,729, respectively.

Future minimum lease payments as of December 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:

Year Ending     Operating     Capital
December 31,     Leases     Leases
             
     2013 (Remainder of)    $ 78,784    $ 13,222 
     2014          15,759 
Total minimum lease payments   $ 78,784    $ 28,981 

Guarantee provided by The RHL Group

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 July 31, 2012, the RHL Group entered into guarantee agreements to guarantee certain obligations of MMR in the amount of $1,014,629. In consideration of this guarantee, the RHL Group received a warrant to purchase 3,055,432 shares of our common stock at an exercise price of $0.02 per share.

Guarantee provided by Robert H. Lorsch

On February 17, 2012, Robert Lorsch agreed to guarantee a convertible note with a principal amount of $150,000 to a third-party only in the event that the Company does not issue shares pursuant to a Conversion Notice.

8


Concentrations

For the three months ended March 31, 2013, our two largest customers (UST Global at $15,000 and Whole Foods at $12,094) accounted for approximately 22% of our total revenue.

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

Litigation Matters

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 April 10, 2013, MMR filed a complaint for patent infringement against Quest Diagnostics Inc., titled MyMedicalRecords, Inc. v. Quest Diagnostics Inc., United States District Court, Central District of California, Case No. CV 13-02538. The complaint alleges that Quest Diagnostics Inc. is infringing MMR's Personal Health Records patent U.S. Patent No. 8,301,466. MMR has not yet served Quest Diagnostics Inc. with the complaint. Counsel does not have enough facts at this time to predict the changes of either a favorable or unfavorable outcome. Nor does counsel have any facts upon which to base any information regarding collectability.

MMR has received a letter from Sunil Singhal, a former employee. Mr. Sunil 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. He filed a charge with the U.S. Equal Employment Opportunity Commission, but that body has declined to take action. In turn, he filed a claim with the California Department of Fair Employment and Housing ("DFEH"). The DFEH had declined to bring a citation, but it has issued a "right to sue" notice. To date no lawsuit has been filed. MMR is represented by Ropers in this matter.

On February 11, 2013, MMR filed a complaint for patent infringement against WebMD Health Corp. and its wholly owned subsidiary WebMD Health Services Group, Inc. (collectively, "WebMD"), titled MyMedicalRecords, Inc. v. WebMD Health Corp et al., United States District Court, Central District of California, Case No. CV 13-00979 ODW (SHx). The complaint alleges that WebMD is infringing MMR's Personal Health Records patent U.S. Patent No. 8,301,466. MMR has not yet served WebMD with the complaint. Counsel does not have enough facts at this time to predict the changes of either a favorable or unfavorable outcome. Nor does counsel have any facts upon which to base any information regarding collectability.

On January 29, 2013, MMR filed a complaint for patent infringement against Walgreen Co., titled MyMedicalRecords, Inc. v. Walgreen Co., United States District Court, Central District of California, Case No. CV 13-00631 ODW (SHx). The complaint alleges that Walgreen Co. is infringing MMR's Personal Health Records patent, U.S. Patent No. 8,301,466. Walgreen Co. filed an answer to the complaint on May 3, 2013. This matter is currently in the initial 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.

On October 18, 2012, MMR was named as a defendant in an action filed in the California Superior Court, County of Los Angeles, by Naj Allana, who has generally claimed that MMR owes approximately $125,000 to him and his corporation and that he is entitled to shares of the corporation. MMR answered the complaint and contends that Allana entered into a series of agreements with the company that released the company from a substantial portion of its obligations to him. MMR has also cross-complained against Allana, claiming that, in lieu of performing his duties for the Company, he entered into transactions on behalf of the company with outside vendors to perform his duties. MMR did not discover Allana's actions until his service for the company was terminated. Should Allana prevail on his affirmative claim, a substantial portion of any ensuing award should be offset by MMR's cross- complaint. The matter is in active discovery. A trial date has been set for November 18, 2013. MMR is represented in this matter by Ropers Majeski, Kohn and Bentley ("Ropers"), a national firm with offices in San Francisco, Redwood City, San Jose, Los Angeles, New York and Boston.

On July 17, 2012, the Company has filed a claim in the United States Bankruptcy Court Southern District of New York for $827,818.74 for reimbursement of initial and on-going costs incurred on the integration of Kodak products and software during the development of MMRPro. The Company has been forced to identify replacement systems and undertake significant additional development efforts as a result of Kodak's bankruptcy filing. The Kodak claim is currently pending in the Bankruptcy Court and counsel does not have enough facts at this time to predict the chances 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, MyMedicalRecords, Inc. filed a lawsuit in the Superior Court of the State of California for the County of Los Angeles for breach of contract and is seeking damages in an amount of $30 million. On September 19, 2012 the Company engaged Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP ("Liner") to substitute into this matter. The Agreement contains an arbitration clause and non-binding arbitration proceedings have been completed. Currently, an appeal is also presently pending the Second Appellate District of the California Court of Appeal stemming from the Superior Court's holding that SCM's Petition to Compel Arbitration was moot. 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.

NOTE 6 - STOCKHOLDERS' DEFICIT

Preferred Stock

The Company has 5,000,000 shares of preferred stock authorized. As of March 31, 2013, and December 31, 2012, there were no shares of preferred stock issued and outstanding.

Common Stock

As of March 31, 2013, we are authorized to issue 950,000,000 shares of common stock.

On May 24, 2012, the Company filed a Form S-1 related to the offer and resale of up to 100,000,000 shares of our common stock by Granite. Granite has agreed to purchase all 100,000,000 shares pursuant to the CIA, and an additional 1,000,000 shares were issued to Granite as partial consideration for the preparation of the documents for its investment in the Company. Subject to the terms and conditions of the CIA, the Company has the right to put up to $15 million in shares of our common stock to Granite. As of March 31, 2013, the amount available under the equity line facility was $15 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, 2013, the total shares of our common stock issued and outstanding amounted to 574,963,491.

9


NOTE 7 - EQUITY ISSUANCES

Stock Option Activity

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. The Plan expired on June 5, 2011 and no options were issued under the 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. On June 20, 2012, the shareholder voted and approved the 2011 Equity Incentive Plan at the 2012 Annual Shareholder Meeting.

A summary of option activity for the three months ended March 31, 2013 is presented below. Options granted by MMR Inc. prior to the date of the Merger have been retroactively restated to reflect the conversion ratio of MMR Inc. to MMR shares.

              Weighted-      
              Average      
          Weighted-   Remaining      
          Average   Contractual     Aggregate
          Exercise   Life     Intrinsic
    Options     Price   (Years)     Value
Outstanding at December 31, 2012   42,157,551    $ 0.11    5.93    $ -  
Granted   -     $ -     -     $ -  
Exercised   -     $ -     -     $ -  
Cancelled   -     $ -     -     $ -  
Outstanding at March 31, 2013 (Unaudited)   42,157,551    $ 0.11    5.71    $ -  
                     
                     
Vested and expected to vest                    
     at March 31, 2013 (Unaudited)   42,157,551    $ 0.11    5.71    $ -  
                     
Exercisable at March 31, 2013 (Unaudited)   33,382,551    $ 0.12    4.85    $ -  

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 three months ended March 31, 2013 and 2012 were $63,532 and $194,450, respectively.

The following table summarizes information about stock options outstanding and exercisable at March 31,, 2013.

      Options Outstanding   Options Exercisable
            Weighted     Weighted       Weighted     Weighted
            Average     Average       Average     Average
  Exercise   Number     Remaining     Exercise   Number   Remaining     Exercise
  Price   of Shares     Life (Years)     Price   of Shares   Life (Years)     Price
                                 
$ 0.05 - 0.09   12,150,000      8.57   $ 0.07    3,375,000    7.52   $ 0.08 
$ 0.1 - 0.15   27,122,290      4.47   $ 0.11    27,122,290    4.47   $ 0.11 
$ > 0.15   2,885,261      5.31   $ 0.19    2,885,261    5.31   $ 0.19 
      42,157,551                33,382,551           

Warrants

On January 10, 2013, we granted a warrant to purchase 100,000 shares of our common stock to a consultant in consideration for services. This warrant vested immediately and has an exercise price of $0.04 per share, and an expiration date of January 10, 2014.

On January 21, 2013, we granted three separate warrants, each to purchase 1,000,000 shares of our common stock, to a consultant in consideration for services. These warrants vested immediately and have an exercise price of $0.04, $0.08 and $0.12 per share, and an expiration date of January 21, 2014.

On February 20, 2013, we granted a warrant to purchase 100,000 shares of our common stock to a consultant in consideration for services. This warrant vested immediately and has an exercise price of $0.04 per share, and an expiration date of February 20, 2014.

On March 13, 2013, we granted a warrant to purchase 1,000,000 shares of our common stock to a third-party in consideration for services. This warrant vested immediately and has an exercise price of $0.10 per share, and an expiration date of March 13, 2014.

10


A summary of the activity of the Company's warrants for the three months ended March 31, 2013 is presented below:

          Weighted Avg
    Shares     Exercise Price
Outstanding at December 31, 2012   66,329,641    $ 0.09 
Granted   4,200,000    $ 0.08 
Exercised   -     $ -  
Cancelled   (3,200,000)   $ 0.11 
Outstanding at March 31, 2013 (Unaudited)   67,329,641    $ 0.09 

The following summarizes the total warrants outstanding and exercisable as of March 31, 2013.

    Warrants Outstanding   Warrants Exercisable
    Warrants     Weighted Avg     Weighted Avg   Warrants     Weighted Avg     Weighted Avg
Ranges   Outstanding     Remaining Life     Exercise Price   Exercisable     Remaining Life     Exercise Price
                                 
$0.03 - $0.25   66,819,641      2.16    $ 0.09    59,411,308      2.60    $ 0.09 
$0.25 - $2.50   510,000      0.74    $ 0.38    510,000      0.83    $ 0.38 
    67,329,641                59,921,308             

Shares Issued for Services or Reduction to Liabilities

During the three months ended March 31, 2013, we issued 5,799,600 shares of common stock with a value of $235,280 to various third parties and charged the proceeds to the appropriate accounts for the following reasons:

      Three-Months Ended March 31, 2013
      (Unaudited)
             
Purpose     Shares     Value
             
Services Provided      5,799,600    $ 235,280 
             
Totals      5,799,600    $ 235,280 

The 5,799,600 shares were not contractually restricted, however as they have not been registered under the Securities Act of 1933, as amended (the "Act"), they are restricted from sale until they are registered under the Act, or qualify for resale under the rules promulgated under the Act. All such shares were issued at the trading closing price on the date of issuance and the corresponding values were calculated therefrom.

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.

Stock Bonus Program

Under the Stock Bonus Program, shares are issued as a bonus for 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. On June 20, 2012 and June 22, 2012, the Company issued a total of 6,250,000 shares of our common stock at $0.02 per share as an incentive to eight employees and three consultants for services to be rendered under the Stock Bonus Program. All shares vested on January 21, 2013 and were forfeitable before such time. At grant date, the employee stock bonus was valued based on the share price of $0.02 and the expenses were amortized using the straight line method; The consultant's stock bonus was re-measured on December 31, 2012 based on the share price on that date. Total stock bonus expenses recorded during the three months ended March 31, 2013 was $8,929, and is reflected in operating expenses in the accompanying consolidated statements of operations.

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

    March 31, 2013   March 31, 2012
    (Unaudited)   (Unaudited)
         
Expected life in years   0 - 5 Years    0 - 5 Years 
Stock price volatility   123.47% - 124.21%   144.34% - 148.34%
Risk free interest rate   0.35% - 0.46%   0.35%
Expected dividends   None   None 
Forfeiture rate   0%   0%

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NOTE 8 - NOTES PAYABLE

Notes payable consisted of the following:

          March 31,         December 31,
      2013     2012
      (Unaudited)      
             
Promissory notes payable due to the former officers of MMRGlobal as
part of severance packages, due in full on August 31, 2009 with no
stated interest
  $ 76,783    $ 76,783 
             
Promissory notes payable due to the former officers of MMRGlobal
pursuant to the Resignation and Post-Merger Employment Arrangement,
due in full on August 31, 2009 with no stated interest
    25,444      25,444 
             
Promissory notes payable due to vendors relating to settlement of certain            
outstanding accounts payable, payable in 18 equal monthly installments            
commencing on July 27, 2009 and ending on January 27, 2011, with no            
stated interest     223,116      223,116 
             
Short term loan due to a third-party with no stated interest      40,000      50,000 
             
Notes payable, current portion   $ 365,343    $ 375,343 
             
             
Short term loan due to a related-party    $ 212,921    $ 192,921 
             
Short term loan due to a related-party      50,000      50,000 
             
Notes payable related party, current portion   $ 262,921    $ 242,921 

NOTE 9 - CONVERTIBLE PROMISSORY NOTES

From time to time we enter into Convertible Promissory Notes ("Note(s)"). As of March 31, 2013, a total of $762,607 in Notes remained outstanding and the investors had not chosen to convert their Note balances into shares of our common stock.

On various dates between January 31, 2013 and March 22, 2013, we entered into fourteen different Convertible Promissory Notes (the "Notes") with eleven different unrelated third-parties for principal amounts totaling $493,750 with fixed conversion prices ranging from $0.02 to $0.028. Under the terms of the agreement, the principal amount owed under the Note becomes due and payable one year 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 Notes have the option to be converted into a total of 24,035,715 shares of our common stock. These Notes bear interest at a rate of 6% per annum payable in cash or shares of common stock or a combination of cash and shares of common stock at the option of the Company. The loan discount for the convertible note feature totaled $73,500 and was amortized to interest. As of March 31, 2013, all notes had been converted.

The total interest expense attributed to the Notes and related warrants for the three months ended March 31, 2013 and 2012 was $84,801 and $65,256 respectively.

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, 2013, 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, 2013 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).

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NOTE 11 - RELATED PARTY TRANSACTIONS

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 15.7% our total outstanding voting stock. The RHL Group, Inc. has loaned us money pursuant to the Seventh 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 Form 8-K, as 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, 2013 and 2012, toward marketing consulting services from Bernard Stolar, a director. We included $58,500 and $41,250 in related party payables as of March 31, 2013 and December 31, 2012, respectively, in connection with these services.

We also incurred $12,500 during the three months ended March 31, 2013 and 2012, 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, 2013 and December 31, 2012 of $71,167 and $58,667, respectively, in connection with these services. Mr. Barreto ceased to be a related party upon his departure from the Board of Directors on September 30, 2011.

We also incurred $0 during the three months ended March 31, 2013 and 2012, respectively, for consulting services from Jack Zwissig, a director. We included in related party payables as of March 31, 2013 and December 31, 2012 of $16,876 and $13,376, 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, 2013 and 2012, the total expenses relating to this stockholder amounted to $30,000 and $126,117, respectively. As of March 31, 2013 and December 31, 2012, the total amounts due to the stockholder and included in related party payables amounted to $346,800 and $447,429, 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 will license an existing 80 million person direct marketing database (the "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 PHR, 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, 2013 and 2012 was $12,500. In addition, we incurred a total of $6,863 and $6,939 during the three months ended March 31, 2013 and 2012, respectively, toward convertible notes interest to Mr. Loftus. We included in related party payables at March 31, 2013 and December 31, 2012 of $59,470 and $49,595, respectively. Furthermore, Mr. Loftus is a value-added-reseller of MMRPro systems. We recognized $5,597 and $67,883 in revenue from E-Mail Frequency for the sale of MMRPro systems, during 2013 and 2012, respectively. Furthermore, on January 6, 2010, we entered into 12% Convertible Promissory Notes with Mr. Loftus for a principal amount totaling $400,000 and warrants to purchase our common stock, which Mr. Loftus immediately converted both into shares of our common stock, for a total 8,860,606 shares of our common stock. On July 26, 2010 and September 21, 2010, we entered into 6% Convertible Promissory Notes with Mr. Loftus for a total principal amount of $450,000 and warrants to purchase the our common stock. On April 15, 2011, we entered into a 6% Convertible Promissory Note with Mr. Loftus for a principal amount of $156,436 and warrants to purchase our common stock. On July 19, 2011, we entered into a 6% Convertible Promissory Note with Mr. Loftus for a principal amount of $157,422 and warrants to purchase our common stock. Effective September 1, 2011, we signed and Amendment to the Agreement dated September 15, 2009 to provide licensor a non-exclusive right to target, market and exploit the Employee Benefits market.

NOTE 12 - SUBSEQUENT EVENTS

On April 11, 2013, the Company announced the filing of a complaint for patent infringement against Quest Diagnostics, Inc. The complaint alleges that Quest is infringing on MMR's Personal Health Records patent, specifically, U.S. Patent No. 8,301,466, and as a result, MMR is seeking monetary damages as well as a permanent injunction. The complaint was filed in the United States District Court for the Central District of California, case number CV-13-2538- CBM (MNx), on April 10, 2013 and is available on the court's website http://www.pacer.gov/. According to the complaint, Quest offers a product known as Gazelle. Gazelle is a mobile health application that is a PHR. Gazelle allows a customer to receive and store through his or her cell phone medical information, including personal medical records. Gazelle is configured to allow Quest to send lab results and other information directly to the customer's account that the customer may access through his or her cell phone. On information and belief, while access is allowed via a cell phone, the personal health information is stored on servers by Quest. The complaint also alleges that on information and belief, Quest, through Gazelle or other products, enables physicians using Quest's Care360 product to also share information directly with patients. Quest's Care360, an EHR platform, provides clinical connectivity and electronic healthcare solutions to healthcare institutions, physicians and patients. Customers using Gazelle can also receive records directly from healthcare providers using Care360, through the Care360 system, and those healthcare providers that are not using Quest's Care360 product.

On April 15, 2013, the Company announced that the United States Patent and Trademark Office had issued a Notice of Allowance for the Company's anti-CD20 monoclonal antibody assets, U.S. Serial No. 11/855,943, under the title, "Antibodies and Methods for Making and Using Them." This is the first U.S. patent to be granted for the Company's anti-CD20 monoclonal antibodies, which have particular utility in fighting cancers. The anti-CD20 monoclonal antibodies are considered extremely important assets of the Company based on benefits and commercial value as demonstrated by Rituxan®, an anti-CD20 monoclonal antibody with reported sales of USD $7.285 billion in 2012, and is due to go off patent in 2015. MMR's first anti-CD20 antibody patent was issued in Mexico in August 2012 (Mexican Patent No. 302058). Additional patent applications for the Company's antibodies are pending in a number of other countries including Australia, Brazil, Canada, China, Hong Kong, India, Europe, Japan and Korea.

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On April 22, 2013, the Company announced that the Australian Patent Office has issued a Notice of Allowance (NOA) for the Company's anti-CD20 monoclonal antibody assets, #2007338607, under the title, "Antibodies and Methods for Making and Using Them." The patent application was originally filed on September 14, 2007. The Australian NOA is significant to the Company in that it reinforces the value of the U.S. antibody patent that was announced by the Company on April 15th, 2013 and the similar antibody patent issued in Mexico in August 2012. These patents for the Company's anti-CD20 monoclonal antibodies have particular utility in fighting cancers and are considered important assets of the Company based on benefits and commercial value demonstrated by Rituxan®, an anti-CD20 monoclonal antibody with reported sales of USD $7.285 billion in 2012, which is due to go off patent in 2015.

On April 30, 2013, MMRGlobal and Unis-Tonghe Technology (Zhengzhou) Co., Ltd. ("UNIS") announced that the two companies will begin offering an Electronic Medical Records ("EMR") system with an integrated MyMedicalRecords Personal Health Record ("PHR") to be sold through the two companies previously announced Joint Venture, Unis Tonghe MMR International Health Management Service Co., Ltd. ("UNIS/MMR"). MMR will begin building the first integrated version of the system in the U.S. working with licensees and existing strategic business partners. The platform will utilize MMR's patented PHR systems to offer two-way connectivity with any EMR or EHR system in hospitals and other ambulatory care centers. The system will also use an integrated HL7 interface to populate data from the UNIS/MMR system directly to patients through their PHR including chart notes, lab test results, medication lists and other discrete protected patient data. The Joint Venture was formally submitted for approval to the Chinese government in 2011 to operate in China through 2042.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the description of our business appearing in our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on April 1, 2013 (the "Form 10-K"). This discussion contains forward-looking statements, which inherently involve risks and uncertainties. Please see "Cautionary Note Regarding Forward-Looking Statements" below. Our actual results could differ materially from those anticipated in these forward- looking statements for many reasons, including the risks faced by us described in "Risk Factors" in Item 1A of the Form 10-K.

Cautionary Note Regarding Forward-Looking Statements

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; and
  • 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 Form10-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.

Overview

Background

We provide secure and easy-to-use online Personal Health Records ("PHRs") and electronic safe deposit box storage solutions, serving consumers, healthcare professionals, employers, insurance companies, professional organizations and affinity groups. MyMedicalRecords enables individuals and families to access their medical records and other important documents, such as birth certificates, passports, insurance policies and wills, anytime from anywhere using the Internet. The MyMedicalRecords Personal Health Record is built on proprietary, patent pending, issued and applied for technologies to allow documents, images and voicemail messages to be transmitted and stored in the system using a variety of methods, including fax, phone, or file upload without relying on any specific electronic medical record platform to populate a user's account. The Company's professional offering, MMRPro, is designed to give physicians' offices an easy and cost-effective solution to digitizing paper-based medical records and sharing them with patients in real time. Since receiving the first notices of allowance in late 2011, the U.S. Patent and Trademark Office has issued the Company a total of four patents and one additional notice of allowance pertaining to the "Method and System for Providing Online Medical Records" and "Method and System for Providing Online Records". Such patents had been applied for as early as 2005 and the Company believes these patents along with the remaining pending and applied for claims represent a competitive barrier to entry and create a competitive advantage for the Company which the Company is looking to leverage through licensing agreements. For a description of our corporate organizational history prior to the date hereof, please see Note 1 to our financial statements.

Source of Revenues

We derive our revenues from the provision of services, which are comprised of facilitating electronic access to consumer medical records and other vital documents, as well as international licensing of our services. We offer our services to subscribers either on a direct subscription basis or an "access" basis through various types of organizations, and in both cases, we record these revenues under "Subscriber" in our income statement. On a direct subscription basis, which we use when we market our products direct to consumers or wholesale through corporations to their employees, or through affinity and membership organizations to their members, the subscriber pays us directly with a credit card or PayPal account either on a monthly or annual plan. On an access basis, which we currently use only with corporations, affinity and membership organizations, hospitals and other business to business customers, we charge a monthly fee to the organization based on the number of users who will have access to our services through such organization, whether or not such users actually enroll. During the three months ended March 31, 2013 and 2012, the Company received $25,380, and $44,846 from subscriber revenues, respectively, which represents 20.8% and 26.0% of our revenues for such periods, respectively.

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We also derive our revenues from the sale of our MMRPro system, which includes a high-tech scanner, various licenses to use third party software, a license to use MMR's proprietary MMRPro application software, dedicated telephone lines, secure online storage and warranties. Installation and training are provided as part of the agreement. Software licenses, telephone lines, online secure storage and warranties are provided over the three year term of the agreement. Our customers pay these contracts in advance and are not refundable. We allocate the revenue derived from these arrangements among all the deliverables, based on the relative selling price of each deliverable. With the exception of MMR's proprietary MMRPro application software, we used third party evidence to set the selling prices used for this allocation. During the three months ended March 31, 2013 and 2012, the Company received $32,238, and $21,580 from MMRPro revenues, respectively, which represents 26.4% and 12.5% of our revenues for such periods, respectively.

On September 27, 2012, the Company signed an agreement with VisiInc PLC, which is incorporated in this filing as Exhibit 10.1, for the sale of a minimum of 1,275 MMR Pro systems through a large reseller of medical products and services to health care professionals. MMRPro will be bundled with other Visi products and marketed as VISI MMRPro. The VISI MMRPro systems are being sold through the Seagate VAR and OEM channels, which includes a syndicate of Seagate VARs, as well as through the Burkhart Dental channel, as part of a Seagate/Visi/MMR/Via3 product bundle. The entire product bundle will be featured at the Synnex VAR conference "Varnex" in Las Vegas on November 14, 2012 to an estimated 700 VAR partners.

The bundle offering also includes Seagate's Network Attached Storage ("NAS") Boxes (NAS440), which, when connected to VISI MMRPro, will store documents and images created in the VISI MMRPro system in the NAS boxes, as well as in MMRPro.

Initially, the Agreement calls for exclusivity in the dental market through Burkhart Dental ("Burkhart"), which has an estimated 24,000 dental office clients. Burkhart has already begun the process of installing MMRPro systems in several of its dental clients' offices. Although the Agreement is based on selling exclusively to the dental channel, VISI has subsequently requested exclusive rights to include, legal, accounting and other verticals. As a result, the Company believes the number of units may increase.

We are also generating revenues from the licensing of our biotech assets, which 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. We record these licensing revenues under "License Fees - Biotech" in our income statement. We are sometimes paid an upfront license fee and milestone payments and we recognized these fees as revenue as payments were received. During the three months ended March 31, 2013, the Company received $3,000, and $100,000 from license fees revenues, respectively, which represents 2.5% and 57.9% of our revenues for such periods, respectively.

We also have generated revenues from licensing the sale and marketing of our services internationally and, to a lesser extent, from ancillary fee payments including web and marketing development services, amongst others. We record these licensing revenues under "License Fees" and other ancillary revenues under "Other Revenues" in our income statement. When we enter into a licensing arrangement, we are sometimes paid an upfront license fee and typically receive ongoing royalty payments that are often based on a percentage of revenue earned by our licensee. We recognize these fees over the license period. When we receive ancillary one-time payments, we record them when services or products are delivered.

In addition, we plan on generating future revenues from the licensing of our biotech and health IT patents. In the third quarter of 2012, we retained the law firm of Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP (Liner) to lead the effort. With Liner's assistance, we will pursue markets that rely on the Company's patented health IT technologies, including hospitals, healthcare providers and physician group practices using document management, imaging, faxing and/or sharing of paper-based medical records into digital online Personal Health Records. The Liner firm will protect and monetize the Company's intellectual property, including the past, present and future use by third parties of its health IT and Biotech patents. Liner will also work with existing consultants and bankers to identify markets and potential infringers, including healthcare IT service vendors and healthcare providers. We will record those fees as revenue as payments are received. These fees may include non-refundable license and up-front fees, non-refundable milestone payments that are triggered upon achievement of a specific event and or future royalties or lump-sum payments on sales of related products.

Cost of Revenue

Our cost of revenue includes the cost of maintaining our voice and fax mailboxes, long-distance call transport costs, fax and voice call processing costs, credit card transaction processing costs, web hosting and management fees, website maintenance and support costs, costs associated with creating and mailing enrollment packages to our subscribers and the cost of scanners. Cost of revenue also includes customer service costs. We also charge to cost of revenue our direct selling costs, which include commissions paid to sales representatives who sell our wholesale and access based accounts.

Operating Expenses

The largest component of our operating expenses is our general and administrative expenses, which include personnel salaries and benefits, office rent and supplies, insurance costs, fees for legal and professional services, as well as our expenses for corporate telecommunications and internet access not associated with our products. Our operating expenses also include sales and marketing expenses (which include expenses associated with attending trade shows and travel costs, as well as a portion of personnel salaries allocated to sales and marketing activities), as well as technology development expenses (which includes expenses related to research and development as well as a portion of personnel salaries allocated to development activities).

Recent Accounting Pronouncements

For a description of recent accounting pronouncements and how we apply such pronouncements to our financial statements, see the accompanying notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Factors Affecting Future Results

Intellectual Property

Since its inception, MMR's health IT business has evolved from a development company, to a provider and reseller of Personal Health Records and document imaging and scanning systems (MMR Services), to a Licensor of MMR's intellectual property. Corroborating the value of protecting the Company's intellectual property, inventions and other IP by investing millions of dollars in the inventing and building of a global patent portfolio, a special report published by the Michael Bass Research Group on January 22, 2013 concluded that the range of value of the Company's U.S. patents could reach between $600 million to $1.1 billion in revenue. (http://michaelbass.com/PDF/Patent_Valuation.pdf). This was based on what is described as conservative estimates based on a market projected to reach a GDP value of $19 billion. Subsequently, Michael Bass issued an updated valuation report on May 2, 2013 based on the issuance by the Japan Patent Office of Patent No. 5191895. The Japanese patent, issued on February 8, 2013, increases the valuation by $200 million, from the initial report of $600 million to $1.1 billion, to $800 million to $1.3 billion.

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Continuing into 2013, we remained focused on maximizing the value of our intellectual property portfolio, particularly the seven U.S. health IT patents that have been granted to date. The Company's health IT patent portfolio, which we have been building since 2005, currently includes our U.S. patents (with a total of 177 claims), 22 pending U.S. patent applications (with hundreds of pending claims), six international patents including two in Australia with others in New Zealand, Singapore, Japan and Mexico, a Notice of Allowance received for our Canadian patent application in March 2013, and 13 other pending patent applications in foreign countries. These patents have the potential effect of enabling the Company to control a dominant marketplace position in personal healthcare, being well-positioned to benefit from the explosion in health IT globally. The full term of the Company's health IT patents will not expire until September 12, 2025 or after.

Significantly, in the U.S., because our health IT patents were filed in advance of the relevant Meaningful Use requirements that address patients' electronic access to health information, we believe that our patent portfolio makes it difficult for eligible healthcare professionals and hospitals to fully qualify for incentives under the HITECH Act without licensing from MMR. Since September 2012, MMR, through the law firm Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, began offering licenses to hospitals, group practices, pharmacies, laboratories, and EMR and PHR providers. As a result, the Company continued to announce licensing agreements with several vendors in the first quarter of 2013, including Interbit Data and Fairway Physicans Insurance Company, while aggressively pursuing infringement claims that resulted in litigation actions being commenced against Walgreen Co. in January 2013, WebMD in February 2013, and, subsequently, Quest Diagnostics, Inc. in April 2013. The Company also announced in February 2013 that it was considering possible patent infringement in Singapore.

The Company's health IT portfolio, which includes issued patents on our MyMedicalRecords, MyEsafeDepositBox and MMRPro document imaging and management systems, is in addition to our portfolio of biotech patents. MMR acquired significant intellectual property assets from the merger with Favrille and continues to seek ways to exploit and monetize those assets, which include, but are not limited to, data from the Company's pre-merger clinical vaccine trials, the FavId™/Specifid™ vaccine, and the anti-CD20 antibodies.

MMRGlobal Health Information Technology Patents

Through our wholly owned subsidiary, MyMedicalRecords, Inc., the Company currently has seven U.S. patents - Nos. 8,117,045; 8,117,646; 8,121,855; 8,301,466; 8,321,240; 8,352,287; and 8,352,288 - as well as additional applications and continuation applications.  The patents are directed at a "Method and System for Providing Online Medical Records" and a "Method and System for Providing Online Records," and involve inventions pertaining to Personal Health Records, Patient Portals and other Electronic Health Record systems. We received Notices of Allowance from the United States Patent and Trademark Office for the first three patent applications in December 2011, which were subsequently issued in February 2012 as, U.S. Patent No. 8,117,045, U.S. Patent No. 8,117,646 and U.S. Patent No. 8,121,855. Together, these patents have a total of 81 claims. Headed into the fourth quarter 2012, we received Notices of Allowance from the USPTO for the next two patent applications: U.S. Patent No. 8,301,466 was issued in October 2012 and expands existing patent coverage for communication of health information from healthcare providers to web-based services through multiple forms of electronic messaging. The Company's fifth patent, U.S. Patent No. 8,321,240, was issued in November 2012, taking only 10 months to issue from its filing date of January 17, 2012. 

MMR's two most recent U.S. patents, U.S. Patent Nos. 8,352,287 and 8,352,288, with claims totaling 57, were issued in January 2013 after being allowed on November 28 and December 3, respectively. Significantly, claims in the sixth patent expanded MMR's patent portfolio with additional claims directed toward a Web-based service to access and collect health records from different types of service providers, including, but not limited to, retail pharmacies as well as hospitals, providers and other healthcare professionals providing services over the Internet. The health records, including prescriptions, may be collected from service providers using various types of messaging including email, facsimile, uploads, and voice. The seventh patent further raised the bar for our PHR intellectual property in that there are additional claims related to collecting insurance information, calendaring, and other features which are already provided by MMR's products and services. Claims in MMR's most recent patent address how healthcare providers send requested patient information to the patient, caretaker, provider or user by various means, including voice, fax, email or other electronic formats connected to a Personal Health Record system, patient portal or other locations on the Web. They also cover how users collect Personal Health Information on the Web or at other destination addresses without the healthcare provider having to enter specific personal identification numbers of the user. The information collected includes but is in not limited to a patient's medical history, chart notes, vaccination records, laboratory and other test results, prescriptions, and X-rays and images, as well as birth certificates and other important documents such as wills and advance directives.

Internationally, the Company has patents issued, pending and applied for in 12 countries of commercial interest. Six of the patents issued are in Australia, New Zealand, Singapore, Mexico and, on February 8, 2013, Japan. A Notice of Allowance in Canada (Serial #2,615,128) was received in March 2013. With the Canadian NOA, the Company's health IT intellectual property looks to include all of North America. MMR also has 14 other pending patent applications in foreign countries further including, Hong Kong, Israel, South Korea, Japan, Mexico, Europe, China. There are also five pending Patent Cooperation Treaty ("PCT") applications. The Company also has hundreds of patent claims in pending U.S. applications including 22 U.S. utility and provisional patent applications related to health information technology. These include applications directed towards a Mobile Platform for Personal Health Records, a Method and System for Managing Personal Health Records with Telemedicine and Personal Health Monitoring Device Features, Prepaid Card Services related to Personal Health Records, a Universal Patient Record Conversion Tool, Aggregation of Data from Third Party Systems into a Personal Health Record Account, Electronic Health Records in Clinical Trials, a Data Exchange with Personal Health Record Service, Delivery of Electronic Medical Records or Electronic Health Records into a Personal Health Records Management System, a Health Record with Inbound and Outbound Fax Functionality, a Method and System for Providing Online Medical Records with Emergency Password. The Company believes that many of the pending claims will ultimately be allowed including both health IT and non-health IT/medical applications which are pending in the Company's entire patent portfolio.

Our patent portfolio was created in conjunction with the intellectual property law boutique of McKee, Voorhees & Sease, P.L.C. ("MVS"). MVS has worked with MMR from the beginning and continues to assist in building U.S. and international patent portfolios in the health information technology and biotechnology areas. Starting in 2014, Stage 2 Meaningful Use requirements under the HITECH Act mandate that patients receive timely online access to their personal health information.  Specifically, in order to qualify for funds under the government's EHR Incentive Programs managed by the Centers for Medicare & Medicaid Services, eligible professionals need to provide more than 50 percent of their patients the ability to view, download and transmit their health information online within four business days of the information being available to the EP and hospitals need to provide the same within 36 hours after discharge from the hospital. The Company believes that the claims in its patent portfolio provide solutions necessary and desirable for healthcare providers to meet those requirements. Because the MMR HIT patents issued thus far have priority dates in advance of the relevant Meaningful Use requirements, the Company believes that its patent portfolio makes it difficult for hospitals and eligible healthcare professionals to fully qualify for incentives under the HITECH Act without licensing from MMR. Also, because of the government incentives now focused on patient engagement, there will continue to be increased interest and need by hospitals and physician groups to deploy Web-based patient portals that have access to medical records.

After the patent issuances of 2011, 2012 and 2013 to date, MMR believes it holds significant foundational patents under a "Method and System for Providing Online Medical Records" and "Method and System for Providing Online Records" and that the patents are relevant to any provider who transmits Electronic Health Records in that they limit their ability to communicate without infringement. As a result, the process of enforcement and licensing of its patent portfolio through the law firm, Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, has continued to build throughout the first quarter of 2013 including a campaign of contacting hospitals, medical groups, pharmacies and other healthcare professionals as part of efforts to license the MMR IP. 

In addition to enforcement actions against Walgreen Co., WebMD and Quest Diagnostics, Inc., The Liner law firm is also representing the Company in the collection of $30 million dollars under the Company's Settlement and Patent License Agreement with SCM as further described in our Litigation Matters section herewith.

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Exploiting MMRGlobal Biotech Assets and Patents

Although the Company's primary business is the Web-based storage and management of personal and professional health and vital records, we acquired intellectual property rights to certain biotech assets through the 2009 Merger with Favrille, Inc. which currently includes three U.S. patents, five U.S. pending patent applications, eight patents in foreign countries and 15 pending patent applications in foreign countries. Tremendously exciting for the Company was the subsequent announcements in April 2013 of two Notices of Allowance for our anti-CD20 monoclonal antibody assets, which follow the granting of our first such patent in Mexico in August of last year for "Antibodies and Methods for Making and Using Them." As announced on April 15, 2013, we received a Notice of Allowance from the United States Patent and Trademark Office, U.S. Serial No. 11/855,943, for our first U.S. patent to be granted for the Company's anti-CD20 monoclonal antibody IP. Shortly thereafter, on April 22, 2013, we announced that the Australian Patent Office had issued a Notice of Allowance for the Company's anti-CD20 monoclonal antibody assets, #2007338607, under the same title, "Antibodies and Methods for Making and Using Them" The Australian NOA was significant to the Company in that it further reinforced the value of the U.S. and Mexico antibody patents. These patents for the Company's anti-CD20 monoclonal antibodies have particular utility in fighting cancers and are considered important assets of the Company based on benefits and commercial value demonstrated by Rituxan®, an anti-CD20 monoclonal antibody with reported sales of USD $7.285 billion in 2012, which is due to go off patent in 2015.

The Company has been working to perfect the patent condition of these biotech assets for over four years. As a result, MMRGlobal now has biotech patents and patent applications pending in 13 foreign countries of commercial interest that provide competitive advantages for this biotechnology. Currently, the Company's biotech patent portfolio includes U.S. and foreign patents with expiration dates of August 2021 or later, relating to the manufacture of the B-cell vaccines. The issued antibody patents (and other patents which may issue relating to this technology) have substantially later expiration dates of September 2027 or later. Additional patent applications once granted may obtain additional term of biotech patent protection.

MMRGlobal's biotech patents include the B-Cell vaccine patents and patent applications entitled "Method and Composition for Altering a B Cell Mediated Pathology" which relate to methods of manufacturing compositions for B-cell vaccines used in the fight against lymphoma and potentially other forms of cancer, including U.S. Patents 6,911,204, 8,114,404 and 8,133,486. An additional manufacturing divisional patent application was filed with the Mexican Industrial Property Institute in the third quarter of 2012 after the awarding of a second Mexican patent No. MX302477 in June 2012 to further enhance the protection of the manufacturing patents already issued in various countries, including the U.S. In January 2013, the Company announced approval of its European Union patent (European Patent No. 01979228.2) for methods of manufacturing the B-cell vaccines which has also resulted in the regional patent undergoing validation in various countries selected by the Company as having commercial interest in the technology. The European Union patent is currently being translated and undergoing validation procedures in the following countries: United Kingdom, France, Germany, Switzerland, Spain, Italy, the Netherlands, Denmark, Sweden, Finland, Ireland and Belgium.

Pre-Merger, the Company spent more than $100 million in development of the biotech assets comprised of patents, patient samples and data from the FavId™/Specifid™ idiotype vaccine trials and our proprietary anti-CD20 antibody panels to treat B-cell lymphoma and additional B-Cell mediated conditions such as rheumatoid arthritis. Subsequent to the Merger, we have recovered additional intellectual property, including certain physical assets used by Favrille, Inc. in the form of over 1,800 patient tissue samples, samples of the B-Cell vaccine, a collection of insect cells used in the manufacture of the vaccine and other materials collected during the Company's pre-Merger FavId™/Specifid™ vaccine trials. The insect cells are of a particular kind believed to be susceptible to a particular baculovirus infection providing unique utility including Trichoplusia ni (Hi-5) and Spodoptera Frugiperda (Sf9) cells which are important to the Company and a material element in its issued patents as well as pending patent applications. Beginning in June 2009, we filed various national phase filings from the Patent Cooperation Treaty (PCT) patent application directed to anti-CD20 monoclonal antibody assets. In addition to the above, national phase filings are pending in major European, Asian, North American, and South American markets, including in the United States, Australia, Brazil, Canada, China, Hong Kong, Europe, India, Japan, and South Korea.

Starting in May 2010, we successfully revived Favrille's original U.S. Patent No. 6,911,204 directed to treating B-cell pathologies. Additional U.S. B-cell pathologies patent applications were also successfully revived and as recently as February 14, 2012 a second and third U.S. Patent Nos. 8,114,404 and 8,133,486 have been awarded to protect certain embodiments of the manufacturing of the vaccine. Additional U.S. applications are pending and under examination before the U.S. Patent and Trademark Office. We are taking further actions to perfect the condition of the patent applications in various other countries offering a potential competitive advantage for this B-cell technology. Although we make no guarantees as to the status of certain patents and patent applications, we are acting to pursue and maintain available patent protection relating to our patents and filings including but not limited to the FavId™/Specifid™ vaccine intellectual property portfolio in the United States and major foreign markets of interest. Three foreign patents have also been awarded in Singapore and Mexico.

On December 22, 2010, the Company entered into a non-exclusive agreement with Celgene to license the use of the Company's clinical and scientific data (originated by Favrille) related to targeted immunotherapies for cancer and other disease treatments to stimulate a patient's immune response and certain other confidential information. In consideration for the rights granted under the Agreement, Celgene agreed to pay the Company certain upfront fees and development milestones. When a milestone is reached it automatically triggers a payment to MMR.

In addition to our patent litigation firm, Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor, we continue to work with scientists, consultants and experienced venture capitalists to assist us in generating revenue through licensing agreements as would be usual and customary in that industry. Moreover, we plan to continue pursuing license agreements with companies like Celgene that have expertise in the area of biotechnology and specifically in treating lymphomas and other cancers, and which can benefit from the use of our clinical and scientific data.

Other Intellectual Property and Trademarks

We own the URL and domain name for the web address www.MyMedicalRecords.com. We also own the domain names www.MyMedicalRecordsMD.com , www.MMRPro.com and www.MMRPatientView.com for use with MMRPro and own the domain name www.MyEsafeDepositBox.com for use with our MyEsafeDepositBox product. We also own the source code for our products.

As we continue to develop our products, we continue to register our tradenames and logos as trademarks and service marks and will seek to protect the copyrights in the initial and any other proprietary content that we develop to support our MyMedicalRecords PHR, MyEsafe and MMRPro products. We also own the source code for a handheld software program, developed to operate on the Palm operating system, which allows Palm users to create a personal medical history on a personal data assistant, or PDA, so that they can have access to this information while traveling and in the event an Internet connection is not available. The Company plans on developing applications to use MyMedicalRecords and MMRPro products on other handheld devices.

Competition

MyMedicalRecords PHR

Though the Company believes that no other product in the marketplace compares to what we provide in comprehensive offerings, especially given our patents as a barrier to entry, there are other PHR providers in the consumer health information management marketplace today that compete for our services. These include MyMediConnect, NoMoreClipboard.com, Dossia, FollowMe,WebMD Health Manager, ZweenaHealth, and HealthVault®, although the last is more of a personal health platform that offers multiple solutions. In addition, we compete with Internet and patient-portals offered by EMR Vendors, insurance companies, hospitals and HMOs for their policyholders and patients.

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Each of our competitors offers varying PHR products and services for online storage and access to medical records at varying price points (at the basic "free" level, with minimal recordkeeping capability and usually includes advertising). However, we believe our MyMedicalRecords PHR product offers unique features that distinguish it from those of our competitors. In particular, we believe our MyMedicalRecords PHR product offers greater ease of use and accuracy than our competitors' products because copies of the actual medical records, such as laboratory test results and radiology reports can be either faxed or uploaded directly into the user's MyMedicalRecords PHR account using a patented integrated system, rather than requiring users to input the data themselves, which may result in transcription errors, or go through a third party, which could result in more time, additional costs and can raise the issue of privacy.

Competitors may offer limited document management capability for PHRs; they have to be scanned and uploaded by the user and they do not allow users to easily manage stored information with the same sophistication as the MMR PHR. In addition, these services do not offer integrated outbound fax directly from the user account, or if they do, we believe they could be infringing on our patents, which means that users of competitive products have to print out and manually handle paper or go through third party intermediaries in order to share information with other providers along the continuum of care.

In addition, while hospital patient, HMO patient. insurance policyholder and employer-based Internet-portals allow users to see certain information regarding test results, prescriptions or claims data, and may even give patients the ability to set appointments and communicate with doctors, these portals only allow users to view data from that specific provider, and if a user changes his or her healthcare provider, insurance carrier or employer, the information may not be available in the future. Our MyMedicalRecords PHR product is designed to offer our customers a single secure online repository for all of their health information and records, from every provider, so that this information is available any time a MyMedicalRecords PHR user needs to access and share it, and our service is completely portable, meaning it stays with the member though changes in health plans, healthcare providers and employers. Moreover, the MyMedicalRecords account covers an entire family of up to 10 members, whereas other services typically only cover an individual or charge for additional family members.

We also believe the enhanced features offered at the same price point with our MyMedicalRecords PHR product, such as outbound fax, document management, emergency login, appointment and prescription reminders and voice messaging features, offer consumers unique and attractive advantages that separate our MyMedicalRecords PHR product from the competition. In addition, competing services may raise consumer awareness about the need for access to personal health information. While this increased awareness may increase the marketability of our MyMedicalRecords PHR product, growth in the consumer health information management marketplace may also attract new entrants. However, while we believe that greater ease of use and array of enhanced features distinguish our MyMedicalRecords PHR product from those of our competitors, many of our competitors may have greater resources and more experience in this market, and can modify their product offerings to make them more competitive, including attempting to replicate some features of our MyMedicalRecords PHR product. We have also sought to protect our proprietary technology through patents in both the U.S. and overseas. See "Intellectual Property - Patents" below.

MyEsafeDepositBox

Our MyEsafeDepositBox product competes with a number of online backup and electronic data storage services. The increasing use of external hard drives and flash drives to backup data also has the potential to compete with online data storage services such as our MyEsafeDepositBox product.

We believe that MyEsafeDepositBox is a superior product when compared with products such as My Vault Storage or Allianz Protect in that it permits multiple service providers, such as insurance agents or lenders, to fax documents directly into a user's account. In addition, much like the MyMedicalRecords PHR, the MyEsafeDepositBox service also offers outbound fax and emergency login features which further differentiate us in the marketplace. We also have the ability to provide private label branding that affords banks, insurance companies, escrow services and other financial and legal businesses to provide not only a useful product but creates brand awareness and loyalty.

MMRPro

MMRPro competes with scanning services that market their services to doctors seeking to convert their historical paper records into electronic files, as well as EMR systems. Scanning services typically do not provide the doctor with an integrated end- to-end system that not only scans the record, but automatically sorts it by patient and by patient chart tab. Most scanners merely digitize patient records and store them either on a local drive or a Local Area Network drive, which requires the doctors to have an IT consultant manage their online records. Since MMRPro is a "Software As Service" model, the scanner records are sent to a web- hosted application with redundant data storage facilities and MMR handles the physical storage and management of patient data in compliance with HIPAA's Privacy Rule and Security Standards. This not only relieves doctors of having to worry about their in-house records management, it also allows them to access patient records from any Internet-connected computer as well as to deploy a copy of a record for the patient.

MMRPro also competes with EMR systems that offer doctors the opportunity to make their entire office paperless. However, many doctors, particularly solo and small group practitioners, are still resisting EMRs with a high cost of conversion and the difficulty and expense associated with maintaining an EMR system. MMRPro provides an efficient alternative and or transition to a full-blown EMR for many thousands of dollars less cost. MMRPro also features a patient portal, MMRPatientView, which is a requirement of meaningful use and is both integrated with our end-to-end system or can be incorporated as a separate module within any EMR system, as is being done in partnership with Interbit Data for the MEDITECH EMR platform.

Marketing and Sales

Marketing Update

Demand for both our consumer and professional medical records products is driven primarily by the U.S. healthcare market and the health information technology market. We are expanding our consumer market through strategic partnerships with nurse advocates, local pharmacies, home healthcare specialists, and medical supply companies, all of whom have significant one-on-one relationships with patients who can benefit immediately from the use of our PHR. Likewise, we have created a retail consumer model through the use of prepaid Personal Health Record cards, which will be sold through retail brick and mortar outlets. On the professional side, demand is increasing in the field of ambulatory surgical centers and EMR systems as well as other clinics looking for an elegant and cost-effective scanning and document management solution. We also view specialty practice areas such as pediatrics, chronic care illnesses and geriatrics as fertile grounds for expanding the MMRPro solution with the integrated patient portal MMRPatientView.

With the use of teleconsulting and telemedicine becoming increasingly prevalent in healthcare, our MyMedicalRecords PHR solution provides a well-suited platform to facilitate collaboration between patients and their doctors and other healthcare providers with the ease of use and integration the solution provides. Through the Company's relationship with ngConnect and Alcatel-Lucent, we have launched a telemedicine reporting module inside the MyMedicalRecords PHR and are further working on identifying strategic partners to send medical information through our portal. One such identified partner will give us the ability to integrate wellness data, such as meal planning, nutritional and biometric information.We are also actively working with ng Connect to assist the Company in taking our Personal Health Record products and services into Alcatel- Lucent's government and telecommunications clients. Additionally, we are continuing to work with major telecommunications companies to bring the MyMedicalRecords.com Personal Health Record to Smartphones. We continue to be actively involved in meetings with Verizon. The Company believes that its patents give us a competitive advantage when negotiating services with the major carriers since many mobile phones receive fax.

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As previously reported, we are working with 4medica to integrate our PHR with laboratory reporting services which is used by tens of thousands of doctors nationwide. Once this application is available, information will be put directly into subscribers' accounts and users will be able to view their laboratory report results in binary format, meaning they will also be able to chart and graph this data. The ability for consumers to directly access their lab report results is also a national initiative being driven by the Department of Health and Human Services which under "new rules" seeks to expand the rights of patients to gain access to test results reports directly from labs using health IT solutions. We also are working with 4Medica to create a "fax portal" for their 30,000 doctors to facilitate better handling of the still large number of lab results that are paper-based in their network. That portal, which creates a significant new revenue stream for the Company, was completed in September and was made available by 4medica to its client doctors late in 2012. We also have completed our initial implementation with the 4medica Electronic Medical Record system. Now when consumers enroll in the MyMedicalRecords Personal Health Record, their data is sent into 4medica in HL7 format so that a Medical Record Number (MRN) can be established in 4medica.

In addition, we are integrating a document signing tool into our PHR for a wellness clinic customer. When this integration is completed in Q2 2013, users will be able to fill out patient registration and authorization forms from within the PHR. Selected data in the forms will be sent as HL7 into the 4medica EMR so that patient demographics are fully populated in the EMR. The forms themselves will be passed to the EMR as well in PDF format, meaning that all relevant forms and data can be populated into the EM before the patient presents at the clinic. Because we are sending data in standard HL7 and PDF formats, this will work with 4medica as well as any EMR system.

Under the Health Information Technology for Economic and Clinical Health Act (HITECH), which was part of the 2009 American Recovery and Reinvestment Act (stimulus bill), a core "Meaningful Use" objective requires that for physicians to qualify for government incentive payments, they need to provide more than 50% of their patients with timely electronic copies of their personal health information in Stage 1, transitioning to the same measure of patients being provided the ability to view online, download and transmit their health information in Stage 2, and at least 90% of patients in Stage 3 by 2014. This is believed to be spurring eligible healthcare professionals to seriously focus on how they will offer Personal Health Records to their patients. As a result, the Company entered into such strategic partnerships in the last year as we have with UST Global and Interbit Data, the latter to provide our MMRPatientView portal to users of the MEDITECH EMR system. MEDITECH is being used by more than 650 hospitals nationwide. Although the solution is only deployed for MEDITECH at this time, we believe that it can work with virtually any EMR platform, which opens up a significant new market opportunity for us.

On the professional side, after nearly three years of development, the Company launched the modules that enable physicians to receive and send faxes from inside a fully functional EMR. Partnered with 4medica, we began incorporating our EMR/EHR Fax Communications Gateway in 4medica's Certified Meaningful Use Integrated Electronic Health Record (4medica iEHR®) at the end of June. 4medica provides the industry's leading cloud clinical integration platform and solutions and the program will also use MMR's patented document management and imaging solution to facilitate electronic consultations for both inbound and outbound referral letters. 4medica will pay monthly minimum usage and patent licensing fees based on the size of the Gateway plus a 20% royalty on revenues generated from healthcare providers.

We plan to continue to take advantage of the burgeoning consumer health information market and leverage federal legislation and initiatives. Beyond HITECH, we believe that the healthcare reform legislation passed by Congress and signed by the President into law in March 2010 (Patient Protection and Affordable Care Act, or ACA) also represents a significant behavioral shift in how consumers will manage their healthcare because of the requirement that most everyone have insurance. After the U.S. Supreme Court heard oral arguments challenging the law during the last week of March 2012, the Court announced its ruling on June 28 to uphold most of the healthcare reform law, which includes the individual mandate requiring most U.S. residents to have health insurance. Although the ruling did not touch directly on health IT or affect the federal incentive programs for EMR/EHR adoption, healthcare reform is now able to move forward with greater clarity. The challenges created by the influx of newly insured to better manage the cost of their care along with the administrative efficiencies mandated by the ACA should see greater demand for health IT solutions such as those provided by MMR.

With government mandates and stimulus building both awareness and momentum for personal and electronic health records, others not directly affected by Meaningful Use incentives are driving healthcare technology to control healthcare spending, and we began recalibrating our marketing and sales strategies in 2012 to allocate resources in these areas. These include pharmacies that can offer patients drug interaction tools within a PHR and prescription refill reminders, the patient-centered medical home where caregivers placed PHRs at the top of their list of technologies that can best support their practice issues, retailers who can use this as a tool to create stickiness and build loyalty programs at the point-of-sale, and the world of telemedicine where data from remote patient monitoring devices is transmitted by smartphones into a patient's PHR for sharing by the entire medical team, such as what the Company is doing with Alcatel-Lucent.

It should also be noted that demand is not solely U.S.-centric. As health IT spreads around the globe, and other countries intensify their focus on controlling healthcare costs through the improved use of information technology, we are seeing increased demand internationally. This expansion and increased demand is evidenced by the Company's agreements in China, Australia and other countries in development to offer Personal Health Record and electronic document management and imaging services. Moreover, in a global economy, companies are increasingly sending employees overseas, a practice which is expected to increase demand for our MyMedicalRecords PHR or MyEsafeDepositBox among ex-pats, particularly in Europe and the Middle East. Additionally, the growth of health IT at home and abroad is further impetus for ensuring the protection and enforcement of our patents worldwide.

Sales Update

MyMedicalRecords PHR

We continue to focus on multiple sales verticals such as independent pharmacies, pharmacy chains and other mass merchandisers, visiting nurses, caregivers, patient advocates, in-home sales affiliates, hospitals and medical supply companies. The Company believes that it will be able to efficiently and profitably gain traction in these markets to create revenue that will allow us to focus on many larger strategic, international licensing opportunities such as the MMR's agreements with Unis-Tonghe in China and VisiInc in Australia, which take long periods of time and significant capital to incubate and develop to their full revenue potential. As the January 1, 2014 deadline for Meaningful User nears, we believe both providers and consumers will show increased interest in Personal Health Records. In addition, our increasing ability to integrate with Electronic Medical Record systems will increase consumer and provider acceptance of our PHR solution as well.

In addition, the Company is working to create partnership programs with caregivers who can distribute its product to patients who most need a Personal Health Record. The Company is in the process of launching its program with VIDA Senior Resource, Inc., a family owned and operated community resource organization headquartered in Boise, Idaho, which provides senior home care services nationwide through a network of certified owned and operated agencies. It is estimated that our product will be sold to some 50,000 patients. It is important to note that VIDA will be selling the PHR at a significantly higher price point, $19.95 per month or $199.95 annually, than it is currently being sold direct to consumer on the Company's Website The programs the Company has created for Vida are requiring significant lead time, training and testing to deploy.

We also continue to actively work with E-mail Frequency and its partners on embedding MyMedicalRecords in benefit programs as part of a suite of healthcare products and services.

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The Company recently introduced a new enhanced service called Personal Touch, in which a credentialed health professional collects the medical records on behalf of a MyMedicalRecords.com subscriber, then works with the subscriber to organize the records and put them into the PHR. The Company believes that the new service will help to speed-up adoption of the PHR product because it removes the need for the user to collect his or her own medical records, thus providing a tremendous convenience. The Personal Touch service also is sold at a premium price - $179.95 annually instead of $99.95 annually. Initial test marketing of the product has shown very promising metrics and we believe that the Personal Touch concierge service can make a significant contribution to our subscriber revenues beginning in Q3 as the marketing program expands after successful testing of the concept. The above is in addition to our ongoing main sales channels focused on healthcare professionals, direct to consumer, corporate sales, insurance companies, affinity group and membership organizations.

In addition, our technology partnership with Interbit Data is helping to create sales opportunities with hospitals who already use Interbit products and services. Our interoperable Patient Portal solution, which was announced at HIMSS 2013 in March, incorporates the ability to present both PDF and discrete user data from hospital EMR systems.

MMRPro

Sales of MMRPro are being directed at physicians, particularly small group and sole practitioners who still do not have any way to digitize the paper in their offices and who do not want to invest the hundreds of thousands of dollars necessary to implement an EMR system, community hospitals and other clinics which do not have the funds or technology resources to invest in a fully functional EMR system, surgery centers and specialty clinics, and EMR and EHR vendors who are looking for a way to bring a patient portal into their systems without having to build their own import modules. We also work with document imaging sales and distribution channels, and the Company is utilizing distribution networks of companies who already sell other products into doctor offices. These distribution partners also help increase our integration and support network.

We are also continuing to build relationships with companies managing Ambulatory Surgical Centers (ASCs), and in the second quarter we signed two additional agreements with, Regent Surgical Health to install MMRPro systems. The MMRPro systems were installed at facilities managed by Regent in Fort Myers, Florida and New Brunswick, New Jersey. The Company expects additional agreements in Chicago, Illinois this quarter. These sales are in addition to previous sales of MMRPro systems for Regent, a leading surgery center management and development company that currently manages more than 20 facilities nationwide. Additionally, through our partnership with Interbit Data, we created a joint software solution that allows hospitals and other clinical facilities to use a Meaningful Use certified solution to instantly make health information available to patients securely over the Internet using MMRPatientView from any EMR system without first having to scan, fax or print any documents. The Interbit Data-MMR module, which the Company presented at the International MUSE Conference in May-June, is already being installed in hospitals and is certified for Meaningful Use with MEDITECH systems.

In 2012, we announced a new business arrangement with Fujitsu Computer Products of America, Inc., one of the world leaders in scanning solutions, which incorporates MMRPro with their new ScanSnap N1800 Network Scanner. Utilizing a proprietary interface created by DocuFi, the document imaging solution offers smaller physician offices, community hospitals and surgery centers the MMRPro system as a lower cost service alternative to digitize medical records.

In September, the Company signed an Agreement with VisiInc, which has committed to selling an initial 75 units, of which the first 25 have been delivered, the next 25 are scheduled to be delivered by the end of the fourth quarter, and the remaining 25 in the first quarter of 2013. Starting in the second quarter of 2013, the agreement calls for the reseller to purchase or license a guaranteed minimum of 100 additional MMRPro systems per quarter over the life of the three- year contract, which represents a minimum of $5 million to $16.8 million in revenues in addition to $1,050,000 for the first 75 units. VisiInc's primary focus is distributing the MMRPRo product into the dental channel, which represents a new opportunity for the Company. The first dental offices were installed in Q4 2012 with continuing installations occurring in Q1 2013.

International Licensing

While the U.S. holds the largest share of the global EMR market, health IT is a growth industry internationally, expected to increase from $99.6 billion in 2010 to $162.2 billion in 2015, representing a CAGR of 10.2 percent from 2010 to 2015. Countries sharing a common goal to control healthcare costs are looking to EMR and PHR solutions to achieve this. The global demand is evidenced by the Company's agreements in China and Australia to offer Personal Health Record and electronic document management and imaging services. Moreover, in a global economy, companies are increasingly sending employees overseas, a practice which is expected to increase demand for our MyMedicalRecords PHR among ex-pats, particularly in Europe and the Middle East. Also, medical tourism is on the rise with estimates of a $100 billion market, and this fueling the need for medical records that are truly universal and can be accessed anytime from anywhere. It should be noted that the growth of health IT at home and abroad is further impetus for ensuring the protection and enforcement of our patent portfolio worldwide. Last year, in June 2012, the Company received its official business license from the Chinese Government to operate the Unis Tonghe MMR International Health Management Service Co., Ltd. Joint Venture (the "JV"). The license enables the JV to develop medical information management software, medical information technology software, health records management systems, and provision of related services, including the Company's Personal Health Record systems. The JV is positioned to offer its products and services to the Chinese government, hospitals, healthcare facilities and to the public, and is valid through 2042. The completion of the definitive Joint Venture agreement between MMR and Unis- Tonghe Technology (Zhengzhou) Co., Ltd., or UNIS, was first announced in January 2010, with the cooperation to build a customized version of MMR's proprietary PHR services and professional document imaging and management solutions in China. During the application and registration process of responding to requests from the Chinese Government, the JV has already been installing early stage EMR systems in three hospitals in Henan Province, with a population of over 100 million. The JV has also been participating in formal government bids to commence numerous medical records projects in China. Unis is a subsidiary of Unisplendour Corporation Limited (SHE: 00938) (www.thunis.com), one of China's leading IT firms.

Subsequently, the Company announced on April 30, 2013, following meetings in Los Angeles with Luo Jianhui, Unisoft Group/Unis-Tonghe Technology Vice President and Chairman, that MMR and Unis-Tonghe will begin offering an Electronic Medical Records system with an integrated MyMedicalRecords Personal Health Record to be sold through the Joint Venture, Unis Tonghe MMR International Health Management Service Co., Ltd. MMR will begin building the first integrated version of the system in the U.S. working with licensees and existing strategic business partners. The platform will utilize MMR's patented PHR systems to offer two-way connectivity with any EMR or EHR system in hospitals and other ambulatory care centers. The system will also use an integrated HL7 interface to populate data from the UNIS/MMR system directly to patients through their PHR including chart notes, lab test results, medication lists and other discrete protected patient data.

The Joint Venture was originally formed to only sell MMR's patented Personal Health Record technologies under license to the JV. The plan was for the JV to sell the UNIS/MMR products and services to hospitals, physician groups and consumers in China. However, at this time both sides see a benefit in delivering a total turnkey system which includes MMR PHRs integrated into the system.

The Chinese government has mandated regulations and initiatives for healthcare including health IT, which include financial incentives that are similar to those in the U.S. and could help drive EMR and PHR revenues to the Joint Venture.

We have begun to leverage our resources in China with other U.S. partners on the ground in China including Alcatel-Lucent to help manage our relationships in China locally. The Company has asked Alcatel Lucent as a 51% owner of Shanghai Bell to help manage the Unis relationship in China.

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In September 2012, the Company announced the signing of an agreement with our Australian licensee, VisiInc PLC, incorporated in the Company's third quarter filing as Exhibit 10.1. The Agreement calls for the sale of more than 1,000 MMRPro systems through a large reseller of medical products and services to healthcare professionals. As of September 30, 2012, we had delivered the first 25 MMRPro systems. Since that time, the Company is continuing scheduled deliveries. MMRPro will be bundled with other Visi products and marketed as VISI MMRPro, which is being sold through the Seagate VAR and OEM channels including the Burkhart Dental channel.

The Company is also working on installations in Europe under an agreement with a large Kodak reseller. We have been invited to visit and present our products for use in a joint venture in Qatar and are working with consultants in that region. We are also meeting with potential strategic partners in countries where our patents are issued such as New Zealand and Singapore, to leverage our global patent portfolio.

Value Added Reseller ("VAR") Networks

On September 27, 2012, the Company signed an agreement with VisiInc PLC, which is incorporated in this filing as Exhibit 10.1, for the sale of a minimum of 1,275 MMR Pro systems through a large reseller of medical products and services to health care professionals. As of September 30, 2012, we had delivered the first 25 MMRPRo systems. In addition, the agreement obligates VisiInc PLC to purchase a minimum of 50 MMRPro by the first quarter of 2013. MMRPro will be bundled with other Visi products and marketed as VISI MMRPro. The VISI MMRPro systems are being sold through the Seagate VAR and OEM channels, which includes a syndicate of Seagate VARs, as well as through the Burkhart Dental channel, as part of a Seagate/Visi/MMR/Via3 product bundle. The entire product bundle will be featured at the Synnex VAR conference "Varnex" in Las Vegas on November 14, 2012 to an estimated 700 VAR partners.

The bundle offering also includes Seagate's Network Attached Storage ("NAS") Boxes (NAS440), which, when connected to VISI MMRPro, will store documents and images created in the VISI MMRPro system in the NAS boxes, as well as in MMRPro.

Initially, the Agreement calls for exclusivity in the dental market through Burkhart Dental ("Burkhart"), which has an estimated 24,000 dental office clients. Burkhart has already begun the process of installing MMRPro systems in several of its dental clients' offices. Although the Agreement is based on selling exclusively to the dental channel, VISI has subsequently requested exclusive rights to include, legal, accounting and other verticals. As a result, the Company believes the number of units may increase.

Results of Operations for the three months ended March 31, 2013 as Compared to the three months ended March 31, 2012

Revenues.

Revenues for the first quarter of 2013 were $122,028, a decrease of $50,770 or 29.4% compared to $172,798 in 2012. The decrease for the quarter was primarily due to lower biotech license fees which varied based on the milestones reached in the same period as compared to prior year, and offset by an increase of other income.

Cost of revenue.

Cost of revenue decreased by $148,706, or 85%, from $174,849 for the first quarter of 2012 to $26,143 in 2013. The decrease was primarily due to decreased website hosting fees and website maintenance and support fees. Gross profit as a percentage of revenues was $95,885, or 78.6% for the first quarter of 2013, as compared to $(2,051), or 1.2% in 2021. Gross profit increased for the three months ended March 31, 2013 primarily due to lower cost of revenue as compared to prior year.

Operating expenses.

Total operating expenses increased by $16,171, or 1.1%, from $1,456,387 in the first quarter of 2012 to $1,472,558 in 2013.

General and administrative expenses decreased by $44,204, or 4.7%, from $933,766 in the first quarter of 2012 to $889,562 in 2013. The decrease for the quarter was driven primarily by lower option expense and salary expense, offset by higher legal fees.

Sales and marketing expenses increased by $106,379, or 23.5%, from $452,644 in the first quarter of 2012 to $559,023 in 2013. The increase for the quarter was primarily due to higher marketing consulting fees, offset by lower option expense and salary expense.

Technology development expenses decreased by $46,004, or 65.7%, from $69,977 in the first quarter of 2012 to $23,973 in 2013. The decrease for the quarter was primarily due to an overall decrease in product management expenses.

Interest and Other Finance Charges, Net.

We had interest and other finance charges, net of $135,148 for the first quarter of 2013, an increase of $9,385 from $125,763 in 2012. The increase was primarily due to higher non-cash interest expense attributed to the conversion feature issued with Convertible Promissory Notes, offset by lower line of credit interest expense.

Net loss.

As a result of the foregoing, we had a net loss of $1,511,821 for the first quarter of 2013 compared to a net loss of $1,584,201 for the first quarter of 2012.

Going Concern

As more fully described in Note 1 to the consolidated financial statements appearing above in this Quarterly Report on Form 10-Q, our independent registered public accounting firm included an explanatory paragraph in their report on our 2012 financial statements for the year ended December 31, 2012 related to the uncertainty of our ability to continue as a going concern. As of March 31, 2013, our current liabilities of $9,029,600 exceeded our current assets of $756,371 by $8,273,229.

For a description of our management's plan regarding our ability to continue as a going concern, please see Note 1 to the financial statements included above.

Liquidity and Capital Resources

As of March 31, 2013, the Company's current liabilities exceeded its current assets by $8.27 million. We have incurred net losses of $1,511,821 and $1,584,201 for the three months ended March 31, 2013 and 2012, respectively. At the current level of borrowing, we require cash of $275,000 per year to service our debt. Furthermore, not including debt service, in order to continue operating our business, we use an average of $278,000 in cash per month, or $3.3 million per year. At this rate of cash burn, over the next twelve months, the Company's existing current assets will sustain our business for approximately five to nine months.

21


In addition to the above cash burn from operations, we will be required to obtain additional financing in order to meet the obligations for installment payments of $621,000 under the Creditor Plan and our obligations under the secured indebtedness to The RHL Group under the Seventh Amended Note (which had a balance of $1,532,451 at March 31, 2013), amongst other debt obligations. Such obligations are currently due and payable pursuant to the terms of the notes. The components of the RHL Group Note payable and the related balance sheet presentation as of March 31, 2013 are as follows: $1,053,946, which is included in the line of credit, related party; and $478,505 for other obligations due to The RHL Group, which is included in related party payables.

Traditionally, we have relied on the sale of stock and convertible debt as well as draws from the RHL Group line of credit to finance our activities. As of March 31, 2013, we had a line of credit with The RHL Group in the amount of $4.5 million. As of March 31, 2013, availability under this line of credit was $1.77 million. Furthermore, we may utilize portions of our standby equity facility with Granite as needed. Additionally, we raised $493,750 and $956,000 in convertible debt during 2013 and 2012, respectively. We expect to continue offering a limited amount of convertible debt in 2013. The Company also expects sales from MMRPro, its prepaid Personal Health Record cards, and fees from patent licensing agreements to generate revenue and gross profit that will significantly improve its monthly sales and reduce annual cash burn from operations.

Cash Flows for the three months ended March 31, 2013 compared to three months ended March 31, 2012

Net cash used in operating activities for the three months ended March 31, 2013 was $777,543, compared to $636,978 used in the similar period in 2012. In 2013, we had a net loss of $1,511,821, less non-cash adjustments (depreciation, amortization, common stock and warrants issued for services and interest, and stock compensation expense) of $342,731, less changes in operating assets and liabilities of $391,547. In 2012, cash used in operating activities included net loss of $1,584,201, less similar non-cash adjustments of $382,977, plus changes in operating assets and liabilities of $264,246. Compared to 2012, non-cash adjustments in 2013 were slightly lower primarily due to a decrease in stock-based compensation expense and payables accrual adjustments, offset by an increase in common stock issued for services.

Net cash used in investing activities in the three months ended March 31, 2013 and 2012 totaled $146,394 and $147,243 respectively. Compared to 2012, investing activities in 2013 were lower mainly due to a decrease in MMRPro and website development costs stemming from lower negotiated rates.

Net cash provided by financing activities in the three months ended March 31, 2013 and 2012 totaled $958,248 and $547,579, respectively. Financing activities primarily included proceeds generated from the issuance of convertible notes, common shares and net proceeds from draw downs on our line of credit from The RHL Group, Inc., a significant stockholder wholly-owned by Robert H. Lorsch, our Chairman and Chief Executive Officer. Compared to 2012, financing activities in 2013 were higher primarily due to an increase in convertible notes activities.

As of March 31, 2013, we had cash and cash equivalents of $70,966, compared to $74,461 as of March 31, 2012.

Description of Indebtedness

The RHL Group

For a description of our indebtedness to The RHL Group, please See Note 3 - Related Party Note Payable, included above in this Quarterly Report on Form 10-Q.

The RHL Group Note payable had a balance of $1,532,451 at March 31, 2013. The components of the RHL Group Note payable and the related balance sheet presentation as of March 31, 2013 are as follows: $1,053,946, which is included in the line of credit, related party; and $478,505 related to other obligations due to The RHL Group which are included in related party payables.

Total interest expense on this note for the three months ended March 31, 2013 and 2012 amounted to $36,551 and $35,451 respectively. The unpaid interest balances as of March 31, 2013 and December 31, 2012 were $43,450 and $35,451, respectively.

Convertible Notes

On various dates between January 31, 2013 and March 22, 2013, we entered into fourteen different Convertible Promissory Notes (the "Notes") with eleven different unrelated third-parties for principal amounts totaling $493,750 with fixed conversion price from $0.020 to $0.028. Under the terms of the agreement, the principal amount owed under the Note became due and payable one year 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 Notes have the option to be converted into a total of 24,035,715 shares of our common stock. These Notes bear interest at a rate of 6% per annum payable in cash or shares of common stock or a combination of cash and shares of common stock at the option of the Company. The loan discounts for the convertible note feature totaled to $73,500 and was amortized to interest. As of March 31, 2013, all notes had been converted.

As of March 31, 2013, a total of $762,607 of Convertible Notes remained outstanding and the Company or the holders had not elected to convert their Note balances into shares of our common stock.

Commitments and Contingencies

For information relating to our commitments and contingent liabilities, please see Note 5 to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

On January 4, 2010, we entered into a Cooperation Agreement with UNIS, which we refer to as the "Cooperation Agreement". Under the Cooperation Agreement, UNIS and the Company agreed to form the JV for the purpose of deploying our Personal Health Record services and document imaging and management solutions in China. We will own 40% of the JV and UNIS will own 60% and each party will have the right to designate two members of the JV's board of directors, with the fifth member being a Chinese citizen mutually designated by us and UNIS. Under the Cooperation Agreement, board actions will require the approval of more than three of the five members of the JV's board of directors and no material actions may be taken unless all board members are present and voting at the meeting.

Under the Cooperation Agreement, UNIS and the Company will contribute an aggregate of 50 million RMB to the joint venture, based on each party's respective ownership, in the form of intellectual property rights, equipment, brand value, cash and such other consideration as may be agreed upon by the parties. Each party's obligation to contribute to the joint venture is subject to a number of conditions, including obtaining all necessary approvals of and licenses from the Chinese government, as well as the joint venture meeting its budget, goals and objectives at the time contributions are due. Under the Cooperation Agreement, each party's contributions will be made over a period of sixty months.

22


For a more complete description of the terms of the Cooperation Agreement, please see Exhibit 10.26 in our annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on March 31, 2010.

On August 10, 2010, the Company entered into a Supplementary Agreement for the purpose of clarifying certain non-material terms of the original Cooperation Agreement mentioned above.

On July 2, 2012, the Company received its official business license from the Chinese government to operate the JV. The JV is officially licensed with the Chinese government and is approved to operate and generate revenue. The license enables the JV to develop medical information management software, medical information technology software, health records management systems, and provision of related services, including the Company's Personal Health Record systems. The JV will offer its products and services to the Chinese government, hospitals, healthcare facilities, and to the public and is valid through 2042.

The Company's entry into the Cooperation Agreement described above constitutes the creation of a direct financial obligation.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable for smaller reporting companies.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in rules 13a-15(b) and 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated the Securities Exchange Act of 1934). The Company's internal control over financial reporting process is designed to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that accurately and fairly reflect, in reasonable detail, our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company's internal control over financial reporting was effective as of March 31, 2013.

Changes in Internal Controls over Financial Reporting

There were no significant changes in our internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our independent auditors have not audited and are not required to audit this assessment of our internal control over financial reporting for the three months ended March 31, 2013.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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 April 10, 2013, MMR filed a complaint for patent infringement against Quest Diagnostics Inc., titled MyMedicalRecords, Inc. v. Quest Diagnostics Inc., United States District Court, Central District of California, Case No. CV 13-02538. The complaint alleges that Quest Diagnostics Inc. is infringing MMR's Personal Health Records patent U.S. Patent No. 8,301,466. MMR has not yet served Quest Diagnostics Inc. with the complaint. Counsel does not have enough facts at this time to predict the changes of either a favorable or unfavorable outcome. Nor does counsel have any facts upon which to base any information regarding collectability. MMR has received a letter from Sunil Singhal, a former employee. Mr. Sunil 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. He filed a charge with the U.S. Equal Employment Opportunity Commission, but that body has declined to take action. In turn, he filed a claim with the California Department of Fair Employment and Housing ("DFEH"). The DFEH had declined to bring a citation, but it has issued a "right to sue" notice. To date no lawsuit has been filed. MMR is represented by Ropers in this matter.

On February 11, 2013, MMR filed a complaint for patent infringement against WebMD Health Corp. and its wholly owned subsidiary WebMD Health Services Group, Inc. (collectively, "WebMD"), titled MyMedicalRecords, Inc. v. WebMD Health Corp et al., United States District Court, Central District of California, Case No. CV 13-00979 ODW (SHx). The complaint alleges that WebMD is infringing MMR's Personal Health Records patent U.S. Patent No. 8,301,466. MMR has not yet served WebMD with the complaint. Counsel does not have enough facts at this time to predict the changes of either a favorable or unfavorable outcome. Nor does counsel have any facts upon which to base any information regarding collectability.

On January 29, 2013, MMR filed a complaint for patent infringement against Walgreen Co., titled MyMedicalRecords, Inc. v. Walgreen Co., United States District Court, Central District of California, Case No. CV 13-00631 ODW (SHx). The complaint alleges that Walgreen Co. is infringing MMR's Personal Health Records patent, U.S. Patent No. 8,301,466. Walgreen Co. filed an answer to the complaint on May 3, 2013. This matter is currently in the initial 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.

23


On October 18, 2012, MMR was named as a defendant in an action filed in the California Superior Court, County of Los Angeles, by Naj Allana, who has generally claimed that MMR owes approximately $125,000 to him and his corporation and that he is entitled to shares of the corporation. MMR answered the complaint and contends that Allana entered into a series of agreements with the company that released the company from a substantial portion of its obligations to him. MMR has also cross-complained against Allana, claiming that, in lieu of performing his duties for the Company, he entered into transactions on behalf of the company with outside vendors to perform his duties. MMR did not discover Allana's actions until his service for the company was terminated. Should Allana prevail on his affirmative claim, a substantial portion of any ensuing award should be offset by MMR's cross- complaint. The matter is in active discovery. A trial date has been set for November 18, 2013. MMR is represented in this matter by Ropers Majeski, Kohn and Bentley ("Ropers"), a national firm with offices in San Francisco, Redwood City, San Jose, Los Angeles, New York and Boston.

On July 17, 2012, the Company has filed a claim in the United States Bankruptcy Court Southern District of New York for $827,818.74 for reimbursement of initial and on-going costs incurred on the integration of Kodak products and software during the development of MMRPro. The Company has been forced to identify replacement systems and undertake significant additional development efforts as a result of Kodak's bankruptcy filing. The Kodak claim is currently pending in the Bankruptcy Court and counsel does not have enough facts at this time to predict the chances 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, MyMedicalRecords, Inc. filed a lawsuit in the Superior Court of the State of California for the County of Los Angeles for breach of contract and is seeking damages in an amount of $30 million. On September 19, 2012 the Company engaged Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP ("Liner") to substitute into this matter. The Agreement contains an arbitration clause and non-binding arbitration proceedings have been completed. Currently, an appeal is also presently pending the Second Appellate District of the California Court of Appeal stemming from the Superior Court's holding that SCM's Petition to Compel Arbitration was moot. 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.

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

The following is a summary of transactions by us since our previous disclosure on Form 10-K, filed with the SEC on April 1, 2013, involving sales of our securities that were not registered under the Securities Act. Each offer and sale was exempt from registration under either Section 4(2) of the Securities Act or Rule 506 under Regulation D of the Securities Act because (i) the securities were offered and sold only to accredited investors; (ii) there was no general solicitation or general advertising related to the offerings; (iii) each investor was given the opportunity to ask questions and receive answers concerning the terms of and conditions of the offering and to obtain additional information; (iv) the investors represented that they were acquiring the securities for their own account and for investment; and (v) the securities were issued with restrictive legends:

On May 13, 2013, we granted four separate warrants to purchase 500,000 shares each of our common stock to two unrelated third-parties in consideration for services. These warrants vest upon certain revenue generating criteria is met, and have exercise prices of $0.08 and $0.12 per share, and an expiration date of May 13, 2015.

On May 10, 2013, we granted a total of 7,250,000 shares of common stock at $0.06 per share to eight employees, two consultants and four directors as an incentive and in consideration for services rendered. All shares vest on January 10, 2014 and are forfeitable before such time.

On April 19, 2013, we granted 200,000 shares of our common stock at a price of $0.06 per share to an unrelated third-party as a reduction in payables.

On April 14, 2013, we granted a total of 1,000,000 shares of our common stock at a price of $0.08 per share to two unrelated third-party in consideration for services.

On April 10, 2013, we issued 500,000 shares of our common stock to an unrelated third-party after the third party elected to exercise a warrant at a price of $0.06 per share against reduction of payables.

On April 3, 2013, we granted 125,000 shares of our common stock at a price of $0.08 per share to an unrelated third-party as a reduction in payables.

On April 3, 2013, we granted 350,000 shares of our common stock at a price of $0.04 per share to an unrelated third-party as a reduction in payables.

On April 1, 2013, we granted two separate warrants, each to purchase 250,000 shares of our common stock to two different unrelated third-parties in consideration for rendering services in our Advisory Board. These warrants vest annually over three years and have an exercise price of $0.06 per share, and an expiration date of April 1, 2018.

On various dates between March 22, 2013 and May 6, 2013, we entered into twelve different Convertible Promissory Notes (the "Notes") with twelve different unrelated third-parties for principal amounts totaling $882,500. The Notes have the option to be converted into a total of 20,062,636 shares of our common stock. These Notes bear interest at a rate of 6% per annum payable in cash or shares of common stock or a combination of cash and shares of common stock at the option of the Company.

On March 27, 2013, we granted 200,000 shares of our common stock at a price of $0.05 per share to an unrelated third-party as a reduction in payables.

On March 22, 2013, we granted 129,600 shares of our common stock at a price of $0.05 per share to an unrelated third-party as a reduction in payables.

On March 22, 2013, we granted 1,900,000 shares of our common stock at a price of $0.04 per share to an unrelated third-party as a reduction in payables.

We generally used the proceeds of the foregoing sales of securities for repayment of indebtedness, working capital and other general corporate purposes.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

24


Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
Number
  Exhibit Description
     
     
10.1   * Non-Exclusive License Agreement (the "Agreement") with Whole Foods Market, Medical and Wellness Centers Inc dated February 26, 2013.
     
31.1   * Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
     
31.2   * Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
     
32.1   * Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
     
32.2   * Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
     
101.INS(1)   XBRL Instance Document
     
101.SCH(1)   XBRL Taxonomy Extension Schema Document
     
101.CAL(1)   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF(1)   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB(1)   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE(1)   XBRL Taxonomy Extension Presentation Linkbase Document

______________

*

Filed herewith.

(1)

The financial information contained in these XBRL documents is unaudited and these are not the official publicly filed financial statements of Mattson Technology. The purpose of submitting these XBRL documents is to test the related format and technology, and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions. In accordance with Rule 402 of Regulation S-T, the information in these exhibits shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

25


SIGNATURES

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

Date: May 15, 2013

MMRGlobal, Inc.

By: /s/ Robert H. Lorsch                                  
Robert H. Lorsch
Chairman, Chief Executive Officer and
President

By: /s/ Ingrid G. Safranek                                    
Ingrid G. Safranek
Chief Financial Officer

26


EXHIBIT INDEX

Exhibit
Number
  Exhibit Description
     
10.1   * Non-Exclusive License Agreement (the "Agreement") with Whole Foods Market, Medical and Wellness Centers Inc dated February 26, 2013.
     
31.1   * Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
     
31.2   * Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
     
32.1   * Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
     
32.2   * Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
     
101.INS(1)   XBRL Instance Document
     
101.SCH(1)   XBRL Taxonomy Extension Schema Document
     
101.CAL(1)   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF(1)   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB(1)   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE(1)   XBRL Taxonomy Extension Presentation Linkbase Document

______________

*

Filed herewith.

(1)

The financial information contained in these XBRL documents is unaudited and these are not the official publicly filed financial statements of Mattson Technology. The purpose of submitting these XBRL documents is to test the related format and technology, and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions. In accordance with Rule 402 of Regulation S-T, the information in these exhibits shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.