0001013762-11-002198.txt : 20110815 0001013762-11-002198.hdr.sgml : 20110815 20110815162842 ACCESSION NUMBER: 0001013762-11-002198 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20110630 FILED AS OF DATE: 20110815 DATE AS OF CHANGE: 20110815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Medefile International, Inc. CENTRAL INDEX KEY: 0000842013 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 850368333 STATE OF INCORPORATION: NV FISCAL YEAR END: 0121 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-25126-D FILM NUMBER: 111036798 BUSINESS ADDRESS: STREET 1: 2 RIDGEDALE AVENUE STREET 2: SUITE 217 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 BUSINESS PHONE: (973) 993-8001 MAIL ADDRESS: STREET 1: 2 RIDGEDALE AVENUE STREET 2: SUITE 217 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 FORMER COMPANY: FORMER CONFORMED NAME: OMNIMED INTERNATIONAL, INC. DATE OF NAME CHANGE: 20051122 FORMER COMPANY: FORMER CONFORMED NAME: BIO SOLUTIONS INTERNATIONAL INC DATE OF NAME CHANGE: 20010214 FORMER COMPANY: FORMER CONFORMED NAME: SEPTIMA ENTERPRISES INC DATE OF NAME CHANGE: 19920703 10-Q 1 form10q.htm MEDEFILE INTERNATIONAL, INC. FORM 10-Q form10q.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q


(Mark One)
  
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2011
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
For the transition period from                             to                           

Commission File Number33-251256-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, Ste 1200
Boca Raton, FL  33431
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (781) 497-2900

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 o 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).  x Yes  o  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
o  
  
Accelerated filer
 o
 
Non-accelerated filer
o
  
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

Number of shares outstanding of registrant’s class of common stock, par value $0.0001 (the "Common Stock"), as of August 15, 2011: 3,900,354,431.
 
 
 
 
1
 



Explanatory Note

Medefile International, Inc. is not subject to the filing requirements of section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), and files reports with the SEC voluntarily. Medefile International, Inc. has filed all Exchange Act reports for the preceding 12 months.
 
 
 
 
2
 

Table of Contents

 
Page
PART I
  
   
FINANCIAL INFORMATION
  
ITEM 1. Financial Statements.
4
ITEM 2. Management Discussion and Analysis of Financial Condition and Results of Operations.
14
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
19
ITEM 4. Controls and Procedures.
19
   
PART II
 20
   
OTHER INFORMATION
20
ITEM 1. Legal Proceedings.
20
ITEM 1A. Risk Factors.
20
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
20
ITEM 3. Defaults Upon Senior Securities.
20
ITEM 4. Reserved.
20
ITEM 5. Other Information.
20
ITEM 6. Exhibits.
21
Signatures
22





 
3
 

Item 1. Financial Statements.

MedeFile International, Inc
Condensed Balance Sheets

             
   
Unaudited
        
   
June 30,
    
December 31,
  
Assets
  
2011
    
2010
  
Current assets
            
Cash
   $ 311,975     $ 499,652  
Inventory
     27,904       22,184  
Merchant services reserve
     53,267       6,173  
Accounts receivable, net
     2,810       2,468  
Prepaid Insurance
     4,494       -  
Total current assets
     400,450       530,477  
Website development, net of accumulated amortization
     36,718       47,210  
Furniture and equipment, net of accumulated depreciation
     15,251       20,364  
Investment
     1,800       -  
Intangibles
     1,339       1,339  
Total assets
   $ 455,558     $ 599,390  
                 
Liabilities and Stockholders' Equity
                
Accounts payable and accrued liabilities
   $ 244,379     $ 310,325  
Cash overdraft
     -       6,928  
Deferred revenues
     6,721       9,575  
Total Current Liabilities
     251,100       326,828  
                 
                 
Stockholders' Equity
                
Preferred stock, $.0001 par value: 10,000 authorized,
                
no shares issued and outstanding
     -       -  
Common stock, $.0001 par value: 5,000,000,000 authorized;
                
3,678,049,471 and 3,450,021,410 shares issued and outstanding on
                
June 30, 2011 and December 31, 2010, respectively
     367,805       345,002  
Common stock payable
     159,000       -  
Additional paid in capital
     16,951,638       16,090,116  
Accumulated deficit
     (17,273,985 )     (16,162,556 )
Total stockholders' equity
     204,458       272,562  
Total liability and stockholders' equity
   $ 455,558     $ 599,390  
                 
                 

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


 
4
 
 
MedeFile International, Inc
Condensed Statements of Operations
(unaudited)

                         
   
For the Three
    
For the Three
    
For the Six
    
For the Six
  
   
Months
    
Months
    
Months
    
Months
  
   
Ended
    
Ended
    
Ended
    
Ended
  
   
June 30,
    
June 30,
    
June 30,
    
June 30,
  
   
2011
    
2010
    
2011
    
2010
  
Revenue
   $ 187,740     $ 4,242     $ 319,842     $ 6,602  
                                 
Cost of goods sold
     90,267       -       153,741       -  
Gross profit
     97,473       4,242       166,101       6,602  
                                 
Operating expenses
                                
Selling, general and administrative expenses
     442,085       101,135       821,205       180,309  
Maketing expense
     310,867       -       440,721       -  
Depreciation and amortization expense
     7,758       9,441       15,604       13,692  
Total operating expenses
     760,710       110,576       1,277,530       194,001  
                                 
Loss from operations
     (663,237 )     (106,334 )     (1,111,429 )     (187,399 )
                                 
Other expenses
                                
Interest expense  - note payable
     -       (3,879 )     -       (10,166 )
Interest expense - related party note payable
     -       (1,216,445 )     -       (1,219,633 )
Total other expenses
     -       (1,220,324 )     -       (1,229,799 )
                                 
Loss before income tax
     (663,237 )     (1,326,658 )     (1,111,429 )     (1,417,198 )
Provision for income tax
     -       -       -       -  
Net Loss
   $ (663,237 )   $ (1,326,658 )   $ (1,111,429 )   $ (1,417,198 )
                                 
Net loss per share: basic and diluted
   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted average share outstanding
     3,584,124,074       1,463,021,410       3,517,124,825       1,463,021,410  
basic and diluted
                                
                                 


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


 
5
 
 
MedeFile International, Inc
Consdensed Statements of Cash Flows
(unaudited)

             
   
For the
    
For the
  
   
Six
    
Six
  
   
Months
    
Months
  
   
Ended
    
Ended
  
   
June 30,
    
June 30,
  
   
2011
    
2010
  
Cash flows from operating activities
            
Net loss
   $ (1,111,429 )   $ (1,417,198 )
Adjustments to reconcile net loss to net
                
cash used in operating activities
                
Depreciation
     5,113       8,447  
Amortization
     10,492       5,245  
Stock based services
     139,643       -  
Warrant expense
     25,682       -  
Interest expense
     -       10,166  
Interest expense - related party
     -       1,219,633  
Changes in operating assets and liabilities
                
Accounts receivable
     (342 )     (2,976 )
Inventory
     (5,720 )     (28,330 )
Prepaid Insurance
     (4,494 )     -  
Deposits and other assets
     -       14,465  
Accounts payable and accrued liabilities
     50,054       (79,261 )
Merchant services reserve
     (47,094 )     -  
Cash overdraft
     (6,928 )     (862 )
Deferred revenue
     (2,854 )     5,079  
Net Cash used in operating activities
     (947,877 )     (265,592 )
Cash flows from investing activities
                
Investment
     (1,800 )     -  
Website development
     -       (21,800 )
Net cash used in investing activities
     (1,800 )     (21,800 )
Cash flow from financing activities
                
Proceeds from common stock subscription
     159,000       1,000,000  
Proceeds from common stock sale
     603,000       -  
Proceeds from note payable
     -       340,842  
Net cash provided by financing activities
     762,000       1,340,842  
Net increase (decrease) in cash and cash equivalents
     (187,677 )     1,053,450  
Cash and cash equivalents at beginning of period
     499,652       1,513  
Cash and cash equvalents at end of period
   $ 311,975     $ 1,054,963  
Supplemental disclosure of cash flow information
                
Cash paid during period for
                
Cash paid for interest
   $ -     $ -  
Cash paid for income taxes
   $ -     $ -  
Cancellation of payroll liability to CEO
   $ 116,000     $ -  
Common stock issued for consulting services
   $ 165,325     $ -  
Conversion of note payable and accrued interest
   $ -     $ 900,000  
The accompanying notes are an integral part of these condensed financial statements
  
                 




 
6
 



Medefile International, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
 
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements of Medefile International, Inc., a Nevada corporation (the "Company" or "Medefile"), 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 condensed 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, 2010. In the opinion of management, these unaudited condensed 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 June 30, 2011, and the results of operations and cash flows for the three and six months ended June 30, 2011 and 2010. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the entire fiscal year.

Nature of Business Operations
 
Medefile International, Inc., 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 medical records. Medefile's goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. Medefile intends to accomplish its 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. Medefile's 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 MedeFile iPHR solution has been designed to gather its members’ 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, not only do members empower themselves to take control of their own health and well-being, they 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.

MedeFile enjoys a number of  competitive advantages over other firms within the medical records marketplace, including:

●
MedeFile has developed products and services geared to the patient, while containing the depth and breadth of information required by treating physicians and medical personnel.
●
MedeFile does all the work of collecting and updating medical information on an ongoing basis; its dependence on the  patient taking action is minimal – particularly when compared to patient action required to support competing solutions.

●
MedeFile provides a complete medical record. Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), and are by no means complete or necessarily accurate records.
●
MedeFile provides a coherent mix of services and products that are intended to affect the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.

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 $1,111,429 for the six months ended June 30, 2011 and $2,492,310 for the year ended December 31, 2010 and had an accumulated deficit of $17,273,985 as of June 30, 2011.  The Company has net working capital of $149,350 as of June 30, 2011.

Cash and Cash Equivalents

For purposes of these financial statements, cash and cash equivalents includes highly liquid debt instruments with maturity of less than three months.
 
 
 
7
 
 
 
Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.  Currently our operating account is above the FDIC limit.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company incurred advertising costs for the three months ended June 30, 2011 and 2010 of approximately $6,500 and $0, respectively.  The Company incurred advertising costs for the six months ended June 30, 2011 and 2010 of approximately $6,500 and $2,568, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
 
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
 
The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition

Property and Equipment

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives being 3 years up to 10 years.

Trademark Costs

Trademark costs incurred in the registration and acquisition of trademarks and trademark rights are capitalized. These costs will be amortized over the legal life of the related trademark once the trademark is awarded. The Company performs an annual review of its identified intangible assets to determine if facts and circumstances exist which indicate that the useful life is shorter than originally estimated or that the carrying amount of the assets may not be recoverable.

The Company expenses all software costs associated with the conceptual formulation and evaluation of alternatives until the application development stage has been reached. Costs to improve or support the technology are expensed as these costs are incurred.

Website Development

The Company's policy is to capitalize website development costs at original cost and amortize the balance over the life of the product.  The life of website is determined at completion of the project. The Company reviews the amounts capitalized for impairment whenever events or circumstances indicate that the carrying amounts of the assets may not be recoverable.

The Company expenses all development costs associated with the conceptual formulation and evaluation of alternatives until the application development stage has been reached. Costs to improve or support the technology are expensed as these costs are incurred.

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.
 
 
 
 
8
 

 
Deferred Revenue

The Company generally receives subscription fees for its services. From time to time, the Company will receive quarterly or annual subscriptions paid in advance and deferred revenue is recorded at that time. The deferred revenue is amortized into revenue on a pro- rata basis each month. Customers with quarterly or annual subscriptions may cancel their subscriptions and request a refund for future months' revenues at any time. Therefore, a liability is recorded to reflect the amounts that are potentially refundable.  As of June 30, 2011 the Company had $6,721 in deferred revenue.

Reclassifications

Certain reclassifications have been made in prior periods financial statements to conform to classifications used in the current period.

Recent Accounting Pronouncements
 
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06: Fair Value Measurements and Disclosures (topic 820) Improving Disclosures about Fair Value Measurements..  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In July 2010, the FASB issued ASU No. 2010-20:, Receivables (Topic 310) Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.  As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.  This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010.  The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.

On December 21, 2010, the FASB issued ASU 2010-29: Business Combinations (Topic 805) which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010.  We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements

In April 2011, FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its consolidated financial statements.

In May 2011, FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The amendments in this update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. For public entities, the new guideline is effective for interim and annual periods beginning after December 15, 2011 and should be applied prospectively. The Company does not expect that the guidance effective in future periods will have a material impact on its consolidated financial statements.
 
Net Loss and Share
 
Basic and diluted loss per share amounts are computed based on net loss divided by the weighted average number of common shares outstanding. Outstanding options to purchase 5,640,000 common shares and warrants to purchase 10,175,000 common shares were not included in the computation of diluted loss per share because the assumed conversion and exercise would be anti-dilutive for the six months ended June 30, 2011.  
 
 
 
 
9
 

 
Management Estimates
 
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
 
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

2.  ACCOUNTS RECEIVABLE

Due to the collection history of the Company, an allowance for doubtful accounts is not maintained.  Recognition of a specific uncollectible account is written directly against the invoice in accounts receivable and expensed in the current period.

3.   WEBSITE DEVELOPMENT

Website development consists of the following:

   
June 30,
 2011
    
December 31,
2010
  
Website development
   $ 62,945     $ 62,946  
Accumulated amortization
     (26,227 )     (15,736 )
         Net website development
   $ 36,718     $ 47,210  

Amortization is calculated over a three-year period beginning in the second quarter of 2010.  Amortization expense for the three- months ending June 30, 2011 and 2010 is $5,245 and $0, respectively.  Amortization expense for the six- months ending June 30, 2011 and 2010 is $10,491 and $5,245 respectively.

4. FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:
 
   
June 30,
2011
    
December 31,
2010
  
Computers and equipment
   $ 169,286     $ 169,286  
Furniture and fixtures
     38,618       38,618  
Subtotal
     207,904       207,904  
Less: accumulated depreciation
     (192,653 )     (187,540  
Net furniture and equipment
   $ 15,251     $ 20,364  
 
Depreciation is calculated by using the straight-line method over the estimated useful life. Depreciation expense totaled $2,513 and $4,196 for the three months ended June 30, 2011 and 2010, respectively.   Depreciation expense totaled $5,113 and $8,446 for the six months ended June 30, 2011 and 2010, respectively.
 
 
 
 
10
 

 
5. EQUITY

Common Stock
 
In June 2010, the Company accepted an agreement for an aggregate of 1,000,000,000 shares of its Common Stock for a per share purchase price of $0.001 per share (the “June Private Placement”).  The Company received aggregate proceeds of $1,000,000 from its June Private Placement.  The shares were unissued as of June 30, 2010 and are recorded through Common Stock Payable.  The shares were issued July 20, 2010.
 
During the first quarter 2011, the Company entered into a securities purchase agreement for the sale of 201,000,000 shares of Common Stock at a purchase price of $0.003 per share.  Total proceeds from the sale of the Common Stock totaled $603,000.

On March 31, 2011, the Company issued 9,375,000 shares of Common Stock for amounts due to consultant.  The shares had a market value of $37,500.

On May 6, 2011, the Company issued 7,653,061 shares of Common Stock for amounts due to consultants.  The shares had a market value of $32,143.

On May 13, 2011, the Company issued 10,000,000 shares of Common Stock for amounts due to consultants.  The shares had a market value of $70,000.
 
On May 24, 2010, Lyle Hauser, the son of the Company's then Chief Executive Officer, agreed to convert notes in the aggregate principal amount of $900,000 into an aggregate of 450,000,000 shares of the Company's Common Stock.  As of June 30, 2010, the conversion to common shares had not occurred.  The amount to be converted is reported in Common Stock Payable on the balance sheet.  The shares were issued on July 20, 2010.

During the first quarter 2011, the Company entered into a securities purchase agreement for the sale of 45,000,000 shares of Common Stock at a purchase price of $0.003 per share.   The funds were received during the first quarter of 2011 and recorded as a stock payable in the amount of $135,000 as of June 30, 2011.  On July 8, 2011, 45,000,000 shares of Common Stock were issued.
 
On June 3, 2011, the Company received $24,000 from proceeds from a securities purchase agreement for the purchase of 8,000,000 shares of Common Stock.  The stock is currently unissued and $24,000 is recorded as a stock payable
 
Stock Options

2006 Incentive Stock Plan

In January 2006, the Board of Directors of the Company (the "Board") approved an Incentive Stock Plan, pursuant to which they have initially reserved 10,000,000 shares of common Stock for issuance. Under the 2006 Incentive Stock, the Board granted an aggregate of 5,640,000 options to employees pursuant to certain employment agreement that are more fully described below:

2008 Amended and Restated Incentive Stock Plan

In November 2008, the Board adopted the 2008 Equity Incentive Plan and subsequently amended it in January 2009, June 2009 and July 2009 (the “2008 Plan”). The purpose of the 2008 Plan was to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2008 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the United States Code (the "code"), non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2008 Plan will be administered by the Board until such time as such authority has been delegated to a committee of the Board.

2010 Incentive Stock Plan

In December 2009, the Board adopted the 2010 Equity Incentive Plan (the “2010 Plan”). The purpose of the 2010 Plan was to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2010 Plan, we are authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2010 Plan will be administered by the Board until such time as such authority has been delegated to a committee of the Board.
 
 
 
 
11
 

 
A summary of option activity under all Plans as of June 30, 2010, and changes during the period then ended are presented below:

   
 
Options
    
Weighted-Average Exercise Price
  
Outstanding at December 31, 2009
     5,640,000     $ 0.80  
Issued
     -       -  
Exercised
     -       -  
Forfeited or expired
     -       -  
Outstanding at December 31, 2010
     5,640,000     $ 0.80  
Issued
     -       -  
Expired
     -       -  
Forfeited
     -       -  
Outstanding at June 30, 2011
     5,640,000       0.80  
Non-vested at June 30, 2011
     -       -  
Exercisable at June 30, 2011
     5,640,000     $ 0.80  
  

The options outstanding as of June 30, 2011 have been segregated for additional disclosure as follows:
 
 Options Outstanding
 Options Exercisable
     
Weighted
    
   
Weighted
Average
  
Weighted
Range of
  
Average
Remaining
  
Average
Exercise
Number
Exercise
Contractual
Number
Exercise
Price
Outstanding
Price
Life
Exercisable
Price
$0.80
5,640,000
$ 0.80
.50
5,640,000
$ 0.80
 

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.  For the three and six months ended June 30, 2011 and 2010, the Company recorded no compensation expense related to options.

Warrants
  
In October 2007, the Company awarded 175,000 Common Stock warrants, at an exercise price of $0.56 per share, to former Board members at the quoted stock price on the effective date of the awards. The warrants have an expiration date of five years from the issue date and contain provisions for a cash exercise. The estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions:

Risk-free interest rate at grant date
    
4.75
%
Expected stock price volatility
    
155
%
Expected dividend payout
    
--
  
Expected option in life-years
    
5
  
 
On June 22, 2011, the Company awarded 10,000,000 Common Stock warrants, at an exercise price of $0.01 per share, to consultants for services at the quoted stock price on the effective date of the awards. The warrants have an expiration date of four years from the issue date and contain provisions for a cash exercise. The estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions:

Risk-free interest rate at grant date
    
0.39
%
Expected stock price volatility
    
172.1
%
Expected dividend payout
    
--
  
Expected option in life-years
    
2
  

Warrant expense recognized for the six months ended June 30, 2011 was $25,682.
 
 
 
 
12
 

 
Transactions involving warrants are summarized as follows:
 
   
Number of Warrants
    
Weighted-Average Price Per Share
  
Outstanding at December 31, 2010
     8,175,000     $ .73  
Granted
     10,000,000       .01  
Exercised
     -       -  
Canceled or expired
     7,950,000       -  
Outstanding at June 30, 2011
     10,175,000     $ 0.019  


Warrants Outstanding
    
Warrants Exercisable
  
           
Weighted
                
Weighted
  
           
Average
    
Weighted
          
Average
  
           
Remaining
    
Average
          
Remaining
  
Exercise
    
Number
    
Contractual
    
Exercise
    
Number
    
Contractual
  
Prices
    
Outstanding
    
Life (years)
    
Price
    
Exercisable
    
Life (years)
  
 
$
0.56
      
175,000
      
1.75
    
$
0.56
      
175,000
      
1.75
  
   
0.01
      
10,000,000
      
4.0
      
0.01
      
10,000,000
      
4.0
  
           
10,175,000
      
3.96
    
$
0.56
      
10,175,000
      
3.96
  

6. RELATED PARTY TRANSACTIONS

On May 10, 2011, the Company and the Company’s Chief Executive Officer, Kevin Hauser, executed an amendment, effective as of March 26, 2011, to the employment agreement dated December 10, 2008, by and between Mr. Hauser and the Company.  Mr. Hauser agreed to reduce the base salary payable to him pursuant to the employment agreement to $100,000 for the year ending December 31, 2010.  As a result, the Company recorded a cancellation of payroll expense due to Mr. Hauser during the first quarter of 2010 through additional paid in capital in the amount of $116,000.

7.  SUBSEQUENT EVENTS

During the first quarter 2011, the Company entered into a securities purchase agreement for the sale of 45,000,000 shares of Common Stock at a purchase price of $0.003 per share.  Total proceeds from the sale of the Common Stock totaled $135,000.  The funds were received during the first quarter of 2011 and on July 8, 2011, 45,000,000 shares of Common Stock were issued.

In July 2011, the Company entered into a securities purchase agreement for the sale of 177,304,960 shares of Common Stock at a purchase price of $0.00282 per share.  Total proceeds from the sale of the Common Stock totaled $500,000.   On July 8, 2011, the 177,304,960 shares were issued.
 
 
 
13
 
 

 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

It should be noted that 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 the Company's dependence on product introduction and customer acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events. 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. We undertake no duty to update this information. More information about potential factors that could affect our business and financial results is included in the section entitled "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on April 1, 2011. The following discussion should be read in conjunction with our consolidated financial statements provided in this quarterly report on Form 10-Q.

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 "Aquirer"), 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 consideration for the acquisition of OmniMed, Bio-Solutions agreed to issue 9,894,900 shares of Bio-Solutions' common stock to the OmniMed Shareholders. These issuances were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended since, among other things, the transaction did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about the company and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

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 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 its 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 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 MedeFile iPHR solution has been designed to gather its members’ 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 (personal computer ("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, not only do members empower themselves to take control of their own health and well-being, they 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 enjoy a number of direct, competitive advantages over others in the medical records marketplace:
 
●  
We have developed products and services geared to the patient, while containing 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; its dependence on the patient taking action is minimal – particularly when compared to patient action required to support competing solutions.
   
 
 
 
 
14
 

 
●  
We provide a complete medical record.  Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), and are by no means complete or accurate records.
   
●  
We provide a coherent mix of services and products that are intended to affect the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.
 
Industry Overview

Since the beginning of modern medicine, information about a patient's history, testing, treatment and care have been key factors in the provision and delivery of quality healthcare. Medical record information takes many forms, such as the patient's diagnosis, treatments, surgeries, medications, allergies, x-rays and test results. The usage of medical record information has dramatically increased over the past two decades due to factors such as the complex reimbursement structure in the United States healthcare system, an ever more litigious society, and increased patient awareness.
 
Every patient visit generates a medical record. Today, this information is largely contained in a paper-based patient medical record. A patient's medical records are usually stored in physicians' offices as well as other healthcare facilities the patient has visited. A record that tracks a patient's medical treatment over time is called a "longitudinal record".

In today's healthcare environment, access to hospital-based medical records by patients and other authorized parties (e.g., insurance companies, attorneys, etc.) is controlled by Release of Information (ROI) policies and procedures. ROI processes are based on the premise that patients have a right to access their medical records and that they must specifically designate any other party to whom their medical information can be released. ROI policies and procedures are based on the following laws and policies: the federal Health Insurance Portability and Accountability Act (HIPPA), various state laws, and the policies and professional practice guidelines set forth by the American Health Information Management Association (AHIMA).

Congress passed the Health Insurance Portability & Accountability Act (HIPAA) in 1996. The purpose of HIPAA is to prevent fraud in the healthcare industry and to protect confidential patient information. HIPPA standardizes and provides enforcement mechanisms for ROI rules and guidelines to protect personal healthcare information. HIPAA effects entities involved with electronic health care information--including health care providers, health plans, employers, public health authorities, life insurers, clearinghouses, billing agencies, information systems vendors, service organizations, universities, and even single-physician offices. The final version of the HIPAA Privacy regulations was issued in December 2000, and went into effect on April 14, 2001. A two-year "grace" period was included; enforcement of the HIPAA Privacy Rules began on April 14, 2003.
  
 
 
15
 
 
 
Overview of Products and Services

MedeFile

MedeFile is a Business-to-Business and a Business-to-Consumer subscription service. MedeFile is designed to create a "cradle to grave" longitudinal record for each of its members by retrieving and consolidating copies of their medical records. When the records are received, the MedeFile system consolidates them into a single medically correct format. The records are then stored in Medefile's MedeVault, a secure repository that can be accessed by MedeFile members 24 hours a day, 7 days a week. Because of the unique security procedures incorporated into the MedeFile system through SecuroMed, the member is the only person to access or give permission to access their records.

A complete MedeFile file is comprised of copies of the member's medical records, as well as a Digital Health Profile, which is an overview of the patient's and his/her family's medical history. In addition, every MedeFile member receives a MedeDrive, an external USB drive which stores all of a patient's emergency medical information, as well as a copy of the member's MedeFile.

MedeFile's Emergency Medical Information (EMI) Card

Upon becoming a MedeFile member, each individual will receive a Membership / Emergency Medical Information (EMI) Card which contains instructions on how to contact MedeFile in order to retrieve the member's medical records.

The Digital Health Profile (DHP)

A part of a member's MedeFile is their Digital Health Profile ("DHP"). This form is completed by the patient in order to provide a summary of the patient's healthcare history which assists healthcare providers in understanding the patient's course of medical treatment. This document, along with Advanced Directives and medical record copies, complete the documents contained in the patient's MedeFile.

MedeDrive

The MedeDrive is an external USB drive which stores all of a patient's emergency medical information and their MedeFile which can be viewed on a personal computer. MedeDrive self loads its own viewer, so no special program or software is required. The MedeDrive easily plugs into any PC USB port on most Windows-based computers built in the last four years (Macintosh version is currently unavailable). The MedeDrive USB key can be updated easily and as frequently as the member desires at no additional cost.
 
MedeVault

The MedeVault is designed to serve as an electronic data and document repository that incorporates state-of-the-art security features in order to prevent unauthorized access to a patient's records. Access to the MedeVault is provided through an encrypted connection to a web service run by Medefile. This connection is provided by Secure Sockets Layer (SSL) technology.
 
Medefile Clinical Information Systems ("Medefile CIS")

Medefile CIS is a Business-to-Business professional consulting service that is designed to generate revenue from two primary sources: consulting engagements and product commissions.

Medefile CIS intends to offer a full range of HIPPA assessment and compliance services. The goal of Medefile CIS is to facilitate the transition to HIPAA compliance. In addition, Medefile CIS intends to offer services that will enable medical facilities to transition from paper-based medical records to electronic medical records. Medefile CIS plans to digitize medical facility offices and offer software to keep the records up-to-date, index the records, and make them queryable based on each facility's specific needs.
 
Medefile consulting engagements are generally fixed-price and fixed scope projects that also generate occasional time-and-materials income from ongoing support and training activities related to its services. In addition, Medefile CIS intends to resell technology from various vendors as needed and may incur commission revenue and revenue from the markup of these products.

Medefile CIS will offer several services, including the evaluation of the record keeping, security, and back office practices. After evaluation is complete, Medefile CIS staff will move forward to implement their own remediation plans for the client.  Other revenue streams may be created based on the licensing of the OmniViewer for the digitized records as well as the scanning software for those facilities wishing to implement a "go-forward" scanning system. Finally, the clients may be charged a contractual support fee for ongoing technical support and updates, which may be assessed on an annual basis.

MedeMinder

MedeMinder is MedeFile’s reminder service.  The member tells us when and where to call, and we automatically contact the member day or night with an appropriate reminder, spoken by real people. The member can even choose the voice they want to hear.  MedeMinder helps insure the member will not miss an appointment or forget to take their medication.
 
SecurMed

SecurMed is designed to serve as an authentication process that protects against any information being viewed by unauthorized persons.

Sales and Marketing

We intend to employ the following marketing strategies in order to generate awareness of our products and services: direct sales, direct mail, a public relations campaign, speaking engagements by our executive officers, participation in trade shows, and alliances and partnerships with third parties.

Our marketing strategy will target the following types of organizations: Health Maintenance Organizations, Preferred Provider Organizations, managed care organizations, insurance companies, unions, large groups of individuals such as AARP, large- and medium-sized corporations, nursing homes and Internet users.

In particular, the MedeFile service is designed to be sold in several distinct ways:

●
MedeFile Website - Through normal e-commerce mechanisms, patients may enroll in the service directly from the MedeFile website. Membership may be purchased on an annual basis and may be paid all at once, or over time at the patient's discretion.
 
 
 
16
 
 

 
●
Physician Referrals - Patients may enroll based on a doctor's referral. In the event that these physicians are also Medefile CIS customers, they may easily transfer their patients' information into the MedeFile system.

●
Large group offerings (e.g., AARP, trade unions) - Large, membership-driven organizations may offer the MedeFile system to their members at a discounted rate, which may be negotiated with us based on the size of the expected enrollment. An additional promotional advantage may be derived from the use of MedeFile through the website of the client organization, allowing members to access MedeFile using each organization's site.

●
Insurance companies - Similar to large group offerings identified above, insurance companies may offer the MedeFile service to their insured as a means to decrease the cost of medical care.

Technology

We use and continue to update the most advanced security measures available. Data transmitted between Web browsers and Web servers over the Internet using TCP/IP is generally susceptible to unauthorized interception. To protect sensitive data, the most common method of protection is data encryption. We use the industry standard Secure Sockets Layer (SSL), which is a mechanism to secure Internet traffic so that it cannot be intercepted. SSL utilizes digital certificates to verify the identity and integrity of a web site (such as MedeFile) and to protect the security of transactions by certifying their source and destination. 

Competition

There are other companies working in the medical information technology arena such as GE Healthcare, Bio-Imaging Technologies, and Cyber Records. Some competing companies offer a USB key for medical record storage, but require the customer to provide or "self-populate" the information to be stored. The information in a self-populated record is limited and is only as accurate as the individual's memory and understanding of their health condition. Other companies expect each customer to obtain their own medical records from their various healthcare providers. Some offer a CD-Rom for record storage. Usually, the CD-Rom cannot be updated with any changes to an individual's medical status or treatment. Therefore, a new CD-Rom needs to be obtained from that company in order for the individual to have the most current, accurate information regarding their health. There are companies that are solely web-based that do not provide the customer the capability to have a copy of their records. In this case, an internet connection is required to view stored documents. In addition, there are companies that do not concentrate on digitizing an individual's medical records but on converting medical facilities' records from paper to electronic format.

The advantage to being a MedeFile member is that we gather, consolidate, organize and securely store each member's actual medical records on their behalf. The MedeFile membership includes a Digital Health Profile (DHP) which contains the member's general health history, emergency contacts, doctor contacts, family medical history, allergies, medications, and current conditions. A MedeFile membership also includes a MedeDrive which easily plugs into any PC USB port on most Windows-based computers built in the last four years (Macintosh version is currently not available yet). The MedeDrive contains the member's emergency medical information that can be easily accessed by emergency care personnel, and the client's actual medical records which are stored in a secure area of the subscriber's MedeFile. The MedeDrive USB key can be updated easily and as frequently as the member desires at no additional cost.

Members

As of August 15, 2011, we had approximately 15,179 members. The Company’s marketing strategy includes issuing trial memberships on several levels.

Employees
 
From our inception through the period ended June 30, 2011, we have primarily relied on the services of outside consultants.  As of June 30, 2011, MedeFile had a total of ­­4 full time employees and 4 consultants.

We believe our relations with our employees are favorable.

Website Development

The Company has completed an extensive redesign of its website.  The site has been rebranded and made ready for search engine optimization (SEO).  During development, the Company used feedback from focus groups to make the site user friendly, intuitive and easy to use.  In addition, improvements have been made to help support direct response campaigns.

RESULTS OF OPERATIONS

COMPARISON OF THREE-MONTHS ENDED JUNE 30, 2011 AND JUNE 30, 2010
 
 
 
 
17
 

 
Revenues

Revenues for the quarter ended June 30, 2011 totaled $187,740 compared to revenues of $4,242 during the quarter ended June 30, 2010.   The increase in membership revenue is primarily related to an increase in the 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.  The Company has increased its marketing and advertising efforts, and as a result, there has been a substantial increase in memberships over the previous period.  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 quarter ended June 30, 2011 totaled $442,085, an increase of $340,950 or approximately 337% compared to selling, general and administrative expenses of $101,135 for the quarter ended June 30, 2010. The overall increase in the total selling, general and administrative is primarily due to increased costs associated with attracting new members, sales and business development expenses.
 
Marketing Expense

Marketing expense for the quarter ended June 30, 2011 totaled $310,867, compared to $0 for the quarter ending June 30, 2010.  The increased marketing expense was due to aggressive lead generation for new members.  The Company relies on telemarketing efforts as our only source of generating leads to increase revenues.
 
Depreciation Expense
 
Depreciation expense totaled $2,512 for the quarter ended June 30 2011, compared to depreciation expense of $4,196 during the quarter ended June 30, 2010. The decrease in depreciation was due to some assets being fully depreciated.    

Amortization Expense

Amortization expense for the quarter ended June 30, 2011 totaled $5,245, compared to $5,245 for the quarter ended June 30, 2010.  Amortization expense is the expensing of the website development through May 2013.  Amortization began in the second quarter of 2010 and is expensed at $5,245 per quarter over a three-year period.

Interest Expense
 
Net interest expense for the quarter ended June 30, 2011 was $0, a decrease of $1,220,324 as compared to interest expense of $1,220,324 during the quarter ended June 30, 2010. The decrease was due to the Company paying of their debt obligations during the 2nd quarter of 2010

Net Loss

For the reasons stated above, our net loss for the quarter ended June 30, 2011 was $663,237, or $0 per share, a decrease of $663,421, compared to a net loss of $1,326,658, or $0 per share, during the quarter ended June 30, 2010.
 
COMPARISON OF SIX-MONTHS ENDED JUNE 30, 2011 AND JUNE 30, 2010

Revenues

Revenues for the six-months ended June 30, 2011 totaled $319,842, compared to revenues of $6,602 during the six-months ended June 30, 2010.    The increase in membership revenue is primarily related to an increase in the 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.  The Company has increased its marketing and advertising efforts, and as a result, there has been a substantial increase in memberships over the previous period.  Revenues received from memberships are expensed 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 six months ended June 30, 2011 totaled $821,205, an increase of $640,896 or approximately 355%, compared to selling, general and administrative expenses of $180,309 for the six months ended June 30, 2010. The overall increase in the total selling, general and administrative is primarily due to increased costs associated with attracting new members, sales and business development expenses.
 
 
 
18
 
 
 
Marketing Expense

Marketing expense for the six-months ended June 30, 2011 totaled $440,721, compared to $0 for the six-months ending June 30, 2010.  The increased marketing expense was due to aggressive lead generation for new members.  The Company relies on telemarketing efforts as our only source of generating leads to increase revenues.
 
Depreciation Expense
 
Depreciation expense totaled $5,114 for the six-months ended June 30 2011, compared to depreciation and amortization expense of $8,446 during the six-months ended June 30, 2010. The decrease in depreciation was due to some assets being fully depreciated.
 
Amortization Expense

Amortization expense for the six-months ended June 30, 2011 totaled $10,490, compared to $5,245 for the six-months ended June 30, 2010.  Amortization expense is the expensing of website development through May 2013.  Amortization began in the second quarter of 2010 and is expensed at $5,245 per quarter over a three-year period.

Interest Expense
 
Net interest expense for the six months ended June 30, 2011 was $0, a decrease of $1,229,799 as compared to interest expense of $1,229,799 during the six months ended June 30, 2010. The decrease was due to the Company paying off their debt obligations during the 2nd quarter of 2010

Net Loss

For the reasons stated above, our net loss for the six-months ended June 30, 2011 was $1,111,429, or $0.00 per share, a decrease of $305,769, compared to a net loss of $1,417,198, or $0.00 per share, during the six-months ended June 30, 2010.

FINANCIAL CONDITION

Liquidity and Capital Resources

As of June 30, 2011, we had cash and cash equivalents of $311,975, inventory of $27,904, merchant services reserve of $53,267, accounts receivable of $2,810 and prepaid insurance of $4,494.  Net cash used in operating activities for the six months ended June 30, 2011 was approximately $947,877. Current liabilities of $251,100 consisted of $244,379 for accounts payable and accrued liabilities and deferred revenues of $6,721. We have a net working capital of $149,350.

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 $1,111,429 for the six months ended June 30, 2011 and $2,492,310 for the year ended December 31, 2010 and had an accumulated deficit of $17,273,985 as of June 30, 2011.  The Company has a net working capital of $149,350 as of June 30, 2011.

Off-Balance Sheet Arrangements
 
We do not have any off balance sheet arrangements as of June 30, 2011 or as of the date of this report.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 3.
 
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.
 
 
 
 
19
 

 
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 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 which also are 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.
 
Changes in Internal Control over Financial Reporting

During the most recent quarter ended June 30, 2011, 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.

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

Item 1A. Risk Factors.

As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item .
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On May 6, 2011, the Company issued 7,653,061 shares of Common Stock for amounts due to consultants for services.
 
On May 12, 2011, the Company received $603,000 from proceeds from a securities purchase agreement for the purchase of 201,000,000 shares of Common Stock.
 
On May 13, 2011, the Company issued 10,000,000 shares of Common Stock for amounts due to consultants for services.
 
On June 3, 2011, the Company received $24,000 from proceeds from a securities purchase agreement for the purchase of 8,000,000 shares of Common Stock. The stock is currently unissued and $24,000 is recorded as a stock payable.

The shares of Common Stock were issued pursuant to the exemption from registration in Section 4(2) of the Securities Act of 1933, as amended and contain a restrictive legend.
 
Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

 
Item 5. Other Information.

None. 
 
 
 
20
 
 
 
Item 6. Exhibits.
 
(a) Pursuant to Rule 601 of Regulation S-K, the following exhibits are included herein or incorporated by reference.
 
Exhibit No.
  
Description
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.*
     
101.INS
  
XBRL Instance Document**
     
101.SCH
  
XBRL Schema Document**
     
101.CAL
  
Calculation Linkbase Document**
     
101.LAB
  
XBRL Label Linkbase Document**
     
101.PRE
  
XBRL Presentation Linkbase Document**
     
101.DEF
  
XBRL Definition Linkbase Document**
* Filed herewith.
** Attached as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements tagged as blocks of text.  The XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 
 
21
 
 
SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
MEDEFILE INTERNATIONAL, INC.
  
       
August 15, 2011
By:
/s/ Kevin Hauser
  
   
Kevin Hauser
  
   
President, Chief Executive Officer, Acting Chief Financial Officer and Director (Principal Executive Officer and Principal Financial Officer)
  
       
 
 
 

 
 
 
 
 
22
 EX-31.1 2 ex311.htm EXHIBIT 31.1 ex311.htm
Exhibit 31.1
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
 
I, Kevin Hauser, certify that:
 
1.    I have reviewed this quarterly report on Form 10-Q of MedeFile International, Inc.
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financing reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 
 
       
Date: August 15, 2011
By:
 /s/ Kevin Hauser  
   
Kevin Hauser
  
   
Chief Executive Officer, Chief Financial Officer (Principal Executive Officer, Principal Financing Officer)
  
       













EX-32.2 3 ex321.htm EXHIBIT 32.1 ex321.htm
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MedeFile International, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Hauser, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)  
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
 
     
       
Date: August 15, 2011
By:
 /s/ Kevin Hauser  
   
Kevin Hauser
  
   
Chief Executive Officer, Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)
  
       









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Jun. 30, 2011
Dec. 31, 2010
Statement of Financial Position [Abstract]    
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Preferred stock, shares authorized 10,000 10,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.0001 $ 0.0001
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Condensed Statements of Operations (Unaudited) (USD $)
 3 Months Ended 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Income Statement [Abstract]        
Revenue $ 187,740 $ 4,242 $ 319,842 $ 6,602
Cost of goods sold 90,267   153,741  
Gross profit 97,473 4,242 166,101 6,602
Operating expenses        
Selling, general and administrative expenses 442,085 101,135 821,205 180,309
Maketing expense 310,867   440,721  
Depreciation and amortization expense 7,758 9,441 15,604 13,692
Total operating expenses 760,710 110,576 1,277,530 194,001
Loss from operations (663,237) (106,334) (1,111,429) (187,399)
Interest expense - note payable   (3,879)   (10,166)
Interest expense - related party note payable   (1,216,445)   (1,219,633)
Total other expense   (1,220,324)   (1,229,799)
Loss before income tax (663,237) (1,326,658) (1,111,429) (1,417,198)
Provision for income tax        
Net Loss $ (663,237) $ (1,326,658) $ (1,111,429) $ (1,417,198)
Net loss per share: basic and diluted $ 0 $ 0 $ 0 $ 0
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 6 Months Ended
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Aug. 15, 2011
Document And Entity Information    
Entity Registrant Name Medefile International, Inc.  
Entity Central Index Key 0000842013  
Document Type 10-Q  
Document Period End Date Jun. 30, 2011
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   3,900,354,431
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2011  
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SUBSEQUENT EVENTS
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
SUBSEQUENT EVENTS

7.  SUBSEQUENT EVENTS

 

During the first quarter 2011, the Company entered into a securities purchase agreement for the sale of 45,000,000 shares of Common Stock at a purchase price of $0.003 per share.  Total proceeds from the sale of the Common Stock totaled $135,000.  The funds were received during the first quarter of 2011 and on July 8, 2011, 45,000,000 shares of Common Stock were issued.

 

In July 2011, the Company entered into a securities purchase agreement for the sale of 177,304,960 shares of Common Stock at a purchase price of $0.00282 per share.  Total proceeds from the sale of the Common Stock totaled $500,000.   On July 8, 2011, the 177,304,960 shares were issued.
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WEBSITE DEVELOPMENT
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
WEBSITE DEVELOPMENT

3.   WEBSITE DEVELOPMENT

 

Website development consists of the following:

 

   

June 30,

 2011

    

December 31,

2010

  
Website development   $ 62,945     $ 62,946  
Accumulated amortization     (26,227 )     (15,736 )
          Net website development   $ 36,718     $ 47,210  

 

Amortization is calculated over a three-year period beginning in the second quarter of 2010.  Amortization expense for the three- months ending June 30, 2011 and 2010 is $5,245 and $0, respectively.  Amortization expense for the six- months ending June 30, 2011 and 2010 is $10,491 and $5,245 respectively.

 
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BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of Medefile International, Inc., a Nevada corporation (the "Company" or "Medefile"), 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 condensed 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, 2010. In the opinion of management, these unaudited condensed 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 June 30, 2011, and the results of operations and cash flows for the three and six months ended June 30, 2011 and 2010. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the entire fiscal year.

 

Nature of Business Operations

 

Medefile International, Inc., 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 medical records. Medefile's goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. Medefile intends to accomplish its 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. Medefile's 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 MedeFile iPHR solution has been designed to gather its members’ 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, not only do members empower themselves to take control of their own health and well-being, they 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.

 

MedeFile enjoys a number of  competitive advantages over other firms within the medical records marketplace, including:

 

● MedeFile has developed products and services geared to the patient, while containing the depth and breadth of information required by treating physicians and medical personnel.
● MedeFile does all the work of collecting and updating medical information on an ongoing basis; its dependence on the  patient taking action is minimal – particularly when compared to patient action required to support competing solutions.

 

● MedeFile provides a complete medical record. Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), and are by no means complete or necessarily accurate records.
● MedeFile provides a coherent mix of services and products that are intended to affect the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.

 

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 $1,111,429 for the six months ended June 30, 2011 and $2,492,310 for the year ended December 31, 2010 and had an accumulated deficit of $17,273,985 as of June 30, 2011.  The Company has net working capital of $149,350 as of June 30, 2011.

 

Cash and Cash Equivalents

 

For purposes of these financial statements, cash and cash equivalents includes highly liquid debt instruments with maturity of less than three months.

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.  Currently our operating account is above the FDIC limit.

 

Advertising

 

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company incurred advertising costs for the three months ended June 30, 2011 and 2010 of approximately $6,500 and $0, respectively.  The Company incurred advertising costs for the six months ended June 30, 2011 and 2010 of approximately $6,500 and $2,568, respectively.

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

 

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition

 

Property and Equipment

 

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives being 3 years up to 10 years.

 

Trademark Costs

 

Trademark costs incurred in the registration and acquisition of trademarks and trademark rights are capitalized. These costs will be amortized over the legal life of the related trademark once the trademark is awarded. The Company performs an annual review of its identified intangible assets to determine if facts and circumstances exist which indicate that the useful life is shorter than originally estimated or that the carrying amount of the assets may not be recoverable.

 

The Company expenses all software costs associated with the conceptual formulation and evaluation of alternatives until the application development stage has been reached. Costs to improve or support the technology are expensed as these costs are incurred.

 

Website Development

 

The Company's policy is to capitalize website development costs at original cost and amortize the balance over the life of the product.  The life of website is determined at completion of the project. The Company reviews the amounts capitalized for impairment whenever events or circumstances indicate that the carrying amounts of the assets may not be recoverable.

 

The Company expenses all development costs associated with the conceptual formulation and evaluation of alternatives until the application development stage has been reached. Costs to improve or support the technology are expensed as these costs are incurred.

 

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.

 

 Deferred Revenue

 

The Company generally receives subscription fees for its services. From time to time, the Company will receive quarterly or annual subscriptions paid in advance and deferred revenue is recorded at that time. The deferred revenue is amortized into revenue on a pro- rata basis each month. Customers with quarterly or annual subscriptions may cancel their subscriptions and request a refund for future months' revenues at any time. Therefore, a liability is recorded to reflect the amounts that are potentially refundable.  As of June 30, 2011 the Company had $6,721 in deferred revenue.

 

Reclassifications

 

Certain reclassifications have been made in prior periods financial statements to conform to classifications used in the current period.

 

Recent Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06: Fair Value Measurements and Disclosures (topic 820) Improving Disclosures about Fair Value Measurements..  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

 

In July 2010, the FASB issued ASU No. 2010-20:, Receivables (Topic 310) Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.  As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.  This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010.  The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.

 

On December 21, 2010, the FASB issued ASU 2010-29: Business Combinations (Topic 805) which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010.  We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements

 

In April 2011, FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its consolidated financial statements.

 

In May 2011, FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The amendments in this update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. For public entities, the new guideline is effective for interim and annual periods beginning after December 15, 2011 and should be applied prospectively. The Company does not expect that the guidance effective in future periods will have a material impact on its consolidated financial statements.

 

Net Loss and Share

 

Basic and diluted loss per share amounts are computed based on net loss divided by the weighted average number of common shares outstanding. Outstanding options to purchase 5,640,000 common shares and warrants to purchase 10,175,000 common shares were not included in the computation of diluted loss per share because the assumed conversion and exercise would be anti-dilutive for the six months ended June 30, 2011.  

 

Management Estimates

 

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

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.
XML 17 R9.htm IDEA: XBRL DOCUMENT  v2.3.0.11
FURNITURE AND EQUIPMENT
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
FURNITURE AND EQUIPMENT

4. FURNITURE AND EQUIPMENT

 

Furniture and equipment consists of the following:

 

   

June 30,

2011

    

December 31,

2010

  
Computers and equipment   $ 169,286     $ 169,286  
Furniture and fixtures     38,618       38,618  
Subtotal     207,904       207,904  
Less: accumulated depreciation     (192,653 )     (187,540  
Net furniture and equipment   $ 15,251     $ 20,364  

 

Depreciation is calculated by using the straight-line method over the estimated useful life. Depreciation expense totaled $2,513 and $4,196 for the three months ended June 30, 2011 and 2010, respectively.   Depreciation expense totaled $5,113 and $8,446 for the six months ended June 30, 2011 and 2010, respectively.

 
XML 18 R10.htm IDEA: XBRL DOCUMENT  v2.3.0.11
EQUITY
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
EQUITY

5. EQUITY

 

Common Stock

 

In June 2010, the Company accepted an agreement for an aggregate of 1,000,000,000 shares of its Common Stock for a per share purchase price of $0.001 per share (the “June Private Placement”).  The Company received aggregate proceeds of $1,000,000 from its June Private Placement.  The shares were unissued as of June 30, 2010 and are recorded through Common Stock Payable.  The shares were issued July 20, 2010.

 

During the first quarter 2011, the Company entered into a securities purchase agreement for the sale of 201,000,000 shares of Common Stock at a purchase price of $0.003 per share.  Total proceeds from the sale of the Common Stock totaled $603,000.

 

On March 31, 2011, the Company issued 9,375,000 shares of Common Stock for amounts due to consultant.  The shares had a market value of $37,500.

 

On May 6, 2011, the Company issued 7,653,061 shares of Common Stock for amounts due to consultants.  The shares had a market value of $32,143.

 

On May 13, 2011, the Company issued 10,000,000 shares of Common Stock for amounts due to consultants.  The shares had a market value of $70,000.

 

On May 24, 2010, Lyle Hauser, the son of the Company's then Chief Executive Officer, agreed to convert notes in the aggregate principal amount of $900,000 into an aggregate of 450,000,000 shares of the Company's Common Stock.  As of June 30, 2010, the conversion to common shares had not occurred.  The amount to be converted is reported in Common Stock Payable on the balance sheet.  The shares were issued on July 20, 2010.

 

During the first quarter 2011, the Company entered into a securities purchase agreement for the sale of 45,000,000 shares of Common Stock at a purchase price of $0.003 per share.   The funds were received during the first quarter of 2011 and recorded as a stock payable in the amount of $135,000 as of June 30, 2011.  On July 8, 2011, 45,000,000 shares of Common Stock were issued.

 

On June 3, 2011, the Company received $24,000 from proceeds from a securities purchase agreement for the purchase of 8,000,000 shares of Common Stock.  The stock is currently unissued and $24,000 is recorded as a stock payable

 

Stock Options

 

2006 Incentive Stock Plan

 

In January 2006, the Board of Directors of the Company (the "Board") approved an Incentive Stock Plan, pursuant to which they have initially reserved 10,000,000 shares of common Stock for issuance. Under the 2006 Incentive Stock, the Board granted an aggregate of 5,640,000 options to employees pursuant to certain employment agreement that are more fully described below:

 

2008 Amended and Restated Incentive Stock Plan

 

In November 2008, the Board adopted the 2008 Equity Incentive Plan and subsequently amended it in January 2009, June 2009 and July 2009 (the “2008 Plan”). The purpose of the 2008 Plan was to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2008 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the United States Code (the "code"), non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2008 Plan will be administered by the Board until such time as such authority has been delegated to a committee of the Board.

 

2010 Incentive Stock Plan

 

In December 2009, the Board adopted the 2010 Equity Incentive Plan (the “2010 Plan”). The purpose of the 2010 Plan was to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2010 Plan, we are authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2010 Plan will be administered by the Board until such time as such authority has been delegated to a committee of the Board.

 


 

A summary of option activity under all Plans as of June 30, 2010, and changes during the period then ended are presented below:

 

   

 

Options

     Weighted-Average Exercise Price  
Outstanding at December 31, 2009     5,640,000     $ 0.80  
Issued     -       -  
Exercised     -       -  
Forfeited or expired     -       -  
Outstanding at December 31, 2010     5,640,000     $ 0.80  
Issued     -       -  
Expired     -       -  
Forfeited     -       -  
Outstanding at June 30, 2011     5,640,000       0.80  
Non-vested at June 30, 2011     -       -  
Exercisable at June 30, 2011     5,640,000     $ 0.80  

  

 

The options outstanding as of June 30, 2011 have been segregated for additional disclosure as follows:

 

  Options Outstanding   Options Exercisable
      Weighted    
    Weighted Average   Weighted
Range of   Average Remaining   Average
Exercise Number Exercise Contractual Number Exercise
Price Outstanding Price Life Exercisable Price
$0.80 5,640,000 $ 0.80 .50 5,640,000 $ 0.80

 

 

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.  For the three and six months ended June 30, 2011 and 2010, the Company recorded no compensation expense related to options.

 

Warrants

  

In October 2007, the Company awarded 175,000 Common Stock warrants, at an exercise price of $0.56 per share, to former Board members at the quoted stock price on the effective date of the awards. The warrants have an expiration date of five years from the issue date and contain provisions for a cash exercise. The estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions:

 

Risk-free interest rate at grant date     4.75 %
Expected stock price volatility     155 %
Expected dividend payout     --  
Expected option in life-years     5  

 

On June 22, 2011, the Company awarded 10,000,000 Common Stock warrants, at an exercise price of $0.01 per share, to consultants for services at the quoted stock price on the effective date of the awards. The warrants have an expiration date of four years from the issue date and contain provisions for a cash exercise. The estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions:

 

Risk-free interest rate at grant date     0.39 %
Expected stock price volatility     172.1 %
Expected dividend payout     --  
Expected option in life-years     2  

 

Warrant expense recognized for the six months ended June 30, 2011 was $25,682.

 

 

Transactions involving warrants are summarized as follows:

 

    Number of Warrants     Weighted-Average Price Per Share  
Outstanding at December 31, 2010     8,175,000     $ .73  
Granted     10,000,000       .01  
Exercised     -       -  
Canceled or expired     7,950,000       -  
Outstanding at June 30, 2011     10,175,000     $ 0.019  

 

 

Warrants Outstanding     Warrants Exercisable  
            Weighted                 Weighted  
            Average     Weighted           Average  
            Remaining     Average           Remaining  
Exercise     Number     Contractual     Exercise     Number     Contractual  
Prices     Outstanding     Life (years)     Price     Exercisable     Life (years)  
  $ 0.56       175,000       1.75     $ 0.56       175,000       1.75  
    0.01       10,000,000       4.0       0.01       10,000,000       4.0  
            10,175,000       3.96     $ 0.56       10,175,000       3.96  

 
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RELATED PARTY TRANSACTIONS
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
RELATED PARTY TRANSACTIONS

6. RELATED PARTY TRANSACTIONS

 

On May 10, 2011, the Company and the Company’s Chief Executive Officer, Kevin Hauser, executed an amendment, effective as of March 26, 2011, to the employment agreement dated December 10, 2008, by and between Mr. Hauser and the Company.  Mr. Hauser agreed to reduce the base salary payable to him pursuant to the employment agreement to $100,000 for the year ending December 31, 2010.  As a result, the Company recorded a cancellation of payroll expense due to Mr. Hauser during the first quarter of 2010 through additional paid in capital in the amount of $116,000.
XML 22 R5.htm IDEA: XBRL DOCUMENT  v2.3.0.11
Condensed Statements of Cash Flows (Unaudited) (USD $)
 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Cash flows from operating activities    
Net loss $ (1,111,429) $ (1,417,198)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation 5,113 8,447
Amortization 10,492 5,245
Stock based services 139,643  
Warrant expense 25,682  
Interest expense   10,166
Interest expense - related party   1,219,633
Changes in operating assets and liabilities    
Accounts receivable (342) (2,976)
Inventory (5,720) (28,330)
Prepaid Insurance (4,494)  
Deposits and other assets   14,465
Accounts payable and accrued liabilities 50,054 (79,261)
Merchant services reserve (47,094)  
Cash overdraft (6,928) (862)
Deferred revenue (2,854) 5,079
Net Cash used in operating activities (947,877) (265,592)
Cash flows from investing activities    
Investment (1,800)  
Website development   (21,800)
Net cash used in investing activities (1,800) (21,800)
Cash flow from financing activities    
Proceeds from common stock subscription 159,000 1,000,000
Proceeds from common stock sale 603,000  
Proceeds from note payable   340,842
Net cash provided by financing activities 762,000 1,340,842
Net increase (decrease) in cash and cash equivalents (187,677) 1,053,450
Cash and cash equivalents at beginning of period 499,652 1,513
Cash and cash equivalents at end of period 311,975 1,054,963
Cash paid during period for    
Cash paid for interest    
Cash paid for income taxes    
Cancellation of payroll liability to CEO   900,000
Common stock issued for consulting services 165,325  
Conversion of note payable and accrued interest   $ 900,000
XML 23 R7.htm IDEA: XBRL DOCUMENT  v2.3.0.11
ACCOUNTS RECEIVABLE
 6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
ACCOUNTS RECEIVABLE

2.  ACCOUNTS RECEIVABLE

 

Due to the collection history of the Company, an allowance for doubtful accounts is not maintained.  Recognition of a specific uncollectible account is written directly against the invoice in accounts receivable and expensed in the current period.

 
XML 24 R2.htm IDEA: XBRL DOCUMENT  v2.3.0.11
Condensed Balance Sheets (USD $)
Jun. 30, 2011
Dec. 31, 2010
Current assets    
Cash $ 311,975 $ 499,652
Inventory 27,904 22,184
Merchant services reserve 53,267 6,173
Accounts receivable, net 2,810 2,468
Prepaid Insurance 4,494  
Total current assets 400,450 530,477
Website development, net of accumulated amortization 36,718 47,210
Furniture and equipment, net of accumulated depreciation 15,251 20,364
Investment 1,800  
Intangibles 1,339 1,339
Total assets 455,558 599,390
Liabilities and Stockholders' Equity    
Accounts payable and accrued liabilities 244,379 310,325
Cash overdraft   6,928
Deferred revenues 6,721 9,575
Total Current Liabilities 251,100 326,828
Stockholders' Equity    
Preferred stock, $.0001 par value: 10,000 authorized, no shares issued and outstanding    
Common stock, $.0001 par value: 5,000,000,000 authorized; x,xxx,xxx,xxx and 3,450,021,410 shares issued and outstanding on June 30, 2011 and December 31, 2010, respectively 367,805 345,002
Common stock payable 159,000  
Additional paid in capital 16,951,638 16,090,116
Accumulated deficit (17,273,985) (16,162,556)
Total stockholders' equity 204,458 272,562
Total liability and stockholders' equity $ 455,558 $ 599,390
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