UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

OR

 

☐ 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 033-25126-D

 

MedeFile International, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		85-0368333
State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)

 

301 Yamato Rd, Suite 1200

Boca Raton, FL 33431

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code (561) 912-3393

 

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     ☐ No

 

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     ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

	Large accelerated filer	☐		Accelerated filer	☐
	Non-accelerated filer	☐		Smaller reporting company	☒

 

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

 

Number of shares outstanding of registrant’s common stock, par value $0.0001: 28,756,010 as of May 12 , 2016.

 

 

 

Table of Content

 

	Page
PART I
FINANCIAL INFORMATION	1
ITEM 1. Financial Statements	1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	10
ITEM 4. Controls and Procedures	10
PART II
OTHER INFORMATION	11
ITEM 1. Legal Proceedings	11
ITEM 1A. Risk Factors	11
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	11
ITEM 3. Defaults Upon Senior Securities	11
ITEM 4. Mine Safety Disclosures	11
ITEM 5. Other Information	11
ITEM 6. Exhibits	11
Signatures	12

 

 

PART I - FINANCIAL INFORMATION 

 

Item 1. Financial Statements.

 

MedeFile International, Inc.

Consolidated Balance Sheets

(Unaudited)

 

		March 31,				December 31,
		2016				2015
Assets
Current assets
Cash		$	44,323			$	38,371
Accounts receivable			-				4,965
Merchant services reserve			2,938				2,938
Total assets		$	47,261			$	46,274
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities		$	20,052			$	14,857
Note payable - related party			100,508				-
Convertible debenture - related party			16,065				15,681
Deferred revenues			560				439
Derivative liability convertible note			13,613				19,067
Total current liabilities			150,798				50,044
Stockholders' equity
Preferred stock, $.0001 par value: 10,000,000 authorized, no shares issued and outstanding			-				-
Common stock, $.0001 par value: 700,000,000 authorized; 28,756,010 and 28,756,010 shares issued and outstanding on March 31, 2016 and December 31, 2015, respectively			2,875				2,875
Additional paid-in capital			28,504,754				28,504,754
Accumulated deficit			(28,611,166	)			(28,511,399	)
Total stockholders' equity			(103,537	)			(3,770	)
Total liabilities and stockholders' equity		$	47,261			$	46,274

 

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

 

MedeFile International, Inc.

Consolidated Statements of Operations

(Unaudited)

 

		For the				For the
		three months				three months
		ended				ended
		March 31,				March 31,
		2016				2015
Revenue		$	4,995			$	13,100
Cost of revenue
Cost of revenue			-				316
Gross profit			4,995				12,784
Operating expenses
Selling, general and administrative expenses			109,323				165,275
Depreciation and amortization expenses			-				22,149
Total operating expenses			109,323				187,424
Loss from operations			(104,328	)			(174,640	)
Other income (expenses)
Interest expense - convertible note - related party			(893	)			(2,048	)
Change in fair value of derivative liabilities			5,454				(33,192	)
Total other income (expense)			4,561				(35,240	)
Net income (loss)		$	(99,767	)		$	(209,880	)
Net income (loss) per share: basic and diluted		$	(0.00	)		$	(0.32	)
Weighted average share outstanding: basic and diluted			26,793,559				664,743

 

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

MedeFile International, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

		For the				For the
		three months				three months
		ended				ended
		March 31,				March 31,
		2016				2015
Cash flows from operating activities
Net income (loss)		$	(99,767	)		$	(209,880	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization			-				22,149
Change in fair value of derivative liabilities			(5,454	)			33,192
Changes in operating assets and liabilities
Accounts receivable			4,965				487
Inventory			-				316
Prepaid expense			-				5,709
Accounts payable and accrued liabilities			5,195				2,189
Accrued interest - convertible debenture			384				2,048
Accrued interest - note payable			508				-
Deferred revenue			121				334
Net cash used in operating activities			(94,048	)			(143,456	)
Cash flow from financing activities
Proceeds from note payable - related party			100,000				-
Proceeds from common stock subscriptions			-				620,000
Net cash provided by financing activities			100,000				620,000
Net increase (decrease) in cash and cash equivalents			5,952				476,544
Cash and cash equivalents at beginning of period			38,371				36,170
Cash and cash equivalents at end of period		$	44,323			$	512,714
Supplemental disclosure of cash flow information
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-
Noncash investing and financing activities
Stock issued for conversion of debt		$	-			$	40,000

 

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

 

  

Medefile International, Inc.

Notes to Unaudited Consolidated Financial Statements

 

1. BASIS OF PRESENTATION AND GOING CONCERN

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of MedeFile International Inc., a Nevada corporation (the "Company"), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-K for the fiscal year ended December 31, 2015. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of March 31, 2016, and the results of operations and cash flows for the three months ended March 31, 2016 and 2015. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire fiscal year.

 

Going Concern

 

The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. However, the Company has reported a net loss of $99,767 for the three months ended March 31, 2016 and has negative working capital of $103,537 as of March 31, 2016.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The operating losses and working capital deficit raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to obtain additional financing depends on the success of its growth strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond the Company's control.

 

We will need additional investments in order to continue operations. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

 

However, the trading price of our common stock could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, we may incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

 

Fair Value of Financial Instruments

 

Cash and Equivalents, Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities

 

The carrying amounts of these items approximated fair value.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).

 

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

 

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

 

The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities as of March 31, 2016 and December 31, 2015 are described below:  

 

		Fair Value Measurements
		Level 1				Level 2				Level 3				Total
March 31, 2016:
Liabilities
Derivative Liabilities		$	-			$	-			$	13,613			$	13,613
Total		$	-			$	-			$	13,613			$	13,613
December 31, 2015:
Liabilities
Derivative Liabilities		$	-			$	-			$	19,067			$	19,067
Total		$	-			$	-			$	19,067			$	19,067

  

Derivative liability as of March 31, 2016 is $13,613, compared to $19,067 as of December 31, 2015.

 

2. NOTE PAYABLE – RELATED PARTY

 

During the three months ended March 31, 2016, the Company entered into two unsecured 7% Promissory Notes with a significant shareholder. The notes have a six month tem and are in the amount of $50,000 each.

 

The changes in notes payable to related party consisted of the following during the three months ended March 31, 2016:

 

		Three Months Ended March 31, 2016
Notes payable – related party at beginning of period		$	-
Borrowings on notes payable – related party			100,000
Accumulated interest			508
Notes payable – related party at end of period		$	100,508

 

3. CONVERTIBLE DEBENTURE – RELATED PARTY

 

The Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. The debentures carry a one year term. Both debentures have a conversion feature at a share price of the lower of $1.00 or 80% of the previous day’s closing price. During the year ended December 31, 2015, the lender converted $40,000 of the note principal and the Company made a payment of $70,000.

 

The outstanding notes payable to related party consisted of the following as of March 31, 2016 and December 31, 2015:

 

		Three Months Ended March 31, 2016
Convertible debenture – related party at beginning of period		$	15,681
Conversion			-
Repayment			-
Accumulated interest			384
Convertible debenture – related party at end of period		$	16,065

   

 

4. DERIVATIVE LIABILITIES

 

In connection with certain securities purchase agreements entered into during the third quarter of 2011 and the second quarter of 2012, the Company granted warrants with ratchet provisions. The warrants contain an expiration date of four years from the date of grant. During the first two years of grant, if the Company issues any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price will be adjusted to equal the average price per share received by the Company for the additional shares issued. After the first two years following the issuance date, if the Company issues any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price will be adjusted using a formula based on the existing exercise price, the outstanding shares before and after the issuance of such shares, and the average price during the issuance of such shares. In addition to the exercise price adjustment, the number of shares upon exercise of the warrants is also subject to adjustment.

 

Upon grant, the Company assesses the fair value of the warrants using the Black Scholes pricing model and records a warrant liability for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the warrant liability to the new value, and records a corresponding gain or loss (see below for variables used in assessing the fair value).

 

Due to the ratchet provisions, the Company treats the warrants as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock.

 

Transactions involving warrants with ratchet provisions during the three months ended March 31, 2016 are as follows:

 

		Number of Warrants				Weighted-Average Price Per Share
Outstanding at December 31, 2015			60,000			$	10
Granted			-				-
Exercised			-				-
Canceled or expired							10
Addition due to ratchet trigger			-				-
Outstanding at March 31, 2016			60,000			$	10

 

The fair value of the warrant derivative liabilities was estimated using the Black-Scholes Option Pricing Model and the following assumptions as of March 31, 2016:

 

		March 31, 2016
Risk-free interest rate			0.18	%
Expected stock price volatility			269	%
Expected dividend payout			-
Expected option in life-years			.05

 

 

The change in fair value of the warrant derivative liability consisted of the following during the three months ended March 31, 2016:

 

		March 31,  2016
Warrant liability (beginning fair value)		$	1,271
Additional liability due to new grants			-
Loss (gain) on changes in fair market value of warrant liability			(1,271	)
Warrant liability (ending fair value)		$	-

 

Change in fair market value of warrant liability resulted in a gain of $1,271 for the three months ended March 31, 2016.

 

The Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. The debentures carry a one year term. Debentures have a conversion feature at a share price of the lower of $1.00 or 80% of the previous day’s closing price.

 

The Company assesses the fair value of the convertible debenture using the Black Scholes pricing model and records a derivative liability for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the liability to the new value, and records a corresponding gain or loss (see below for variables used in assessing the fair value).

 

Due to the variable conversion rates, the Company treats the convertible debenture as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock. The fair value of the conversion options was determined using the Black-Scholes Option Pricing Model and the following significant assumptions during the three months ended March 31, 2016:

 

		March 31, 2016
Risk-free interest rate			.08	%
Expected stock price volatility			258	%
Expected dividend payout			-
Expected option in life-years			.50

 

The change in fair value of the conversion option derivative liability consisted of the following during the three months ended March 31, 2016:

 

		March 31,  2016
Conversion option liability (beginning fair value)		$	17,796
Additional liability due to new grants			-
Loss (gain) on changes in fair market value of warrant liability			(4,183	)
Conversion option liability (ending fair value)		$	13,613

 

Change in fair market value of conversion option liability resulted in a gain of $4,183 for the three months ended March 31, 2016.

 

 

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

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain "forward-looking statements." The terms "believe," "anticipate," "intend," "goal," "expect," and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's current expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including customer acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation that the strategy, objectives or other plans of the Company will be achieved. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as may be required under applicable securities laws, we undertake no duty to update this information.

 

OVERVIEW

 

Organizational History

 

On November 1, 2005, Bio-Solutions International, Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the "Agreement") with OmniMed Acquisition Corp., (the "Acquirer), a Nevada corporation and a wholly owned subsidiary of Bio-Solutions, OmniMed International, Inc., a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the "OmniMed Shareholders"). Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed from the OmniMed Shareholders.

 

As a result of the Agreement, the OmniMed Shareholders assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions changed its name to OmniMed International, Inc. Effective January 17, 2006, OmniMed changed its name to MedeFile International, Inc. ("MedeFile" or the "Company").

 

Overview of Business

 

MedeFile International, Inc., through its MedeFile, Inc. subsidiary, has developed and globally markets a proprietary, patient-centric, Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s actual medical records. Our goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. We intend to accomplish our objective by providing individuals with a simple and secure way to access their lifetime of actual medical records in an efficient and cost-effective manner. Our products and services are designed to provide healthcare providers with the ability to reference their patient's actual past medical records, thereby ensuring the most accurate treatment and services possible while simultaneously reducing redundant procedures.

 

Interoperable with most electronic medical record systems utilized by physician practices, clinics, hospitals and other care providers, the highly secure, feature-rich MedeFileiPHR solution has been designed to gather all of its members’ actual medical records on behalf of each member, and create a single, comprehensive Electronic Health Record (EHR).  The member can access his/her records 24-hours a day, seven days a week – or authorize a third party user – on any web-enabled device (PC, cell phone, PDA, e-reader, et al), as well as the portable MedeFile flash drive/keychain or branded UBS-bracelet.

 

By subscribing to the MedeFile system, members can empower themselves to take control of their own health and well-being, as well as empower their healthcare providers to make sound and lifesaving decisions with the most accurate, up-to-date medical information available.  In addition, with MedeFile, members enjoy the peace of mind that comes from knowing that their medical records are protected from fire, natural disaster, document misplacement or the closing of a medical or dental practice.

 

We believe we enjoy a number of direct, competitive advantages over others in the medical records marketplace, including that:

 

●

We have developed products and services geared to the patient, which also have the depth and breadth of information required by treating physicians and medical personnel

 

●

We do all the work of collecting and updating medical information on an ongoing basis; our products’ dependence on the patient taking action is minimal – particularly when compared to patient action required to support competing solutions.

 

●

We provide a complete medical record.  Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), which are by no means complete or necessarily accurate records

 

●

We provide a coherent mix of services and products that are intended to improve the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.

 

 

RESULTS OF OPERATIONS

 

FOR THE THREE MONTHS ENDED March 31, 2016 COMPARED TO THE THREE MONTHS ENDED March 31, 2015

 

Revenues

 

Revenues for the three months ended March 31, 2016 totaled $4,995 compared to revenues of $13,100 during the three months ended March 31, 2015.  The decrease in membership revenue is primarily related to amount of members and medical record reimbursement revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors for sending updated medical records to MedeFile. The off-setting expense is charged to selling, general and administrative expense. Revenues received from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a fraction of the membership in the quarter being reported.   

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended March 31, 2016 totaled $109,323, a decrease of $55,952 or approximately 33.9% compared to selling, general and administrative expenses of $165,275 for the three months ended March 31, 2015. The decrease was due mainly to decreased payroll, legal expense, and consulting fees.

 

Amortization Expense

 

Amortization expense for the three months ended March 31, 2016 was $0, compared to $22,149 the three months ended March 31, 2015.  Amortization expense in 2015 is the expensing of the website development. Website costs were impaired in the previous year and the Company incurred an impairment expense of $182,195

 

Interest Expense

 

Interest expense on convertible debentures for the three months ended March 31, 2016 and 2015, was $893 and $2,043 respectively.   The Company entered into two secured convertible debentures during the third quarter of 2013.  The notes have a one year term at a 10% interest rate.

 

Other Expense

 

Gain on change in fair value of derivate liabilities for the three months ended March 31, 2016 was $5,454 compared to a loss of $33,243 for the three months ended March 31, 2015

 

Net Loss

 

For the reasons stated above, our net loss for the three months ended March 31, 2016 was $99,767, or $0.00 per share, a decrease of $110,113, compared to net loss of $209,880, or $0.02 per share, for the three months ended March 31, 2015. The significant change is directly related to adjustments in the fair value of our derivative liability and a decrease in our selling, general and administrative expenses.  

 

FINANCIAL CONDITION

 

Liquidity and Capital Resources

 

As of March 31, 2016, we had cash and cash equivalents of $44,323, and merchant services reserve of $2,938.  Net cash used in operating activities for the three months ended March 31, 2016 was approximately $94,048. Our current liabilities as of March 31, 2016 of $150,798 consisted of: $20,052 for accounts payable and accrued liabilities, deferred revenues of $560, convertible debenture of $16,065, note payable of $100,508, and derivative liability of $13,613. We have a net working capital deficit of $103,537 as of March 31, 2016.

 

The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company has reported a net loss of $99,767 for the three months ended March 31, 2016 and had an accumulated deficit of $28,611,166 as of March 31, 2016.

 

The Company currently estimates that it will require approximately $420,000 to continue its operations for the next twelve months.  Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and conditions in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

 

 

Off-Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements as of March 31, 2016 or as of the date of this report.

 

Critical Accounting Policies

 

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.

 

We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our condensed consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

 

Revenue Recognition

 

The Company generates revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

 

Stock-based Compensation

 

The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (Principal Executive and Financial Officer) of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer (Principal Executive and Financial Officer) concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and also are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (Principal Executive and Financial Officer), to allow timely decisions regarding required disclosure.

 

 

Management concluded that the design and operation of our disclosure controls and procedures are not effective because the following material weaknesses exist:

 

●

Our chief executive officer also functions as our chief financial officer.  As a result, our officers may not be able to identify errors and irregularities in the financial statements and reports.

 

●

We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.

 

●

Documentation of all proper accounting procedures is not yet complete.

 

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, the following:

 

●

Increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended March 31, 2016, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

   

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not party to any material legal proceedings.

 

Item 1A. Risk Factors

 

Not required for a smaller reporting company.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information

 

None. 

 

Item 6. Exhibits

 

31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-101.INS	XBRL INSTANCE DOCUMENT
EX-101.SCH	XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
EX-101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
EX-101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
EX-101.LAB	XBRL TAXONOMY EXTENSION LABELS LINKBASE
EX-101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

 

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.

 

	MEDEFILE INTERNATIONAL, INC.
Date: May 18, 2016	By:	/s/ Niquana Noel
		Niquana Noel
		Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

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