Notes
to Consolidated Financial Statements
June
30, 2017
Note
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Medifirst
Solutions, Inc. (“MSI” or the “Company”) was incorporated in Nevada in November 2010. The Company has
not generated significant sales to date. The Company intends to have a diverse product line of consumer products. Since inception,
the Company has been engaged in business planning activities, including researching the industry, identifying target markets for
the Company’s products, developing the Company’s models and financial forecasts, performing due diligence regarding
potential geographic locations most suitable for establishing the Company’s offices and identifying future sources of capital.
At the present time, the Company is building products and affiliations in and related to the cosmetic healthcare industry.
In July 2016, Medifirst, in response to its
Premarket Notification 510(k) submission for “The Time Machine” Series Laser, received clearance from the U.S. Food
and Drug Administration (“FDA”) to market its infrared Time Machine TTML-8102000 Laser Thermal Therapeutic Device.
The Company is actively putting together a sales and distribution team to offer our lasers in the US and foreign markets.
Pursuant
to a sale and purchase agreement dated August 19, 2015 between the Company and the Company’s president, the Company acquired
100% of the equity interests in Medical Lasers Manufacturer, Inc. (“MLM”) with the total purchase price of 20,000
shares of the Company’s common stock at $0.001 per share (or $20). The fair value of the acquired entity was $20.
The
transaction was considered as a business acquisition and accordingly the acquisition method of accounting has been applied. MLM
had no assets at the date of the business combination.
The
Consolidated financial statements include the accounts of MSI and its only wholly owned subsidiary, MLM. All material intercompany
balances and transactions have been eliminated in consolidation.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding
to operationalize the Company’s current technology.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Basis
of Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered
necessary for a fair presentation of the consolidated financial position of the Company as of June 30, 2017, the consolidated
results of its operations for the three-month and six-month periods ended June 30, 2017 and 2016, the consolidated change in stockholders’
equity for the six-month period ended June 30, 2017 and the consolidated cash flows for the six-month periods ended June 30, 2017
and 2016. The results of operations for the six-month period ended June 30, 2017 are not necessarily indicative of the operating
results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements
and related disclosures for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for the
year then ended.
Some
items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no
effect on prior year net income or shareholders’ equity.
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The
following policies reflect specific criteria for the various revenues streams of the Company:
Revenue
is recognized at the time the product is delivered or services are performed. Provision for sales returns are estimated based
on the Company’s historical return experience. Revenue is presented net of returns.
Accounts
Receivable
The
Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers,
maintaining an allowance for potential credit losses. Accounts receivable is reported net of the allowance for doubtful accounts.
The allowance is based on management’s estimate of the amount of receivables that will actually be collected. The Company
has not recorded an allowance for doubtful accounts as of June 30, 2017 or December 31, 2016.
Inventory
Inventory
consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value. Finished goods inventory
includes hand held laser devices and their carrying cases.
Notes
receivable (Investor)
In
May 2017 the company entered into a securities purchase agreement with an investor (as more fully described in Note 5 below).
As part of that agreement, the company issued convertible 8% notes payable to the investor in the amounts of $131,250, $131,250,
$125,000 and $125,000. Two of these notes will close subsequent to June 30, 2017 and are secured by fully collaterlized promissory
notes issued by the Investor to the Company in the amounts of $131,250 and $125,00 ( also know as the “back-end notes”).
These notes bear interest at the rate of 8% per annum.
Equipment
Equipment,
consisting of computer equipment, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, of five years.
Long-Lived
Assets
The
Company reviews long-lived assets, such as equipment, for impairment whenever events or changes in circumstances indicate the
carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of
an asset exceeds the estimated future cash flows, an impairment loss will be recorded by the amount the carrying value exceeds
the fair value of the asset.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Intangible
Asset- Licensing Agreement
On
March 8th 2016 (with an effective date of October 1, 2015), the company, through it’s sole wholly-owned subsidiary (“Licensee”),
entered into a Product and Know-How License Agreement (“Agreement”) with a Florida Corporation (“Licensor”)
which is owned by a related party - the son of the Company’s CEO. The license provides with respect to the Technology, Licensor
hereby grants to Licensee an irrevocable, nontransferable, royalty-bearing license, with a right of sublicense (the “License”),
throughout the Territory in the Field of Use, whether or not under the Licensed Patent, to:
●
|
use or submit or deliver the Technology
and/or any Product to any regulatory body throughout the Territory for purposes of obtaining approval to make, Sell, offer
for Sale, import, export and distribute the Technology or Products; and
|
●
|
use or copy the Technology and/or any
Product; and
|
●
|
market, make, have made, Sell, offer for
Sale, import and distribute Products; and
|
●
|
sublicense the Technology; and
|
●
|
prepare, or have prepared on its behalf,
modifications, enhancements and/or derivative works of the Technology.
|
In
connection with the license granted, Licensor hereby grants to Licensee a license to the Licensed Patents, whether now existing
or hereafter acquired.
The
consideration for the licensing agreement consisted of the issuance of 25,000 Series B Preferred stock shares to the Licensor
(at par) plus a $150,000 promissory note issued by the Company to the licensor. During the quarter-ended June 30, 2017, the $150,000
promissory note plus $18,986 in accrued interest was fully satisfied through the issuance of 17,272,727 shares of the Company’s
common stock.The last part of the consideration in this license agreement is the royalty payments which have not taken effect
yet since they are based on sales for which the company has had only minimum thus far.
The
licensing agreement is for a ten year period effective from October 1, 2015. The cost of the licensing agreement is being amortized
over it’s ten-year period and charged to income on a straight-line basis.
Debt
Issue Costs and Debt Discount
The
Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible
debt. These costs are amortized over the life of the debt to interest expense. If a conversion of the underlying debt occurs,
a proportionate share of the unamortized amounts are immediately expensed. Beginning in 2015, the Company adopted ASU 2015-03:
Simplifying the Presentation of Debt Issuance Costs and has reflected the deferred financing costs as a direct reduction of the
related debt (See table included in Note 5 to Consolidated Financial Statements).
Original
Issue Discount
For
certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount
is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Derivative
Liabilities
Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. The Company assessed its securities for purposes of
determining the proper accounting treatment and valuation as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37
Fair Value in Financial Instruments
; Statement of Financial Accounting Standard ASC 815
Accounting for Derivative Instruments
and Hedging Activities
; and Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
In
assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible
debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional
convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once
the derivative liabilities are determined, they are adjusted to reflect fair value at each reporting period end, with any increase
or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the condensed consolidated balance sheets and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Financial
Instruments
The
carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and other accrued liabilities
approximate their fair values.
Segment
Information
The
Company follows Accounting Standards Codification (“ASC”) 280, “Segment Reporting”. The Company currently
operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Net
Income (Loss) Per Common Share
The
Company calculates net income (loss) per share based on the authoritative guidance. Basic earnings (loss) per share is calculated
by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss)
per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock
equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered,
as their effect would be anti-dilutive.
Income
Taxes
The
Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities
are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities,
and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance
against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.
The
Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a
tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold,
the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority.
For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and
penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits
as of June 30, 2017, and does not expect this to change significantly over the next 12 months.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC
718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the
issuance date.
Equity
instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the
fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument
is satisfied or there is a significant disincentive for non-performance.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June
30, 2017, the Company had $231,333 in cash equivalents.
Recent
Pronouncements
In
May 2014, FASB and IASB issued a new joint revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition.
The core principle of the standard is that revenue recognition should depict the transfer of goods and services to customers in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
The new standard is effective for the Company to annual reporting periods beginning after December 15, 2017 (that is, a public
organization is required to apply the new revenue standard beginning in the first interim period within the year of adoption).
Additionally, the Board decided to permit public organizations to adopt the new revenue standard early, but not before the original
public organization effective date (that is, annual periods beginning after December 15, 2016). A public organization should apply
the new revenue standard to all interim reporting periods within the year of adoption.The Company has evaluated the impact of
this ASU on the consolidated financial statements and has determined, at this time, the ASU’s implementation would not have
a material impact on revenue recognition. See below - Accounting Standards Update 2016-10 - Revenue from Contracts with Customers
(Topic 606) Identifying Performance Obligations and Licensing.
On
January 05, 2016, the FASB completed its Classification and Measurement of Financial Instruments project by issuing ASU No. 2016-01, Financial
Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new
guidance improves certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For
public business entities, the new guidance is effective for fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years. The Company does not believe the impact of its pending adoption of this ASU on the Company’s
consolidated financial statements will be material.
In
November 2015, FASB issued ASU 2015-17 - Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes which simplifies
the presentation of deferred income taxes. For public business entities, the amendments in this Update are effective for financial
statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company
does not believe the impact of its pending adoption of this ASU on the Company’s consolidated financial statements will
be material.
In
March 2016, the FASB issued Accounting Standards Update 2016-09 Compensation—Stock Compensation (Topic 718) Improvements
to Employee Share-Based Payment Accounting. The Board is issuing this Update as part of its Simplification Initiative. The objective
of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP)
for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users
of financial statements. The areas for simplification in this Update were identified through outreach for the Simplification Initiative,
pre-agenda research for the Private Company Council, and the August 2014 Post-Implementation Review Report on FASB Statement No.
123(R), Share-Based Payment. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
In
April 2016, the FASB issued Accounting Standards Update 2016-10 - Revenue from Contracts with Customers (Topic 606) Identifying
Performance Obligations and Licensing. The core principle of the guidance in Topic 606 is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following
steps: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the
transaction price. 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue when
(or as) the entity satisfies a performance obligation. The amendments in this Update do not change the core principle of the guidance
in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations
and the licensing implementation guidance, while retaining the related principles for those areas. The Company is currently evaluating
the impact of this ASU on the consolidated financial statements.
Note
2. PROPERTY, PLANT AND EQUIPMENT (NET)
Equipment
is recorded at cost and consisted of the following at June 30, 2017 and December 31, 2016:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Computer equipment
|
|
$
|
8,956
|
|
|
$
|
8,956
|
|
Less: accumulated depreciation
|
|
|
(7,405
|
)
|
|
|
(7,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,551
|
|
|
$
|
1,871
|
|
Depreciation
expense was $320 and $568, for the six months ended June 30, 2017 and 2016 respectively.
Note
3. DUE TO RELATED PARTY
The
Company was indebted to a related party through common management in the amount of $8,921 at June 30, 2017 and December 31, 2016,
respectively. The loan bears no interest and is payable on demand. See Note 10 for additional related party transactions.
Note
4. LOANS PAYABLE - STOCKHOLDERS
During
the periods ended June 30, 2017 and 2016 a stockholder of the Company advanced the Company $-0- and $-0- respectively. The loan
has a balance of $15,055 at June 30, 2017 and a balance of $8,955 as of December 31, 2016. The loan bears no interest and is payable
on demand.
In
December 2012, the Company issued a promissory note to a stockholder in the amount of $5,000 with interest at 10% per annum. Principal
and interest were due and payable on June 2, 2013. In April 2014, the note was amended to provide the note holder with the option
to convert the note to the Company’s common stock at $0.0001 per share. Subsequently, in 2014, in a private transactions,
the note holder transferred $2,500 of note principal to third parties and the new holders converted their holdings into 2,500,000
shares of the Company’s common stock. During 2015, the original note holder transferred an additional $2,400 of note principal
to third parties who converted their holdings into 2,400,000 shares of the Company’s common stock. At June 30, 2017 and
December 31, 2016, the loan had balance was $100 and $100, respectively.
At
June 30, 2017 and December 31, 2016, the Company was indebted to a stockholder in the amount of $1,000 and $1,500, respectively.
The loan has an interest rate of 26.7%. In February 2017 the note was sold to another investor and that noteholder converted $500
in principal into 5,000,000 shares of common stock. Principal and accrued interest were due and payable on January 1, 2014.
In
February 2016, the Company issued a promissory note to a stockholder in the amount of $7,000 with interest at the rate of 6% per
annum. On September 6, 2016 the note holder converted the entire principal balance and accrued interest into common stock and
therefore at June 30, 2017 there is no principal balance remaining on the note.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Note
5. CONVERTIBLE NOTES PAYABLE
Note
Payable-BS
In
March 2011, the Company issued $800 aggregate principal amount of 6% convertible notes due in January 2012. Interest on the notes
accrue at the rate of 6% per annum and are payable when the notes mature. The notes matured prior to conversion but have not been
repaid. Interest continues to accrue at the rate of 6% per annum.
The
holder of one of the notes converted $110 of note principal into 1,100,000 shares of common stock as follows:
Date of Conversion
|
|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
June 2013
|
|
$
|
70
|
|
|
$
|
0.0001
|
|
|
|
700,000
|
|
August 2013
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
|
|
In
August 2013, in a private transaction, the same note holder transferred $330 of the remaining note principal plus $55 in accrued
interest to a third party.
In
August 2013, in a private transaction, the new note holder transferred $5 of the remaining note principal to a third party who
then converted the note into 50,000 shares of common stock.
In
September 2013, the new note holder converted $100 of note principal into 1,000,000 shares of common stock.
In
September 2013, in a private transaction, the new note holder transferred $35 of the remaining note principal to a third party
who then converted the note into 350,000 shares of common stock.
In
November and December 2013, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock
as follows:
Date of Conversion
|
|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
November 2013
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
|
|
December 2013
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500,000
|
|
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
In
March and April 2014, the new note holder converted an additional $90 of note principal into 900,000 shares of common stock as
follows:
Date of Conversion
|
|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
March 2014
|
|
$
|
50
|
|
|
$
|
0.0001
|
|
|
|
500,000
|
|
April 2014
|
|
$
|
40
|
|
|
$
|
0.0001
|
|
|
|
400,000
|
|
Subsequent
to these conversions there remains $125 in note principal outstanding at June 30, 2017.
Note
Payable-SF
In
July 2013, the holder of the second note converted $240 of note principal into 400,000 shares of the Company’s common stock
at $0.0006 per share. At June 30, 2017 and December 31 2016, the note had a remaining principal balance of $60 and $60, respectively.
At
any time on or after the maturity date, the holders of the notes, have the option of converting any of the unpaid principal and
interest into the Company’s common stock. The notes plus any accrued but unpaid interest are convertible at the rate of
$0.0001 per share at the time of conversion up to a maximum of 9.99% of the then issued and outstanding common stock.
Note
Payable-RK
In
May 2012, the Company issued a $25,000 6% per annum note that matured in November 2012. In December 2012 the note was amended
to be a convertible note. Interest on the note accrues interest at 6% per annum and is payable when the note matures.
The
holder of the $25,000 note had the option of converting it at any time prior to maturity. The note plus any accrued but unpaid
interest were convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then issued
and outstanding common stock.
The
holder of the note converted $1,010 of note principal into 1,010,000 shares of common stock as follows:
Date of Conversion
|
|
Principal Amount Converted
|
|
|
Conversion Rate
|
|
|
Shares Received
|
|
December 2012
|
|
$
|
150
|
|
|
$
|
0.001
|
|
|
$
|
150,000
|
|
January 2013
|
|
$
|
660
|
|
|
$
|
0.001
|
|
|
$
|
660,000
|
|
March 2013
|
|
$
|
200
|
|
|
$
|
0.001
|
|
|
$
|
200,000
|
|
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
In
July 2013, the Company retired $14,000 of note principal in payment for consulting services provided to the note holder.
In
July 2013, the note holder converted $300 of note principal into 300,000 shares of the Company’s common stock.
In
July 2013, in a private transaction, the note holder transferred the remaining note principal balance of $9,690 to a third party
(See
Note Payable-NW
below).
Note
Payable-NW
After
receiving the transfer of the principal balance of $9,690 in July 2013 in the private transaction noted in
Note Payable-RK
above, in August 2013, in a private transaction, the new note holder of the aforementioned note transferred $4,475 of principal
to a stockholder of the company.
In
October 2013, the note holder converted $400 of note principal into 400,000 shares of the Company’s common stock at $0.001
per share.
In
October 2014, the note holder converted $1,100 of note principal into 1,100,000 of the Company’s common stock.The note holder
has the option of converting the balance at any time with the approval of the Board of Directors. The note plus any accrued but
unpaid interest are convertible at the rate of $0.001 per share at the time of conversion up to a maximum of 9.99% of the then
issued and outstanding common stock, or 22,562,213 shares at December 31, 2016 and 3,506,665 shares at December 31, 2015.
In
August 2016, the note holder converted $3,000 of note principal into 3,000,000 shares of the Company’s common stock. At
June 30, 2017 and December 31, 2016, the remaining principal balance on this portion of the note is $715 and $715 respectively.
Note
Payable-MC #1
In
August 2013, the note holder/stockholder who received the $4,475 in principal from the aforementioned noteholder, converted $700
of note principal into 700,000 shares of the Company’s common stock at $0.001 per share. In October 2013, in a private transaction,
this note holder transferred $1,000 of note principal to a third party of which $700 was converted into 700,000 shares in June
2014. In January 2017 the remaining $2,075 principal balance on this note was transfered to another investor who during the same
period converted the entire remaining principal balance into 4,190,480 common shares.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Note
Payable-MC #2
In
April 2015, the Company issued a $3,000 8% per annum note that matures in October 2015. The holder of the note has the right to
convert the principal into shares of the Company’s common stock at any time 180 days after the closing date at $0.0001 per
share. Interest on the note accrues interest at 8% per annum and is payable when the note matures. During January 2017, the current
noteholder converted $1,100 in principal balance into 11,000,000 shares of common stock. During the same period, the current noteholder
transfered $600 of the remaining principal balance to another investor who then converted the entire principal balance he received
into 6,000,000 shares of common stock. During April 2017, the current notholder converted $410 of remaining principal into 6,000,000
shares of commn stock. There remains $890 in principal balance at June 30, 2017 with the current noteholder and $3,000 in principal
balance with the original noteholder at December 31, 2016.
Convertible
Note Payable-VV to LG (8%)#1
In
July 2015, the Company issued a convertible note payable in the principal amount of $59,000. The note matured in March 2016 and
bears interest at 8%. Beginning 180 days following the closing date the note holder shall have the right to convert any or all
of the outranking principal balance into shares of the Company’s common stock at the discounted rate of 55% of the average
of the three lowest market trading prices during the 10 days immediately preceding the conversion date. Through a series of conversions
during 2016, the note holder converted all of the entire note principal and accrued interest into common stock thereby leaving
no principal balance remaining on the note at June 30, 2017 and December 31,2016.
Convertible
Note Payable-VV (8%) #2
In
August 2015, the Company issued a convertible note payable in the principal amount of $38,000. The note matured in March 2016
and bears interest at 8%. Beginning 180 days following the closing date the note holder shall have the right to convert any or
all of the outranking principal balance into shares of the Company’s common stock at the discounted rate of 55% of the average
of the three lowest market trading prices during the 10 days immediately preceding the conversion date. Through a series of conversions
during 2016, the note holder converted all of the entire note principal and accrued interest into common stock thereby leaving
no principal balance remaining on the note at June 30, 2017 and December 31,2016.
Convertible
Note Payable-LGC(8%)
On
October 8, 2015, the Company issued a convertible note payable in the principal amount of $31,000 with an Original Issue Discount
of $1,500. The note matures on October 8, 2016 and bears interest at 8%. The note holder has the right at any time to convert
any part or all of the outstanding unpaid principal balance into shares of the Company’s common stock at the discounted
rate of 58% of the lowest market trading price during the 20 days prior to and including the conversion date. Through a series
of conversions during 2016, the note holder converted all of the entire note principal and accrued interest into common stock
thereby leaving no principal balance remaining on the note at June 30, 2017 and December 31,2016.
Debenture
Payable - (5%) B (Original $100K)
In
June 2015, the Company issued a convertible note payable in the principal amount of $100,000. The note matures in December 2015
and bears interest at 5%. Beginning 180 days following the closing date the note holder shall have the right to convert any or
all of the outranking principal balance into shares of the Company’s common stock at the discounted rate of 50% of the average
of the three lowest market trading prices during the 3 days immediately preceding the conversion date. The remaining principal
balance on the note at June 30, 2016 was $40,000 after a private sale of $60,000 in principal and deemed accrued interest on May
2, 2016 to another investor and the issuance of a replacement note by the Company - see below-
Convertible Note Payable-SO-B
(8%) (Original $60k)
.
On
September 27, 2016 the remaining $40,000 in principal balance and accrued interest on the note was sold in a private transaction
to another investor and the Company issued a replacement note in the amount of $50,000. Both of the above noted transactions which
took place on May 2, 2016 and September 27, 2016 respectively, resulted in a loss on the extinguishment of the original debt in
the amount of $4,733 from deeming accrued interest in excess of actual accruals. This loss is reported in the statement of operations
for the year ended December 31, 2016. Through a series of conversions during 2016, the note holder converted all of the entire
note principal and accrued interest into common stock thereby leaving no principal balance remaining on the note at June 30, 2017
and December 31,2016.
As
a result of the aforementioned transactions and conversions, there is no principal balance remaining on the original $100,000
note as of June 30, 2017 and December 31,2016.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Convertible
Note Payable-SO-B (8%) (Original $60k)
On
May 2, 2016, the Company issued to an Investor a replacement redeemable convertible note in the principal amount of $60,000 (“the
Replacement Note”). The Note, which matures on May 2, 2017, pays interest at the rate of 8% per annum. This Replacement
Note partially replaces a note originally issued on June 12, 2015 in the principal amount of $100,000 The holder of the note is
entitled, at its option beginning on the 6 month anniversary, to convert all or any of the principal face amount of the Note then
outstanding into shares of the Company’s common stock at the price equal to 55% of the lowest trading price for the twenty
prior trading days including the date of conversion. Any unamortized original issue discount and deferred financing costs from
the original note was expensed upon replacement. The derivative discount and liability on the original note was appropriately
accounted for upon replacement and a new derivative discount and liability for the replacement note appropriately recorded.
Through
a series of conversions during 2016, the note holder converted all of the entire note principal and accrued interest into common
stock thereby leaving no principal balance remaining on the note at December 31,2016.
Convertible
Note Payable-CB (5%) (Original $35k)
On
October 15, 2015 the Company issued a convertible note payable in the principal amount of $35,000 with an Original Issue Discount
of $5,000. The note matures on October 15, 2016 and bears interest at 5%. The note holder has has the right at any time on or
after the day that is six months from October 15, 2015 to convert any part or all of the outstanding unpaid principal balance
into shares of the Company’s common stock at the discounted rate of 55% of the lowest market trading prices during the 20
days prior to the conversion date.
During
the months of May, June and July 2016, the holder of the above $35,000 Note converted all of the principal to common stock thereby
leaving no principal balance payable on the note as of June 30, 2017 and December 31, 2016.
Convertible
Note Payable-LGC (8%)
On
January 7 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited
investor (the “Investor”) for the sale of convertible redeemable notes in aggregate principal amount of $251,803.
On January 7, 2016, the Company and the Investor conducted the first closing under the Purchase Agreement, pursuant to which the
Company issued to the Investor (i) a convertible redeemable note in principal amount of $105,000 containing an original issue
discount of $20,000 (the “$105K Note”); and (ii) a convertible redeemable note in principal amount of $50,000 (the
“$50K Note” and together with the $105K Note, the “Notes”). Under the Purchase Agreement, on March 15,
2016 and June 15, 2016, the Company and the Investor conducted additional closings for the sale and purchase of additional notes
having the same terms as the Notes in principal amounts equal to $50,000 and $46, 803, respectively (see
Convertible Notes
Payable-LGC (8%) BEN
below). During the quarter ended March 31, 2017 the noteholder converted the entire principal balance
into 62,067,838 shares of common stock and therefore there is no principle balance outstanding at June 30, 2017. At December 31,
2016 the entire principal balance of $105,000 was outstanding.
Convertible
Notes Payable-LGC (8%) BEN
In
consideration for the issuance of the $105K Note, on January 13, 2016, the Company received net proceeds (after deducting the
original issue discount and legal fees) in the amount of $75,697. In consideration for the issuance of the $50K Note, the Investor
issued to the Company a $50,000 fully-collateralized secured promissory note (the “Investor Note”), pursuant to which
the Investor agreed to pay the Company $50,000 on or before April 30, 2016. The Notes, which are due on January 7, 2017, bear
interest at the rate of 8% per annum. Subject to a beneficial ownership limitation equal to 9.99%, principal and interest on the
Notes is convertible into shares of the Company’s common stock (“Common Stock”) at a conversion price equal
to 55% of the lowest trading price of Common Stock during the 20 trading day period prior to conversion.
In
accordance with the terms of the Purchase Agreement, the investor and the Company closed on the two outstanding notes ($50,000
and $46,803) in May and June 2016 when the Company received the cash funding. During April 2017 the noteholder converted the entire
principal balance of the $50,000 note into common stock of the Company. During June 2017 the noteholder converted $16,000 of the
remaining principal of the $46,803 note into common stock of the Company. As of June 30,2017, there is no principal balance remaining
on the $50,000 note and there is $30,803 in principal remaining on the $46,803 note. As of December 31, 2016 the entire principal
balances of $50,000 and $46,803 were outstanding.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Convertible
Notes Payable-SO (8%)
On
May 2, 2016, the Company issued to an Investor a convertible redeemable note in the principal amount of $57,750 (“the Note”).
The Note, which matures on May 2, 2017, pays interest at the rate of 8% per annum. The note contains a 10% original issue discount.
The holder of the note is entitled, at its option beginning on the 6 month anniversary, to convert all or any of the principal
face amount of the Note then outstanding into shares of the Company’s common stock at the price equal to 55% of the lowest
trading price for the twenty prior trading days including the date of conversion. During the quarter ended March 31, 2017 the
noteholder converted $32,298 of the principle balance into 23,489,690 shares of common stock thereby leaving a principal balance
of $25,452 on the note at June 30, 2017. The entire principal balance in the amount of $57,750 was outstanding on the note at
December 31, 2016.
Convertible
Notes Payable-LG (9%)
On
October 11, 2016, the Company issued to an Investor a replacement convertible note in the principal amount of $50,000 (“the
Replacement Note”). The Note, which matures on March 27, 2018, pays interest at the rate of 9% per annum. This Replacement
Note partially replaces a note originally issued on June 12, 2015 in the principal amount of $100,000. During the quarter ended
December 31, 2016 the noteholder converted the entire principal balance into shares of common stock thereby leaving $-0- principal
balance remaining on the note as of June 30, 2017 and December 31, 2016.
Convertible
Notes Payable-BBCG (9%)
On
October 11, 2016, the Company issued to an Investor a convertible note in the principal amount of $157,895 (“the Note”).
The Note, which matures on March 27, 2018, pays interest at the rate of 9% per annum. The note contains an original issue discount
in the amount of $7,895. The holder of the note is entitled, at its option beginning on the 6 month anniversary, to convert all
or any of the principal face amount of the Note then outstanding into shares of the Company’s common stock at the price
equal to 57.5% of the lowest trading price for the twenty prior trading days including the date of conversion. During April and
June of 2017, the noteholder converted the entire remaining principal balance of the note into common stock of the Company. There
is no principal balance remaining on the note as of June 30, 2017. The entire $157,895 principal balance was outstanding on the
note as of December 31, 2016.
Convertible
Notes Payable - LG Funding (8%)
On
May 1 2017 ,the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited
investor (the “Investor”) for the sale of 8 convertible redeemable notes in aggregate principal amount of $1,012,500.
On May 1st, 2017 and June 2, 2017, the Company and the Investor conducted the first two closings under the Purchase Agreement,
pursuant to which the Company issued to the Investor (i) a convertible redeemable note in principal amount of $131,250 (the “$131K
Note”) ; and (ii) a convertible redeemable note in principal amount of $125,000 (the “$125K Note” and together
with the $131K Note, the “Notes”). Under the Purchase Agreement, on January 1, 2018 and February 2, 2018, the Company
and the Investor expect to conduct additional closings for the sale and purchase of additional notes having the same terms as
the Notes in principal amounts equal to $131,250 and $125,000 respectively. Further, the Company and the Investor will conduct
four additional closings in July 2017, August 2017, March 2018 and April 2018 for the four remaining notes totaling $500,000 under
the Purchase Agreement.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
In
consideration for the issuance of the $131K Note and the $125K Note, on May 1, 2017 and June 2, 2017, the Company received net
proceeds (after deducting $12,500 in legal fees) in the amount of $243,750. In consideration for the issuance of the $131K and
the $125k Notes, the Investor issued to the Company a $131,250 fully-collateralized secured promissory note and a $125,000 fully-collateralized
secured promissory note (the “Investor Notes”), pursuant to which the Investor agreed to pay the Company $131,250
and $125,000 on or before January 1, 2018 and February 2, 2018 respectively. These Notes (often referred to as “back-end
Notes”), bear interest at the rate of 8% per annum.
The
Company’s convertible notes payable and the related derivative liabilities, derivative discount, deferred financing costs
and original-issue discount are presented in the financial statements at June 30, 2017 as follows:
6/30/2017
Debt
|
|
Remaining Principal Amount
|
|
|
Original Issue Discount
|
|
|
Derivative Discount
|
|
|
Deferred Financing Costs
|
|
|
Total Convertible Notes Payable
|
|
|
Derivative Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable - BS
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
Note Payable - SF
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
Note Payable - SD
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
Note Payable - NW
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
715
|
|
|
|
|
|
Note Payable - MC #2
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890
|
|
|
|
|
|
Convertible Note Payable - CB (5%)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
883
|
|
Convertible Note Payable - LGC (8%) BEN
|
|
|
30,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,803
|
|
|
|
32,909
|
|
Convertible Notes Payable-SO (8%)
|
|
|
25,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,452
|
|
|
|
26,556
|
|
Convertible Note Payable - LGC (8%) 1
|
|
|
131,250
|
|
|
|
|
|
|
|
|
|
|
|
(5,223
|
)
|
|
|
126,027
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) BEN 1
|
|
|
131,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,250
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) 2
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
(5,223
|
)
|
|
|
119,777
|
|
|
|
|
|
Convertible Note Payable - LGC (8%) BEN 2
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
$
|
585,545
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(10,446
|
)
|
|
$
|
575,099
|
|
|
$
|
60,348
|
|
As
of June 30, 2017, the convertible notes payable can be converted into approximately 442,089,020 shares of common stock.
Note
6. DERIVATIVES AND FAIR VALUE INSTRUMENTS
The
Company applied paragraph 815-10-05-4 of the FASB Accounting Standards Codification to the 5% Convertible Notes Payable issued
June 12th 2015 and the 8% Convertible Note payable issued June 25th 2015 and for the 8% Convertible Notes Payable issued January
7, 2016 and March 7, 2016 and the 9% Convertible Note payable issued October 1, 2016. Based on the guidance in paragraph 815-10-05-4
of the FASB Accounting Standards Codification the Company concluded these instruments were required to be accounted for as derivatives
on issuance date. The Company records the fair value of the Convertible Notes Payable and certain warrants that are classified
as derivatives on issuance date and the fair value changes on each reporting date reflected in the consolidated statements of
operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging
instruments under paragraph 815-10-05-4 of the FASB Accounting Standards Codification and are disclosed on the balance sheet under
Derivative Liabilities.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
The
Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for
disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value
in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level
2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
Level
3 Pricing inputs that are generally observable inputs and not corroborated by market data.
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepayments and other current assets,
accounts payable, and accrued expenses, approximate their fair values because of the short maturity of these instruments.
The
Company’s Level 3 financial liabilities consist of the 5% Convertible Notes Payable issued June 12th 2015 and the 8% Convertible
Note payable issued June 25th 2015 and for the 8% Convertible Notes Payable issued January 7, 2016 and March 7, 2016 and May 1,
2017 and June 2, 2017 and the 9% Convertible Note payable issued October 1, 2016, for which there is no current market for these
securities such that the determination of fair value requires significant judgment or estimation. We have valued the automatic
conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model,
with the assistance of a valuation consultant, for which management understands the methodologies. These models incorporate transaction
details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings,
volatility, and holder behavior as of issuance and June 30, 2017. The primary assumptions include: projected annual volatility
of 158%-181%; the follow-on securities purchase option; the conversion feature as a percentage of Market; automatic/conditional
conversions; market price trigger events.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
As
of June 30, 2017 the Company’s derivative financial instruments included:
1)
Embedded derivatives associated with certain of the Company’s unsecured convertible notes payable. The Company’s 5%
convertible notes payable and 8% convertible notes payable and 9% convertible note payable issued to unrelated investors is a
hybrid instrument, which warrants separate accounting as a derivative instrument. The embedded derivative feature has been bifurcated
from the debt host contract, referred to as the Derivative Liability, which resulted in a reduction of the initial carrying amount
(as unamortized discount) of the Convertible Notes Payable. The unamortized discount is amortized to interest expense using the
effective interest method over the life of the Notes. The embedded derivative feature includes the conversion feature within the
notes and an early redemption option. The compound embedded derivatives within the convertible notes have been recorded at fair
value at the date of issuance; and are marked-to-market each reporting period with changes in fair value recorded to the Company’s
statement of operations as Change in fair value of derivative liabilities.
The
5% Convertible Note Payable and the 8% Convertible Notes Payable and the 9% convertible note payable are valued at June 30, 2017.
The following assumptions were used for the valuation of the embedded derivative:
●
|
The stock price of $0.0091 decreased to
$0.0022 in this period (basis for the variable conversion price) would fluctuate with the Company projected volatility;
|
●
|
An event of default for the Convertible
Note would occur 0% of the time, increasing 1.00% per month to a maximum of 5.0%;
|
●
|
Alternative financing for the Convertible
Note would be initially available to redeem the note 0% of the time and increase monthly by 1% to a maximum of 10%;
|
●
|
Capital raising events (a single financing
at 1 month from the valuation date) are a factor for the VV to LG Convertible Note. The full reset events projected to occur based
on future stock issuance (single event) resulting in a reset exercise price.
|
●
|
The monthly trading volume would average
$493,426 as of 6/30/2017 and would increase at 5% per month;ownership limits conversion across LG’s 6 notes based on 4.99%
with shares outstanding increasing monthly by 1%.
|
●
|
The variable conversion price of 50% to
58% over 3 to 20 trading days would have effective rates of 38.61% to 52.68%;
|
●
|
The Note Holders would automatically convert
the notes early (and not hold to maturity) with variable conversion prices and full ratchet resets if the registration was effective
and not in default;
|
●
|
The projected annual volatility for each
valuation period was based on the historical volatility of the company:
|
3/31/2017
|
|
|
172
|
%
|
|
6/2/2017
|
|
|
176
|
%
|
4/7/2017
|
|
|
176
|
%
|
|
6/5/2017
|
|
|
158
|
%
|
4/11/2017
|
|
|
174
|
%
|
|
6/15/2017
|
|
|
162
|
%
|
4/26/2017
|
|
|
173
|
%
|
|
6/23/2017
|
|
|
169
|
%
|
5/2/2017
|
|
|
181
|
%
|
|
6/30/2017
|
|
|
173
|
%
|
The
foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the
probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuation.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
The
Company’s derivative liabilities on convertible notes payable are presented at market value in the financial statements
at June 30, 2017 as follows:
Convertible
Note
|
|
Derivative
Treatment Date
|
|
Maturity
Date
|
|
Principal
Note Amount
|
|
|
Original
Derivative Valuation
|
|
|
Derivative
Valuation December 31,
2017
|
|
|
Quarter
Ended March 31,
2017 Issuances
|
|
|
Quarter
Ended March 31,
2017 Conversions
|
|
|
Quarter
Ended March 31,
2017 Mark-to- Market
|
|
|
Derivative
Valuation March 31,
2017
|
|
|
Quarter
Ended
June 30,
2017 Conversions
|
|
|
Quarter
Ended June 30,
2017 Issuances
|
|
|
Quarter
Ended June 30,
2017 Mark-to- Market
|
|
|
Derivative
Valuation June 30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Note
Payable- issued 5/2/2016
|
|
10/1/2016
|
|
5/2/2017
|
|
$
|
57,750
|
|
|
$
|
58,355
|
|
|
$
|
58,355
|
|
|
|
|
|
|
$
|
(34,680
|
)
|
|
$
|
17,806
|
|
|
$
|
41,481
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
(14,925
|
)
|
|
$
|
26,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 % Convertible Note-
Payable - issued 6/12/2015
|
|
4/12/2016
|
|
1/7/2017
|
|
|
35,863
|
|
|
|
37,827
|
|
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
440
|
|
|
$
|
1,358
|
|
|
|
|
|
|
|
|
|
|
|
(475
|
)
|
|
|
883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9% Convertible Notes
Payable- issued 10/01/2016
|
|
3/26/2017
|
|
3/27/2018
|
|
|
157,895
|
|
|
|
56,956
|
|
|
|
|
|
|
|
162,463
|
|
|
|
|
|
|
|
58,370
|
|
|
$
|
220,833
|
|
|
|
(194,820
|
)
|
|
|
-
|
|
|
|
(26,013
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
105,000
|
|
|
|
87,287
|
|
|
|
21,395
|
|
|
|
|
|
|
|
(136,759
|
)
|
|
|
115,364
|
|
|
$
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued January 7, 2016
|
|
1/7/2016
|
|
1/7/2017
|
|
|
50,000
|
|
|
|
15,803
|
|
|
|
15,803
|
|
|
|
|
|
|
|
|
|
|
|
66,985
|
|
|
$
|
82,788
|
|
|
|
(85,228
|
)
|
|
|
-
|
|
|
|
2,440
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued March 7, 2016
|
|
3/7/2016
|
|
3/7/2017
|
|
|
50,000
|
|
|
|
87,538
|
|
|
|
36,449
|
|
|
|
|
|
|
|
|
|
|
|
45,348
|
|
|
$
|
81,797
|
|
|
|
(74,602
|
)
|
|
|
-
|
|
|
|
(7,195
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% Convertible Notes
Payable- issued March 7, 2016
|
|
3/7/2016
|
|
1/7/2017
|
|
|
46,803
|
|
|
|
82,115
|
|
|
|
15,894
|
|
|
|
|
|
|
|
|
|
|
|
60,672
|
|
|
$
|
76,566
|
|
|
|
(17,111
|
)
|
|
|
-
|
|
|
|
(26,546
|
)
|
|
|
32,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
503,311
|
|
|
$
|
425,881
|
|
|
$
|
148,814
|
|
|
$
|
162,463
|
|
|
$
|
(171,439
|
)
|
|
$
|
364,985
|
|
|
$
|
504,823
|
|
|
$
|
(371,761
|
)
|
|
$
|
-
|
|
|
$
|
(72,714
|
)
|
|
$
|
60,348
|
|
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
The
Company’s total mark-to-market fair value adjustment ((income)/expense) for the six month ended June 30, 2017 amounted to
$292,271.
Note
7. STOCKHOLDERS’ EQUITY
The
Company has authorized 1,500,000,000 shares of common stock with a par value of $0.0001 per share. There were 600,468,629 and
225,847,976 shares of common stock issued and outstanding at June 30, 2017 and December 31, 2015, respectively.
The
Company has authorized 1,000,000 shares of Series A preferred stock with a par value of $0.0001 per share. At June 30, 2017 and
December 31, 2015, there were 500,000 shares and 50,000 shares of Series A preferred stock were issued and outstanding respectively.
The preferred stock has preferential voting rights of 100 votes per outstanding share.
The
Company has authorized 50,000 shares of Series B convertible preferred stock with a par value of $0.0001 per share. At December
31, 2016 there were 39,000 shares issued of which 12,900 shares of Series B preferred were converted into common stock in accordance
with the terms of the Series B Preferred stock. Therefore; there were 26,100 shares outstanding at December 31, 2016. The Series
B preferred stock has no voting rights. During the quarter ended March 31, 2017, 18,100 shares of Series B preferred shares were
converted into common stock in accordance with the terms of the Series B preferred stock. As of result there were 8,000 shares
of Series B preferred shares outstanding at June 30, 2017. The holders of the Series B convertible preferred stock have the right
to convert the same into Common Stock of the Corporation at the ratio of one (1) share of Series B Convertible Preferred for five
hundred (500) shares of Common Stock.
During
the quarter ended March 31, 2016, the Company issued an aggregate 4,787,129 shares of common stock at prices ranging from $0.00275
to $0.003355 per share as partial conversion of notes.
During
the quarter ended March 31, 2016, the Company issued 1,700,000 shares of common stock upon conversion of 3,400 shares of Series
B preferred stock.
During
the quarter ended March 31, 2016, the Company issued 10,000 shares of Series B Preferred stock in settlement of the $50,000 liability
to a related party for the purchase of inventory.
During
the quarter ended June 30, 2016, the Company issued an aggregagte 10,683,804 shares of common stock at prices ranging from $0.0028
to $0.0044 per share as partial conversion of notes.
During
the quarter ended June 30, 2016 the Company amended a Convertible Debenture originally issued June 12, 2015. The Company issued
300,000 shares to the debenture holder for the main purpose of extending the maturity date to one year from the date of the amendment.
During
the quarter ended June 30, 2016, the Company issued 1,950,000 shares of common stock upon conversion of 3,900 shares of Series
B preferred stock.
During
the quarter ended June 30, 2016, the Company issued 1,100,000 shares of common stock upon conversion of 2,200 shares of Series
B preferred stock.
During
the quarter ended June 30, 2016, the Company issued 1,700,000 shares of common stock upon conversion of 3,400 shares of Series
B preferred stock.
During
the quarter ended June 30, 2016, the Company issued 4,000 shares of Series B Preferred stock in settlement of the $20,000 liability
to a related party for the purchase of a trademark.
On
April 15, 2016 the Company entered into a Business Consulting Agreement with a Michigan limited liability company (“Consultant”).
The agreement provides for the Company retaining the Consultant for 125 days for general business and product development services.
The Consultant shall be paid $750 per month in cash and 500,000 shares of common stock of the Company valued at $5,000 as of the
effective date and another 500,000 common shares upon determination of the Company in its sole and absolut discretion.
During
the quarter ended June 30, 2016 pursuant to the Business Consulting Agreement, the Company issued 500,000 shares of common stock
at $0.01 per share for services provided to the Company.
During
the quarter ended September 30, 2016, the Company issued an aggregate 39,043,730 shares of common stock at prices ranging from
$0.0001 to $0.0092 per share as partial conversion of notes.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
During
the quarter ended September 30, 2016, the Company issued 4,000,000 shares of common stock at $0.0092 per share for services provided
to the Company.
During
the quarter ended September 30, 2016, the Company issued an aggregate 13,500,000 shares of common stock at prices ranging from
$0.0001 to $0.0092 per share for services provided to the Company.
During
the quarter ended December 31, 2016, the Company issued an aggregate 78,581,563 shares of common stock at prices ranging from
$0.0012 to $0.0054 per share as partial conversion of notes.
During
the quarter ended December 31, 2016, the Company issued an aggregate 36,900,000 shares of common stock at prices ranging from
$0.0012 to $0.0054 per share for services provided to the Company.
During
the quarter ended March 31, 2017, the Company issued an aggregate 43,000,000 shares of common stock at prices ranging from $0.0028
to $0.0094 per share for services provided to the Company.
During
the quarter ended March 31, 2017, the Company issued an aggregate 112,497,708 shares of common stock at prices ranging from $0.0001
to $0.0028 per share as partial conversion of notes.
During
the quarter ended March 31, 2017, the Company issued an aggregate 9,050,000 shares of common stock for conversion of 18,100 shares
of Preferred Series B stock.
During
the quarter ended June 30, 2017, the Company issued an aggregate 33,000,000 shares of common stock at prices ranging from $0.0022
to $0.0028 per share for services provided to the Company.
During
the quarter ended June 30, 2017, the Company issued an aggregate 177,072,945 shares of common stock at prices ranging from $0.0001
to $0.0028 per share as partial conversion of notes.
During
the quarter ended June 30, 2017, the Company issued an aggregate 450,000 shares of Preferred Series A stock at par of $.0001.
Note
8. COMMITMENTS AND CONTINGENCIES
The
Company currently has three office locations. It rents offices on a month-to-month basis from the Company’s President and
stockholder for $525 per month which amounted to $3,150 for the six months ended June 30, 2017. The Company also has ready-to-go
office space available to be used for meetings etc. at a nominal cost of approximately $100 per month with no commitment. The
cost of this space for the six-months ended June 30, 2017 was $594. On September 12th 2016 the Company entered into a commercial
lease agreement for office premises at a cost of $650 per month for a one-year term with the option to renew for one extended
term of three years. The cost of this space for the six-months ended June 30, 2017 was $3,900.
Total
rent expense for the six-months ended June 30, 2017, and 2016, totaled $7,644 and $4,093.
The
Company has agreements with consultants for ongoing services to be rendered with the following commitments:
|
|
Commitment
|
|
Term
|
Consultant
- FDA requirements and compliance
|
|
$2,000
per month
|
|
12
Months
|
Consultant
- capital formation and market services
|
|
Various
equity percentage issuances of restricted stock for fundings
|
|
6
Months
|
Consultant - tradeshow attendance, strategy and collaboration, coordination
regarding FDA compliance, manufacturing operations, sales and marketing, other related services
|
|
$10,000
per month (payable quarterly in cash or common stock from the 2016 Equity Incentive Plan)
|
|
12
Months
|
Note
9. INCOME TAXES
The
Company’s deferred tax asset consists primarily of carryforward net operating losses (NOLs). The Company believes that,
at this time, it is more likely than not that the benefit of the NOLs will not be realized and has therefore recorded a full valuation
allowance.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
The
income tax benefit differs from the amount computed by applying the statutory federal and state income tax rates to the loss before
income taxes. The sources and tax effects of the differences are as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Statutory federal income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
State income taxes, net of federal taxes
|
|
|
9
|
%
|
|
|
9
|
%
|
Valuation allowance
|
|
|
(43
|
)%
|
|
|
(43
|
)%
|
Effective income tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
As
of December 31, 2016, the Company has a net operating loss carryforward of approximately $1,125,667 to reduce future federal taxable
income which begins to expire in the year 2030. The Company is also subject to corporate taxes in the State of New Jersey which
has similiar net operating loss carryover provisions which start to expire in the year 2030.
The
Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since
its inception. All of the Company’s open tax years beginning in tax year 2013 are subject to federal and state tax examinations.
Note
10. RELATED PARTY TRANSACTIONS
In
August 2015, the Company acquired 100% of the issued and outstanding common stock of Medical Lasers Manufacturer, Inc. (“MLM”)
from a stockholder and officer of the Company for 20,000 common shares which were valued at $0.001 per share. All intercompany
transactions were eliminated during consolidation.
As
more fully described in Note 3 to the Consolidated Financial Statements, the Company owed the following amounts to related parties
as of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Due to Related Party
|
|
$
|
8,921
|
|
|
$
|
8,921
|
|
Due to officer/stockholder
|
|
|
8,955
|
|
|
|
10,555
|
|
Due to other stockholders
|
|
|
6,790
|
|
|
|
5,975
|
|
Total Related Party Obligations
|
|
$
|
24,666
|
|
|
$
|
25,451
|
|
The
company has entered into an employment agreement with its Chief Executive Officer (CEO) for the five year period beginning January
1, 2012. The agreement provides for base compensation, annual bonus, benefits, vacation and reimbursements. Under this agreement,
the base compensation of the Company’s CEO is $100,000 per annum which has been accrued for the years ended December 13,
2015 and 2014. In mid-year 2016 the Company commenced payroll and is paying the CEO for current wages in this manner. During the
year ended December 31, 2016, $18,974 in accrued compensation was paid. Accrued compensation in the amount of $30,000 was converted
to shares of common stock during 2015. In the quarter ended June 30, 2017, $45 in accrued CEO compensation was converted to Series
A Preferred shares.
In
August 2015, MLM acquired a trademark from the son of the Company’s President for $20,000 due 90 days from the date of acquisition.
During the quarter ended June 30, 2016, the Company issued 3,400 shares of Preferred Series B stock as settlement on this liability.
Due to the uncertainty of future cash flows from the trademark management has deemed it to be impaired and recorded an impairment
expense of $20,000 at September 30, 2015.
In
August 2015, subsequent to the date the Company acquired MLM, MLM purchased $50,000 in inventory from the son of the Company’s
President. The inventory consisted of 20 hand-held laser devices. During the quarter-ended March 31, 2016, 10,000 shares of Series
B Preferred stock were issued in settlement of this liability.
Medifirst
Solutions, Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
As
more fully described in Note 1-Intangible Asset-Licensing Agreement, on March 8th 2016 (with an effective date of October 1, 2015)
the Company entered into a Licensing Agreement with a Florida Corporation (Licensor) that is owned by a related party. The Company
issued 25,000 shares of Series B Preferred stock to the Licensor as partial consideration for the Licensing agreement plus a $150,000
promissory note to the Licensor for the balance of the consideration. During the quarter-ended March 31, 2016, 3,400 shares of
Series B Preferred stock were converted into 1,700,000 shares of common stock in accordance with the terms of the Series B Preferred
stock. During the quarter ended March 31, 2017, 18,100 shares of Series B preferred stock was converted into 9,050,000 shares
of common stock in accordance with the terms of the Series B Preferred stock.
Note
11. BASIS OF REPORTING - GOING CONCERN
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the recoverability of assets and the satisfaction of liabilities in the normal course of business.
The Company has incurred losses from inception
of approximately $3,250,726 which, among other factors, raises substantial doubt about the Company’s ability to continue
as a going concern. The ability of the Company to continue as a going concern is dependent upon management’s plans to raise
additional capital from the sale of stock and to receive additional financing and to commence sales of its flagship product and
create revenue. The accompanying financial statements do not include any adjustments that might be required should the Company
be unable to continue as a going concern.
Note
12. STOCK COMPENSATION - EQUITY INCENTIVE PLAN
In
July 2016, the Company adopted the Medifirst Solutions, Inc. 2016 Equity Incentive Plan (the “Plan”) pursuant to which
the Company may grant stock options, restricted stock purchase offers and other equity-based awards up to an aggregate of 20,000,000
shares of common stock. The Plan is designed to retain directors, executives and selected employees and consultants and reward
them for making contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards
under the Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company.
On
December 6th, 2016 the company amended the terms of the Plan and filed an S-8 Registration Statement with the Securities and Exchange
Commission (“SEC”) increasing the number of shares permitted to be issued under the Plan to 32,000,000.
During
the quarter ended March 31, 2017, the Company issued from the Plan a total of 27,100,000 shares of common stock to non-employees
for services rendered. As of March 31, 2017 there is a balance of -0- shares available for future issuance under the Medifirst
Solutions, Inc. 2016 Equity Incentive Plan.
In
May 2017, the Company adopted the Medifirst Solutions, Inc. 2017 Equity Incentive Plan (the “Plan”) pursuant to which
the Company may grant stock options, restricted stock purchase offers and other equity-based awards up to an aggregate of 125,000,000
shares of common stock. The Plan is designed to retain directors, executives and selected employees and consultants and reward
them for making contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards
under the Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company. During
the quarter ended June 30, 2017, the Company issued from the Plan 28,000,000 shares to non-employees for services rendered. As
of June 30, 2017 there is a balance of 97,000,000 shares available for future issuance under the Medifirst Solutions, Inc. 2017
Equity Incentive Plan.
Note
13. SUBSEQUENT EVENTS
Subsequent to the quarter ended June 30, 2017,
the Company issued an aggregate of 8,000,000 shares of Common Stock for services rendered by consultants and professionals.
Subsequent
to the quarter ended June 30, 2017, the Company issued an aggregate 17,285,121 shares of Common Stock upon conversions of an aggregate
principal amount equal to approximately $15,803 outstanding convertible promissory notes and $1,309 in accrued interest.