ITEM 1. BUSINESS
Organizational History
On November 1, 2005, Bio-Solutions International, Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the "Agreement") with OmniMed Acquisition Corp., (the "Acquirer”), a Nevada corporation and a wholly owned subsidiary of Bio-Solutions, OmniMed International, Inc., a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the "OmniMed Shareholders"). Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed from the OmniMed Shareholders. As consideration for the acquisition of OmniMed, Bio-Solutions agreed to issue 1,979 shares of Bio-Solutions' common stock to the OmniMed Shareholders.
As a result of the Agreement, the OmniMed Shareholders assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions changed its name to OmniMed International, Inc. Effective January 17, 2006, OmniMed changed its name to MedeFile International, Inc. (“MedeFile”, the “Company”, “we”, “us”, or “our”).
On October 8, 2012, the Company effected a 5,000-to-1 reverse split of its common stock. All share amounts in this report reflect the reverse stock split unless otherwise indicated.
Overview of Business
MedeFile International, Inc., through its MedeFile, Inc. subsidiary, has developed and globally markets a proprietary, patient-centric, Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s actual medical records. 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 all of its members’ actual medical records on behalf of each member, and create a single, comprehensive, electronic Personal Health Record (PHR). 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 MedeDrive flash drive/keychain or branded UBS-bracelet.
By subscribing to the MedeFile system, members empower themselves to take control of their own health and well-being, and 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 benefit from knowing that their medical records are protected from fire, natural disaster, document misplacement or the closing of a medical or dental practice.
MedeFile believes it enjoys a number of direct, competitive advantages over others in the medical records marketplace:
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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.
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MedeFile does all the work of collecting and updating medical information on an ongoing basis; the function of our products’ dependence on the patient taking action is minimal - particularly when compared to patient action required to support competing solutions.
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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.
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MedeFile provides a coherent mix of services and products that are intended to improve the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.
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 (HIPAA), 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. HIPAA 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.
In addition, in 2009, the Health Information Technology for Economic and Clinical Health Act (HITECH Act) legislation was created to stimulate the adoption of electronic health records (EHR) and supporting technology in the United States. President Obama signed HITECH into law on February 17, 2009 as part of the American Recovery and Reinvestment Act of 2009 (ARRA), an economic stimulus bill. The HITECH Act continues the effort of the Health Insurance Portability and Accountability Act (HIPAA) to encourage movement to electronic patient records and to deliver stricter data protection regulations for more secure patient privacy. The HITECH act stipulates that, beginning in 2011, healthcare providers will be offered financial incentives for demonstrating meaningful use of electronic health records (EHR). Incentives will be offered until 2015, after which time penalties may be levied for failing to demonstrate such use. The Act also establishes grants for training centers for the personnel required to support a health IT infrastructure.
Overview of Products and Services
MedeFile iPHR
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 iPHR is comprised of copies of the member's actual medical records as well as a Digital Health Profile (DHP), which is an overview of the patient's and his family's medical history. In addition, every Premium MedeFile member and MedeOne 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.
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.
Quality of Care Program
MedeFile’s Quality of Care Program is a unique marketing initiative providing for MedeFile to partner on a revenue-sharing basis with established medical practitioners, physician groups and hospitals to educate patients on the benefits and advantages of adopting the MedeFile system as their Personal Health Record solution. Studies have shown that consumers are more interested in adopting a PHR offered by their healthcare provider than any other source.
MedeFile believes that its iPHR platform can serve as a highly effective patient portal and practice integration tool that addresses the need for practitioners to meet Stage 2 “meaningful use” standards required for qualifying for federal incentive payments pursuant to the HITECH Act. Stage 2 of the HITECH Act, which begins October 2012, stipulates that 20% of the patient populations of eligible providers must have the ability to electronically view and download their health information - including diagnostic test results, physician’s notes, medication lists and medication allergies, via a web-based portal within 36 hours of being seen by the eligible providers. With the Quality of Care Program, healthcare providers can establish an elevated patient-centric standard of care and economically benefit from increased clinical efficiencies, government “meaningful use” incentives and their financial stake in the successful marketing of MedeFile’s iPHR solution to their patient populations.
MedePro
Introduced in 2012, MedePro is a medical record retrieval and document management solution created specifically by MedeFile for legal and insurance professionals.
For Legal Professionals
Medical record retrieval and document management play critical roles in helping plaintiff or defense counsels build, support and win their cases, be them mass tort, malpractice, personal injury, product liability, workers’ compensation or other types of health- or medical-related litigation. However, the sheer cost, manpower and time required to request, retrieve and manage what is typically hundreds, if not thousands, of records can be overwhelming. Upon engagement, MedeFile’s highly competent MedePRO customer service agents and our proprietary electronic retrieval system go to work contacting case-related healthcare providers nationwide to collect copies of all actual medical records and files - including actual notes, EKGs, X-rays, MRIs, labs, et al. Then, using a secure, double encrypted process, MedeFile consolidates, digitizes, indexes, paginates, Bates stamps, stores and protects the records in the MedeVault, MedeFile’s proprietary, highly secure, redundant electronic depository which can only be accessed by authorized individuals.
Retrieved medical records can be searched and viewed online through MedeFile’s secure online portal from anywhere on Earth using an Internet-enabled desktop computer or mobile computing device. In addition, individual and/or collective documents can also be downloaded, shared with co-counsels (essential for large mass tort cases), and copied to a MedeDrive, a proprietary USB thumb drive ideal for portability and convenient and economical long term storage.
The MedePRO solution may also be seamlessly integrated into a law firm’s case management system to facilitate real-time, one-click status checks of requested records, helping to expedite case discovery and complex trial preparation.
For Insurance Professionals
In collaboration with medical insurance providers and with proper authorization, MedePRO enables the expeditious, secure retrieval and management of all actual medical records and files from a patient’s current and former care providers. Records received are then digitized, indexed, coded and stored in the MedeVault, from which case managers can access, view, share and download a patient’s comprehensive, longitudinal personal health record from any web-enabled device. Further, MedePRO’s online record order tracking system allows case managers to view real-time status reports on a 24/7 basis. Insurance professionals can also tap the power and convenience of MedePRO for the purpose of analyzing medical claims or investigating and adjudicating medical identity theft and fraud.
Members
As of December 31, 2012, MedeFile had approximately 20,238 members. The Company’s marketing strategy includes issuing trial memberships on several levels.
Sales and Marketing
MedeFile employs the following marketing strategies to generate awareness of MedeFile's products and services: direct sales, direct mail, public relations campaigns, speaking engagements by MedeFile's executive officers, participation in trade shows, and alliances and partnerships with third parties.
MedeFile's marketing strategy will target the following types of organizations: Health Maintenance Organizations; Preferred Provider Organizations; law practices, managed care organizations; insurance companies; trade unions; large affinity groups, such as AARP; large and medium-sized self-insured corporations; nursing homes and assisted living facilities; and Internet users.
In particular, the MedeFile service is designed to be sold in several distinct ways:
MedeFile’s 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.
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Physician referrals - Patients may enroll based on a doctor's referral. In the event that these physicians are also MedeFile Quality of Care Program customers, they may easily transfer their patients' information into the MedeFile system.
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Large group offerings (e.g. AARP, trade unions, etc.) - Large, membership-driven organizations may offer the MedeFile system to their members at a discounted rate, which may be negotiated with MedeFile 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. Hence, MedeFile functionality may be accessed using each organization's site.
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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.
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Law firms and insurance companies - law firms and insurance companies may engage MedeFile’s MedePro service for the purpose of retrieving medical records and managing documents in association with case preparation and management.
Technology
MedeFile will 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. MedeFile will 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 MedeFile gathers, consolidates, organizes and securely stores 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 unavailable). 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.
Employees
From our inception through the period ended December 31, 2012, we have primarily relied on the services of outside consultants. As of December 31, 2012, MedeFile had a total of 4 full time employees and 4 consultants.
The employees are covered by employment agreements, and we believe our relations with our employees are favorable.
ITEM 1A.
ITEM 1A. RISK FACTORS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS TOGETHER WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. SOME OF THE INFORMATION CONTAINED IN THIS DISCUSSION AND ANALYSIS OR SET FORTH ELSEWHERE IN THIS ANNUAL REPORT, INCLUDING INFORMATION WITH RESPECT TO OUR PLANS AND STRATEGIES FOR OUR BUSINESS, INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. YOU SHOULD REVIEW THE "RISK FACTORS" SECTION OF THIS REPORT FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE RESULTS DESCRIBED IN OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD SUFFER.
RISKS RELATED TO OUR BUSINESS
We have a history of operating losses, and we may not achieve or maintain profitability in the future.
We have experienced a net loss of $11,404,925, for the year ended December 31, 2012. As of December 31, 2012, we have an accumulated deficit of $29,123,348. The accompanying consolidated financial statements have been prepared contemplating a continuation of the Company as a going concern.
In the event that cash flow from operations is less than anticipated and we are unable to secure additional funding to cover our expenses, in order to preserve cash, we would be required to reduce expenditures and effect reductions in our corporate infrastructure, either of which could have a material adverse effect on our ability to continue our current level of operations. To the extent that operating expenses increase or we need additional funds to make acquisitions, develop new technologies or acquire strategic assets, the need for additional funding may be accelerated and there can be no assurances that any such additional funding can be obtained on terms acceptable to us, if at all. If we were not able to generate sufficient capital, either from operations or through additional debt or equity financing, to fund our current operations, we would be forced to significantly reduce or delay our plans for continued research and development and expansion. This could significantly reduce the value of our securities.
The commercial success of our products and services depends on the widespread market acceptance of digital technology in the healthcare industry.
The market for digitization of medical records is emerging. Our success will depend on acceptance of digital technology for use in and maintaining and accessing medical records by individuals and healthcare providers, as well as the success of the commercialization of the MedeFile products and services. Presently, it is difficult to assess or predict with any assurance the potential size, timing and viability of market opportunities for our technology in this market. The healthcare records market sector is well established with entrenched competitors with whom we must compete.
We may be unable to effectively manage our growth or implement our expansion strategy.
Our growth strategy is subject to related risks, including pressure on our management and on our internal systems and controls. Our planned growth will require us to invest in new, and improve our existing, operational, technological and financial systems and to expand, train and retain our employee base. Our failure to effectively manage our growth could have a material adverse effect on our future financial condition. In addition, due to our lack of operating experience we may have difficulty in managing our growth.
We have limited marketing or sales capabilities, and if we are unable to develop sales and marketing capabilities, we may not be successful in commercializing our products.
We currently have limited sales, marketing and distribution capabilities. As a result, we may be forced to depend on collaborations or agreements with third parties that have established distribution systems and direct sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenues will depend upon the efforts of third parties, over which we may have little or no control.
We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.
We may acquire additional businesses, technologies and products if we determine that these additional businesses, technologies and products complement our existing business or otherwise serve our strategic goals. If we do undertake transactions of this sort, the process of integrating an acquired business, technology or product may result in operating difficulties and expenditures and may absorb significant management attention which would otherwise be available for ongoing development of our business. Moreover, we may never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of our securities, the incurrence of debt and contingent liabilities and amortization expenses related to intangible assets, which could adversely affect our results of operations and financial condition.
RISKS RELATED TO OUR COMMON STOCK:
Because our common stock is not registered under the Exchange Act, we will not be subject to the federal proxy rules and our directors, executive offices and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year.
Our common stock is not registered under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and we do not intend to register our common stock under the Exchange Act for the foreseeable future (provided that, we will register our common stock under the Exchange Act if we have, after the last day of our fiscal year, more than 500 shareholders of record and $10 million in assets, in accordance with Section 12(g) of the Exchange Act). As a result, although we are required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our Common Stock is not registered under the Exchange Act, we will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the Securities and Exchange Commission (“SEC”) a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our Common Stock is not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding Common Stock will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than 10% of a registered class of equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common shares and other equity securities, on Forms 3, 4 and 5 respectively. Such information about our directors, executive officers, and beneficial holders will only be available through periodic reports we file under the Exchange Act or registration statements we file under the Securities Act. Furthermore, so long as our Common Stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.
Our Common Stock is subject to the "Penny Stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
● that a broker or dealer approve a person's account for transactions in penny stocks; and
● the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
● obtain financial information and investment experience objectives of the person; and
● make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
● sets forth the basis on which the broker or dealer made the suitability determination; and
● that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
We do not expect to pay dividends for some time, if at all.
No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future operations and growth. We do not expect to pay cash dividends in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors.
Our future capital needs could result in dilution to investors; additional financing could be unavailable or have unfavorable terms.
Our future capital requirements will depend on many factors, including cash flow from operations, progress in our present operations, competing market developments, and our ability to market our products successfully. It may be necessary to raise additional funds through equity or debt financings. Any equity financings could result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense. Any financing, if available, may be on terms unfavorable to us. If adequate funds are not obtained, we may be required to reduce or curtail operations.
The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.
Our board of directors has the right, without stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely affect the voting power and equity interest of the holders of common stock, which could be issued with the right to more than one vote per share, and could be utilized as a method of discouraging, delaying or preventing a change of control. The possible negative impact on takeover attempts could adversely affect the price of our common stock.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K includes forward-looking statements. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project" and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management's beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the headings "Risk Factors" and "Management Discussion and Analysis of Financial Condition."
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified in this annual report which would cause actual results to differ before making an investment decision. Except as may be required under applicable securities laws, we undertake no duty to update any of the forward-looking statements.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES
MedeFile leases its main office, which is located at 301 Yamato Rd, Boca Raton, FL 33431. The current lease expires June 2013. The following table sets forth our rent payments for the last two fiscal years.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may become involved in litigation relating to claims arising out of it operations in the normal course of business. We are not currently involved in any legal proceedings or litigation and, to the best of knowledge, no governmental authority is contemplating any proceeding in which we are a party or to which any of our properties is subject, which would reasonable be likely to have a material adverse effect on the Company,
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted on the OTCQB under the symbol MDFI. Prior to February 23, 2011, our common stock was quoted on the OTC Bulletin Board under the symbol MDFI.
The following table sets forth, for the periods indicated, the range of high and low intraday closing bid information per share of our common stock.
The above prices are believed to reflect representative inter-dealer quotations, without retail markup, markdown or other fees or commissions, and may not represent actual transactions.
As of March 31, 2013, there were approximately 1,073 holders of record of the Company's common stock.
DIVIDEND POLICY
We do not currently pay any cash dividends on our common stock, and we currently intend to retain any future earnings for use in our business. Any future determination as to the payment of cash dividends on our common stock will be at the discretion of our Board of Directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by our Board of Directors. There are no restrictions in the Company's articles of incorporation or bylaws that prevent the Company from declaring dividends. The Nevada Revised Statutes, however, do prohibit the Company from declaring dividends where, after giving effect to the distribution of the dividend:
1. The Company would not be able to pay its debts as they become due in the usual course of business; or
2. The Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
The declaration of dividends on our common stock also may be restricted by the provisions of credit agreements that we may enter into from time to time.
SALES OF UNREGISTERED SECURITIES
On September 20, 2012, the Company sold 100,000 shares of common stock to an accredited investor for a purchase price of $50,000. The shares were issued on November 14, 2012.
In connection with the foregoing, the Company relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.
ISSUER PURCHASES OF EQUITY SECURITIES
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain "forward-looking statements." The terms "believe," "anticipate," "intend," "goal," "expect," and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's current expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including customer acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. 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. Except as may be required under applicable securities laws, 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"
OVERVIEW
Organizational History
On November 1, 2005, Bio-Solutions International, Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the "Agreement") with OmniMed Acquisition Corp., (the "Acquirer), a Nevada corporation and a wholly owned subsidiary of Bio-Solutions, OmniMed International, Inc., a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the "OmniMed Shareholders"). Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed from the OmniMed Shareholders. As consideration for the acquisition of OmniMed, Bio-Solutions issued 1,979 shares of Bio-Solutions' common stock to the OmniMed Shareholders.
As a result of the Agreement, the OmniMed Shareholders assumed control of Bio-Solutions. Effective November 21, 2005, Bio-Solutions changed its name to OmniMed International, Inc. Effective January 17, 2006, OmniMed changed its name to MedeFile International, Inc. ("MedeFile" or the "Company").
Overview of Business
MedeFile International, Inc., through its MedeFile, Inc. subsidiary, has developed and globally markets a proprietary, patient-centric, Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s actual medical records. Our goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. We will seek to accomplish this objective by providing individuals with a simple and secure way to access their lifetime of actual medical records in an efficient and cost-effective manner. Our products and services are designed to provide healthcare providers with the ability to reference their patient's actual past medical records, thereby ensuring the most accurate treatment and services possible while simultaneously reducing redundant procedures.
Interoperable with most electronic medical record systems utilized by physician practices, clinics, hospitals and other care providers, the highly secure, feature-rich MedeFile iPHR solution has been designed to gather all of its members’ actual medical records on behalf of each member, and create a single, comprehensive Electronic Health Record (EHR). The member can access his/her records 24-hours a day, seven days a week - or authorize a third party user - on any web-enabled device (PC, cell phone, PDA, e-reader, et al), as well as the portable MedeFile flash drive/keychain or branded UBS-bracelet.
By subscribing to the MedeFile system, members can empower themselves to take control of their own health and well-being as well as empower their healthcare providers to make sound and lifesaving decisions with the most accurate, up-to-date medical information available. In addition, with MedeFile, members benefit from knowing that their medical records are protected from fire, natural disaster, document misplacement or the closing of a medical or dental practice.
We believe we enjoy a number of direct, competitive advantages over others in the medical records marketplace:
·
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; the function of our products’ dependence on the patient taking action is minimal - particularly when compared to patient action required to support competing solutions.
·
We provide a complete medical record. Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), and are by no means complete or necessarily accurate records
·
We provide a coherent mix of services and products that are intended to improve the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2012 COMPARED TO YEAR ENDED DECEMBER 31, 2011
Revenues
Revenues for the year ended December 31, 2012 totaled $39,217 compared to revenues of $495,451 during the year ended December 31, 2011. The decrease in membership revenue is primarily related to a decrease 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 decreased its marketing and advertising efforts through a previously used telemarketing campaign. As a result, there has been a substantial decrease 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 year ended December 31, 2012 totaled $1,189,982, a decrease of $666,642 or approximately 35.9% compared to selling, general and administrative expenses of $1,855,825 for the year ended December 31, 2011. Overall there was a decrease in the total selling, general and administrative which is primarily due to decreased costs associated with a previously used telemarketing campaign and business development expenses.
Compensation Expense
On April 10, 2012 there was an expense totaling $9,792,000 for the issuance of 1,632,000 shares, valued based on a closing price of $6.00 per share to the CEO in relation to an anti-dilution agreement. The shares issued to the CEO are treated as compensation under GAAP accounting.
Marketing Expense
Marketing expense for the year ended December 31, 2012 totaled $0, compared to $524,301 for the year ending December 31, 2011. The decrease in marketing expense was due to decreased use of lead generation for telemarketing efforts. The Company relied on one source for generation of leads through the Company’s telemarketing efforts.
Depreciation Expense
Depreciation expense totaled $8,749 for the year ended December 31, 2012, compared to depreciation expense of $10,086 during the year ended December 31, 2011. The decrease in depreciation was due to some assets being fully depreciated.
Amortization Expense
Amortization expense for the year ended December 31, 2012 totaled $20,982, compared to $20,983 for the year ended December 31, 2011. 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.
Net Loss
For the reasons stated above, our net loss for year ended December 31, 2012 was $11,404,925, or $1.47 per share, a decrease of $9,849,058, compared to a net loss of $1,555,867, or $2.09 per share, during the year ended December 31, 2011.
FINANCIAL CONDITION
Liquidity and Capital Resources
As of December 31, 2012, we had cash and cash equivalents of $234,356, inventory of $55,458, merchant services reserve of $64,319, prepaid insurance of $998 and accounts receivable of $391. Net cash used in operating activities for the year ended December 31, 2012 was approximately $1,101,817. Current liabilities of $5,761,343 consisted of $138,211 for accounts payable and accrued liabilities, deferred revenues of $4,313 and warrant liabilities of $5,618,819. We have a net negative working capital of $5,405,821.
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 $11,404,925 for the year ended December 31, 2012 and $1,555,867 for the year ended December 31, 2011 and had an accumulated deficit of $29,123,348 as of December 31, 2012. The Company has a net negative working capital of $5,405,821 as of December 31, 2012.
The Company currently estimates that it will require approximately $420,000 to continue its operations for the next twelve months. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and conditions in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements as of December 31, 2012 or as of the date of this report.
Critical Accounting Policies
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policy involves the most complex, difficult and subjective estimates and judgments:
Revenue Recognition
The Company generates revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Stock-based Compensation
The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
Recent Accounting Pronouncements
On January 1, 2012, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. These changes both clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only. Other than the additional disclosure requirements, the adoption of these changes had no impact on the Consolidated Financial Statements.
On January 1, 2012, the Company adopted changes issued by the FASB to the presentation of comprehensive income. These changes give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. Management elected to present the two-statement option. Other than the change in presentation, the adoption of these changes had no impact on the Consolidated Financial Statements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of MedeFile International, Inc.
We have audited the accompanying consolidated balance sheets of MedeFile International, Inc. as of December 31, 2012 and 2011, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the two year period ended December 31, 2012. MedeFile International, Inc.'s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MedeFile International, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
/s/ L.L. Bradford & Company, LLC
L.L. Bradford & Company, LLC
April 9, 2013
Las Vegas, Nevada
Medefile International, Inc.
Consolidated Balance Sheets
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2012 and 2011
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc.
Consolidated Statement of Stockholders' Equity
For the year ended December 31, 2012 and 2011
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc.
Consolidated Statements of Cash Flows
For the year ended December 31, 2012 and 2011
The accompanying notes are an integral part of these consolidated financial statements
Medefile International, Inc.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS
Basis of Presentation
The accompanying financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Restatement
In connection with Securities Purchase Agreements entered into during the third quarter 2011 (see Notes 5 and 6), the Company granted warrants with ratchet provisions that were not accounted for properly. The warrants, which were for the purchase of up to 35,461 shares of the Company’s common stock with an original exercise price of $2.50, were granted in July 2011 in connection with the sale of 35,461 shares of common stock. The warrants’ ratchet provision were triggered by the Company’s sale of common stock in April 2012 at a purchase price of $0.50, as a result of which , the exercise price was adjusted to $0.50 and the number of shares underlying the warrants was increased to 1,733,050. The anticipated effects of the resulting adjustments are as follows:
Upon grant, the Company assesses the fair value of the warrants using the Black Scholes pricing model and records a warrant liability for the value. The adjustment for this valuation to Warrant Liability is $635,143. An adjustment to change in fair value of warrant liability is a gain of $523,507 for the year ended December 31, 2011 reflected directly to retained earnings. The warrant liability at December 31, 2011 is $111,636.
The following table provides additional details regarding the changes to the balance sheet as of December 31, 2011
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 actual medical records. Medefile's goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. Medefile will seek 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 all of its members’ actual medical records on behalf of each member, and create a single, comprehensive Electronic Health Record (EHR). The member can access his/her records 24-hours a day, seven days a week - or authorize a third party user - on any web-enabled device (PC, cell phone, PDA, e-reader, et al), as well as the portable MedeFile flash drive/keychain or branded UBS-bracelet.
By subscribing to the MedeFile system, members empower themselves to take control of their own health and well-being, and 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 believes it 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; function of our products’ 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 improve 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 $11,404,925 for the year ended December 31, 2012 and $1,555,867 for the year ended December 31, 2011 and had an accumulated deficit of $29,123,348 as of December 31, 2012. The Company has negative working capital of $5,405,821 as of December 31, 2012.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The operating losses raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to obtain additional financing depends on the availability of its borrowing capacity, the success of its growth strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond the Company's control.
We will need additional investments in order to continue operations to cash flow break even. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.
However, the trading price of our common stock could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.
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 not 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 year ended December 31, 2012 and 2011 of approximately $0 and $6,500 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. At December 31, 2012 and 2011, deferred revenue totaled $4,313 and $9,855, respectively.
Reclassifications
Certain reclassifications have been made in prior periods financial statements to conform to classifications used in the current period.
Recent Accounting Pronouncements
On January 1, 2012, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. These changes both clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only. Other than the additional disclosure requirements, the adoption of these changes had no impact on the Consolidated Financial Statements.
On January 1, 2012, the Company adopted changes issued by the FASB to the presentation of comprehensive income. These changes give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. Management elected to present the two-statement option. Other than the change in presentation, the adoption of these changes had no impact on the Consolidated Financial Statements.
Fair Value of Financial Instruments
Cash and Equivalents, Store Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities
The carrying amounts of these items approximated fair value.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).
Level 1-Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2-Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3-Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities are described below:
Impairment of Long Lived Assets
In accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. ASC 360-10 relates to assets that can be amortized and the life can be determinable. The Company reviews property and equipment and other long-lived assets for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the asset’s carrying amount to future undiscounted net cash flows the assets are expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the assets or their fair values, whichever is more determinable.
Inventory
Inventories are stated at the lower of cost or market value. Cost is determined by the first-in, first-out basis and market being determined as the lower of replacement cost or net realizable value. The Company records inventory write-downs for estimated obsolescence of unmarketable inventory based upon assumptions about future demand and market conditions. For the years ended December 31, 2012 and 2011, the Company did not have any inventory write downs.
Net Loss per Share
Basic and diluted loss per share amounts are computed based on net loss divided by the weighted average number of common shares outstanding. Warrants to purchase 29,035 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 year ending December 31, 2012. Warrants to purchase 29,035 common shares and options to purchase 1,128 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 year ended December 31, 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.
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:
During May 2012 the Company began redesigning of its website. The redesign is anticipated to be completed in May 2013.
Amortization is calculated over a three-year period beginning in the second quarter of 2010. Amortization expense for the years ending December 31, 2012 and 2011 is $20,982 and $20,983, respectively.
4. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
Depreciation is calculated by using the straight-line method over the estimated useful life. Depreciation expense totaled $8,749 and $10,086 for the years ended December 31, 2012 and 2011, respectively.
5. WARRANT LIABILITY
In connection with certain securities purchase agreements entered into during the third quarter 2011 and the second quarter 2012 (see Note 6), the Company granted warrants with ratchet provisions. The warrants expire date of four years from the date of grant. During the first two years of grant, if the Company issues any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price will be adjusted to equal the average price per share received by the Company for the additional shares issued. After the first two years, if the Company issues any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price will be adjusted using a formula based on the existing exercise price, the outstanding shares before and after the issuance of such shares, and the average price during the issuance of such shares. In addition to the exercise price adjustment, the number of shares upon exercise of the warrants are also subject to adjustment.
Upon grant, the Company assesses the fair value of the warrants using the Black Scholes pricing model and records a warrant liability for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the warrant liability to the new value, and records a corresponding gain or loss. (see Note 6 for variables used in assessing the fair value). The Company uses expected volatility based primarily on historical volatility using weekly pricing observations for recent periods that correspond to the expected life of the warrants. The risk-free interest rate is based on U.S. Treasury securities rates.
Due to the ratchet provisions, the Company treats the warrants as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock.
As of December 31, 2012, these warrants include the following:
Warrants granted during July 2011 in connection with the sale of 35,461 shares of common stock with the right to originally purchase up to 35,461 shares of the Company’s common stock with an original exercise price of $2.50. Due to the issuance of the Company’s common stock in April 2012, the exercise price was adjusted to $0.50 and the number of shares to 1,773,050. Fair value was determined using the following variables:
Warrants granted during April 2012 in connection with the sale of 100,000 shares of the Company’s preferred stock to a significant shareholder and brother of the Chief Executive Officer with the right to purchase up to 200,000 shares of the Company’s common stock with an exercise price of $0.50. Fair value was determined using the following variables:
Warrants granted during April 2012 in connection with the sale of 1,000,000 shares of the Company’s common stock with an exercise price of $0.50.
Transactions involving warrants with ratchet provisions are as follows:
As of December 31, 2012 and December 31, 2011, the warrant liability consisted of the following:
Change in fair market value of warrant liability resulted in a gain (loss) totaling $429,131 and $(523,507) for the years ended December 31, 2012 and 2011, respectively.
6. EQUITY
Common Stock
On October 8, 2012, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada, pursuant to which (i) the Company effected a 5,000-to-1 reverse split of its common stock and (ii) the number of authorized shares of the Company’s common stock decreased from 75,000,000,000 to 100,000,000. The market effective date of the reverse split was October 9, 2012. The effect of the stock split has been applied retroactively.
During the first quarter 2011, the Company entered into a Securities Purchase Agreement, pursuant to which the Company sold 40,200 shares of common stock at a purchase price of $15.00 per share. Total proceeds from the sale of the stock totaled $603,000.
On March 31, 2011, the Company issued 1,875 shares of common stock for amounts due to consultant. The shares had a market value of $37,500.
On April 29, 2011, the Company issued 1,531 shares of common stock for amounts due to a consultant. The shares had a market value of $32,143.
On May 11, 2011, the Company issued 2,000 shares of common stock for amounts due to consultants. The shares had a market value of $70,000.
During the first quarter 2011, the Company entered into a Securities Purchase Agreement for the sale of 9,000 shares of common stock at a purchase price of $15.00 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, 9,000 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 1,600 shares of common stock. On March 15, 2012 the Company issued the 1,600 shares of common stock in accordance with the Securities Purchase Agreement and the shares of common stock were issued against the remaining balance in Stock Payable.
During the third quarter of 2011, the Company entered into a Securities Purchase Agreement pursuant to which it sold 35,461 shares of common stock at a purchase price of $14.10 per share for cash of $500,000.
On August 1, 2011, the Company issued 2,206 shares of common stock for amounts due to consultant. The shares had a market value of $33,088.
On November 1, 2011, the Company issued 9,375 shares of common stock for amounts due to consultants. The shares had a market value of $42,187.
On March 1, 2012, the Company issued 10,714 shares of common stock to a consultant. The market value of the shares was $42,859,
On April 18, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with accredited investors (the “Investors”) pursuant to which, on April 18, 2012, the Company sold 1,000,000 shares of common stock for an aggregate purchase price of $500,000, and the Company issued four-year warrants to purchase 1,000,000 shares of common stock to the Investors with an exercise price of $0.50. The Investors were purchasers under the Company’s Securities Purchase Agreements entered into in July 2011.
On April 23, 2012, the Company issued an aggregate of 7,980,133 shares of common stock to certain shareholders of the Company, in accordance with anti-dilution rights held by such shareholders, including 5,383,594 shares to Lyle Hauser valued at par $539, 1,632,000 shares to Kevin Hauser valued at fair market value for compensation expense of $9,792,000, and 964,539 shares valued at par $96 to purchasers under Securities Purchase Agreements entered into by the Company in July 2011. Lyle Hauser is the Company’s largest shareholder and the brother of Kevin Hauser, the Company’s chief executive officer.
On May 15, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with accredited investors (the “Investors”) pursuant to which, on May 15, 2012, the Company sold 600,000 shares of common stock for an aggregate purchase price of $300,000, and the Company issued four-year warrants to purchase 600,000 shares of common stock to the Investors with an exercise price of $0.50. The Investors were purchasers under the Company’s Securities Purchase Agreements entered into in July 2011.
On June 26, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with accredited investors (the “Investors”) pursuant to which, on June 26, 2012, the Company sold 200,000 shares of common stock for an aggregate purchase price of $100,000, and the Company issued four-year warrants to purchase 200,000 shares of common stock to the Investors with an exercise price of $0.50. The Investors were purchasers under the Company’s Securities Purchase Agreements entered into in July 2011. The Company issued 100,000 shares on July 18, 2012 and the remaining 100,000 shares on November 14, 2012.
On July 16, 2012, the Company issued 24,000 shares of common stock to a consultant in the amount of $60,000.
On September 20, 2012, the Company sold 100,000 shares of common stock for a purchase price of $50,000. The shares were issued on November 14, 2012
On August 24, 2012, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which, the Company sold 500,000 shares of common stock for an aggregate purchase price of $250,000.
Preferred Stock
On April 10, 2012, the Company filed a certificate of designation of Series B Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of Nevada, pursuant to which 100,000 shares of the Company’s preferred stock were designated as Series B Convertible Preferred Stock (the “Series B Preferred Stock”). Pursuant to the Series B Certificate of Designation, the Series B Preferred Stock:
●
Has a liquidation preference over the common stock equal to the stated value of $1.00 per share.
●
Votes as a single class with the common stock and entitles its holders, for each share of Series B Preferred Stock, to cast such number of votes equal to 0.00051% of the total number of votes entitled to be cast. Accordingly, a holder of all 100,000 shares of Series B Preferred Stock will have the right to cast 51% of the total number of votes entitled to be cast.
●
Will automatically convert into common stock at a ratio of 2 shares of common stock for each share of Series B Preferred Stock, effective upon the Company’s filing of a certificate of amendment to its articles of incorporation, pursuant to which the Company’s number of authorized shares of common stock will increase to75,000,000,000.
On April 12, 2012, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Lyle Hauser (the “Preferred Stock Investor”). Lyle Hauser is the Company’s largest shareholder and the brother of Kevin Hauser, the Company’s chief executive officer. Pursuant to the Purchase Agreement, on April 12, 2012, the Company sold 100,000 shares of Series B Preferred Stock to the Preferred Stock Investor for an aggregate purchase price of $100,000, and the Company issued four-year warrants to purchase 200,000 shares of common stock to the Preferred Stock Investor with an exercise price of $0.50. Pursuant to the Purchase Agreement, the Preferred Stock Investor agreed to vote its shares of Series B Preferred Stock to approve an amendment to the Company’s articles of incorporation to increase the Company’s authorized shares of common stock to 75,000,000,000.
On April 23, 2012, 100,000 Series B Preferred shares were converted to 200,000 shares of common stock
Stock Options
2006 Incentive Stock Plan
In January 2006, the Board of Directors of the Company approved an Incentive Stock Plan, pursuant to which they have initially reserved 2,000 shares of common Stock for issuance. Under the 2006 Incentive Stock, the Board has granted an aggregate of 1,128 options to employees pursuant to certain employment agreement that are more fully described below: As of December 31, 2011 all options have expired.
2008 Amended and Restated Incentive Stock Plan
In November 2008, our Board of Directors 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 Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2008 Plan will be administered by our Board of Directors until such time as such authority has been delegated to a committee of the board of directors.
2010 Incentive Stock Plan
In December 2009, our Board of Directors 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 our Board of Directors until such time as such authority has been delegated to a committee of the Board of Directors.
A summary of option activity under all Plans as of December 31, 2012, and changes during the period then ended are presented below:
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 years ended December 31, 2012 and 2011, the Company recorded no compensation expense related to options.
Other Warrants
During the first quarter of 2008 the Company awarded 35 Common Stock warrants, at an exercise price of $2,800.00per 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:
On June 22, 2011, the Company awarded 2,000 Common Stock warrants, at an exercise price of $50.00 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 listed below:
On July 28, 2011, the Company awarded 27,000 Common Stock Warrants, at an exercise price of $25.00 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 three 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 was determined using the Black-Scholes pricing model and the assumptions listed below.
Warrant expense recognized for the years ending December 31, 2012 and 2011 was $0.00 and $314,589 respectively.
Transactions involving warrants are summarized as follows:
7. RELATED PARTY TRANSACTIONS
On April 12, 2012, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Lyle Hauser (the “Preferred Stock Investor”). Lyle Hauser is the Company’s largest shareholder and the brother of Kevin Hauser, the Company’s chief executive officer. Pursuant to the Purchase Agreement, on April 12, 2012, the Company sold 100,000 shares of Series B Preferred Stock to the Preferred Stock Investor for an aggregate purchase price of $100,000, and the Company issued four-year warrants to purchase 200,000 shares of common stock to the Preferred Stock Investor with an exercise price of $0.50. Pursuant to the Purchase Agreement, the Preferred Stock Investor agreed to vote its shares of Series B Preferred Stock to approve an amendment to the Company’s articles of incorporation to increase the Company’s authorized shares of common stock to 75,000,000,000.
On April 23, 2012, the Company issued an aggregate of 7,980,133 shares of common stock to certain shareholders of the Company, in accordance with anti-dilution rights held by such shareholders, including 5,383,594 shares to Lyle Hauser, 1,632,000 shares to Kevin Hauser, and 964,539 shares to purchasers under Securities Purchase Agreements entered into by the Company in July 2011. Lyle Hauser is the Company’s largest shareholder and the brother of Kevin Hauser, the Company’s chief executive officer.
8. SUBSEQUENT EVENTS
On January 20, 2013, the Company entered into and closed a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 200,000 shares of common stock for an aggregate purchase price of $100,000.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Annual 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.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management, with the participation of our principal executive and financial officer, have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2012 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation management concluded that, as of December 31, 2012, our internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to permanent rules of the SEC that permit the Company to provide only management’s report in this annual report.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer (Principal Executive and Financial Officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in internal controls
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10.
ITEM 10. DIRECTORS, OFFICERS AND CORPORATE GOVERNANCE.
The following tables set forth certain information with respect to our directors and officers. The following persons serve as our directors and executive officers:
Our executive officers are appointed by and serve at the discretion of our Board of Directors. There are no family relationships between any director and/or any executive officer.
Background of Executive Officers and Directors
Kevin Hauser, President, Chief Executive Officer and Acting Chief Financial Officer. On August 15, 2010, Mr. Hauser was appointed MedeFile’s new Chief Executive Officer, the post formerly held by his father and Company founder, Milton Hauser, who stepped down due to a personal health crisis. Prior to assuming the helm of the Company, Mr. Hauser was a key member of the executive management team, serving as MedeFile’s Vice President of Sales, Marketing and New Business Development since 2005. In this capacity, he helped to design, develop and implement strategies and programs aimed at establishing the MedeFile brand on a global basis. Among his many diverse responsibilities, he led a three-year series of consumer focus groups and conducted several in-depth industry market studies, helping to define “must-have” features and functionality of the MedeFile iPHR platform. In addition, Mr. Hauser was charged with pursuing strategic business partnerships capable of enhancing the Company’s brand-building and marketing efforts, which has since resulted in several important teaming arrangements being secured by the Company.
Mr. Hauser was also instrumental in the conception and commencement of MedeFile’s Quality of Care program, a strategic physician-focused initiative designed to educate patients on the benefits of MedeFile’s iPHR solution, promote new annual subscribers and generate a profitable new revenue channel for care providers. Since becoming CEO, Mr. Hauser has remained largely focused on executing a broad range of commercialization strategies to drive MedeFile subscription growth and build enduring long term value for the Company’s stockholders.
Prior to joining MedeFile, Mr. Hauser earned distinction in the securities industry, working primarily at Raymond James Financial Services. In 1996, he established a branch office for Raymond James in New York City’s Wall Street district, which rapidly became one of the firm’s top producing branches in the country. Earning placement in Raymond James’ President Club, he was the youngest Independent Sales Associate to receive that honor at that time.
Michael Delin, Director. Mr. Delin has served on our board of directors since December 2008. After providing specialty consulting services to the management team, he joined MedeFile’s Board of Directors in December 2008. Mr. Delin is the sole proprietor and operator of an accounting and tax preparation service. He also currently serves as the Chief Financial Officer of a construction company that is based in Southwest Florida. He is a graduate of the University of South Florida where he earned a Bachelor of Arts degree in Accounting.
COMMITTEES
We currently do not maintain any committees of the Board of Directors. Given our size and the development of our business to date, we believe that the board through its meetings can perform all of the duties and responsibilities which might be contemplated by a committee. Our board of directors is expected to appoint an audit committee, nominating committee and compensation committee, and to adopt charters relative to each such committee, in the near future. We intend to appoint such persons to the committees of the board of directors as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange, although we are not required to comply with such requirements until we elect to seek listing on a national securities exchange, and we are under no obligation to do so.
Except as may be provided in our bylaws, we do not currently have specified procedures in place pursuant to which whereby security holders may recommend nominees to the Board of Directors.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles. Kevin Hauser has served as our Chairman and Chief Executive Officer since August 2010. We believe it is in the best interest of the Company to have the Chairman and Chief Executive Officer roles combined due to our small size and limited resources.
Our Board of Directors is primarily responsible for overseeing our risk management processes. The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensure that risks undertaken by our company are consistent with the Board’s appetite for risk. While the Board oversees our company, our company’s management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.
CODE OF ETHICS
We have adopted a Code of Ethics and Business Conduct that applies to our officers, directors and employees. The Code of Ethics is available on our website found at www.medefile.com .
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Because we do not have a class of equity securities registered pursuant to Section 12 of the Exchange Act, we are not subject to Section 16(a) of the Exchange Act.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for services in all capacities rendered to us for the two fiscal years ended December 31, 2012 and 2011, of our Chief Executive Officer. There were no other executive officers whose total annual compensation exceeded $100,000 during the years ended December 31, 2012 and 2011.
SUMMARY COMPENSATION TABLE
Outstanding Equity Awards at Fiscal Year-End as of December 31, 2012
Director Compensation for Year Ending December 31, 2012
(1) Does not include $29,373 for accounting services performed for the fiscal year 2012 through a company solely owned by Michael Delin.
EMPLOYMENT AGREEMENTS
On December 10, 2008, MedeFile entered into an employment agreement with Kevin Hauser pursuant to which Mr. Hauser agreed to continue to serve as the Company’s Vice President of Sales and New Business Development for a term of three years. The term of his agreement automatically extended for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the agreement. Pursuant to his agreement, Mr. Hauser was entitled to receive an annual salary of $216,000. He was also entitled to a discretionary bonus from time to time during the term of the agreement in an amount determined by the sole discretion of the Company’s Board of Directors. For the year ended December 31, 2010, the amount of $216,000 due under the employment agreement was accrued but unpaid.
On May 10, 2011, the Company and Mr. 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 (the “Employment Agreement”). The amendment memorialized the agreement of Mr. Hauser to reduce the base salary payable to him pursuant to the Employment Agreement to $100,000 for the year ending December 31, 2010, and to $125,000 commencing January 1, 2011. The Company recorded a cancellation of payroll expense due to Mr. Hauser during the first quarter of 2011 through additional paid in capital in the amount of $116,000. The amendment further provides for a performance bonus which may be awarded to Mr. Hauser, at the discretion of the Board, at such time as the Company becomes cash flow positive (defined as a quarterly net income in excess of $75,000) and has a positive Quick Ratio (Cash less current liabilities in excess of $100,000). The performance bonus may be paid in either cash or through the issuance of shares of the Company’s common stock at the discretion of the Board.
Risk Management
The Company does not believe risks arising from its compensation policies and practices for its employees are reasonably likely to have a material adverse effect on the Company.
LONG TERM INCENTIVES
STOCK OPTIONS AND RESTRICTED STOCK. Executive officers, together with our other employees, are eligible to receive grants of awards under our 2006 Stock Option Plan. These awards may be in the form of stock options and/or restricted stock grants. The number of shares underlying options or shares, together with all other terms of the options and shares, are established by the Board of Directors.
STOCK INCENTIVE PLANS
2006 Incentive Stock Plan
The 2006 Incentive Stock Plan has initially reserved 2,000 shares of common Stock for issuance. Under the 2006 Incentive Stock Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.
Purpose. The primary purpose of the 2006 Incentive Stock Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.
Administration. The 2006 Incentive Stock Plan is administered by our Board of Directors, as the Board of Directors may be composed from time to time. Notwithstanding the foregoing, the Board of Directors may at any time, or from time to time, appoint a committee of at least two members of the Board of Directors, and delegate to the committee the authority of the Board of Directors to administer the 2006 Incentive Stock Plan. Upon such appointment and delegation, the committee shall have all the powers, privileges and duties of the Board of Directors, and shall be substituted for the Board of Directors, in the administration of the 2006 Incentive Stock Plan, subject to certain limitations.
Eligibility. Under the 2006 Stock Incentive Plan, options may be granted to key employees, officers, directors or consultants of the Company.
Terms of Options. The term of each option granted under the 2006 Incentive Stock Plan shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the 2006 Incentive Stock Plan, including the following:
(a) Purchase Price. The purchase price of the common stock subject to each incentive stock option shall not be less than the fair market value (as set forth in the 2006 Incentive Stock Plan), or in the case of the grant of an incentive stock option to a principal stockholder, not less than 110% of fair market value of such common stock at the time such option is granted. The purchase price of the common stock subject to each non-incentive stock option shall be determined at the time such option is granted, but in no case less than 85% of the fair market value of such common stock at the time such option is granted;
(b) Vesting. The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Board of Directors, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the 2006 Incentive Stock Plan;
(c) Expiration. The expiration of each option shall be fixed by the Board of Directors, in its discretion, at the time such option is granted; however, unless otherwise determined by the Board of Directors at the time such option is granted, an option shall be exercisable for ten years after the date on which it was granted, or five years for grants to certain executive officers. Each option shall be subject to earlier termination or repurchase as expressly provided in the 2006 Incentive Stock Plan or as determined by the Board of Directors, in its discretion, at the time such option is granted;
(d) Transferability. No option shall be transferable, except by will or the laws of descent and distribution, and any option may be exercised during the lifetime of the optionee only by such optionee. No option granted under the 2006 Incentive Stock Plan shall be subject to execution, attachment or other process;
(e) Option Adjustments. The aggregate number and class of shares as to which options may be granted under the 2006 Incentive Stock Plan, the number and class shares covered by each outstanding option and the exercise price per share thereof (but not the total price), and all such options, shall each be proportionately adjusted for any increase decrease in the number of issued common stock resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend; and
(f) Termination, Modification And Amendment. The 2006 Incentive Stock Plan (but not options previously granted under the plan) shall terminate ten years from the date of its adoption by the Board of Directors, and no option or shares shall be granted after termination of the 2006 Incentive Stock Plan. Subject to certain restrictions, the 2006 Incentive Stock Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Nevada.
2008 Amended and Restated Incentive Stock Plan
The 2008 Plan, as amended, reserved 150,000 shares of common Stock for issuance. Under the 2008 Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.
Purpose. The primary purpose of the 2008 Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.
Administration. The 2008 Plan is administered by our Board of Directors, as the Board of Directors may be composed from time to time. Notwithstanding the foregoing, the Board of Directors may at any time, or from time to time, appoint a committee of at least two members of the Board of Directors, and delegate to the committee the authority of the Board of Directors to administer the 2008 Plan. Upon such appointment and delegation, the committee shall have all the powers, privileges and duties of the Board of Directors, and shall be substituted for the Board of Directors, in the administration of the 2008 Plan, subject to certain limitations.
Eligibility. Under the 2008 Plan, options may be granted to key employees, officers, directors or consultants of the Company.
Terms of Options. The term of each option granted under the 2008 Plan shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the 2008 Stock Plan, including the following:
(a) Purchase Price. The purchase price of the common stock subject to each incentive stock option shall not be less than the fair market value (as set forth in the 2008 Plan), or in the case of the grant of an incentive stock option to a principal stockholder, not less that 110% of fair market value of such common stock at the time such option is granted. The purchase price of the common stock subject to each non-incentive stock option shall be determined at the time such option is granted, but in no case less than 85% of the fair market value of such common stock at the time such option is granted;
(b) Vesting. The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Board of Directors, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the 2008 Plan;
(c) Expiration. The expiration of each option shall be fixed by the Board of Directors, in its discretion, at the time such option is granted; however, unless otherwise determined by the Board of Directors at the time such option is granted, an option shall be exercisable for ten years after the date on which it was granted, or five years for grants to certain executive officers. Each option shall be subject to earlier termination or repurchase as expressly provided in the 2008 Plan or as determined by the Board of Directors, in its discretion, at the time such option is granted;
(d) Transferability. No option shall be transferable, except by will or the laws of descent and distribution, and any option may be exercised during the lifetime of the optionee only by such optionee. No option granted under the 2008 Plan shall be subject to execution, attachment or other process;
(e) Option Adjustments. The aggregate number and class of shares as to which options may be granted under the 2008 Plan, the number and class shares covered by each outstanding option and the exercise price per share thereof (but not the total price), and all such options, shall each be proportionately adjusted for any increase decrease in the number of issued common stock resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend; and
(f) Termination, Modification and Amendment. The 2008 Plan (but not options previously granted under the plan) shall terminate ten years from the date of its adoption by the Board of Directors, and no option or shares shall be granted after termination of the 2006 Incentive Stock Plan. Subject to certain restrictions, the 2008 Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Nevada.
2010 Incentive Stock Plan
The 2010 Plan has initially reserved 66,000 shares of common Stock for issuance. Under the 2010 Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.
Purpose. The primary purpose of the 2010 Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.
Administration. The 2010 Plan is administered by our Board of Directors, as the Board of Directors may be composed from time to time. Notwithstanding the foregoing, the Board of Directors may at any time, or from time to time, appoint a committee of at least two members of the Board of Directors, and delegate to the committee the authority of the Board of Directors to administer the 2010 Plan. Upon such appointment and delegation, the committee shall have all the powers, privileges and duties of the Board of Directors, and shall be substituted for the Board of Directors, in the administration of the 2010 Plan, subject to certain limitations.
Eligibility. Under the 2010 Plan, options may be granted to key employees, officers, directors or consultants of the Company.
Terms of Options. The term of each option granted under the 2010 Plan shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the 2008 Stock Plan, including the following:
(a) Purchase Price. The purchase price of the common stock subject to each incentive stock option shall not be less than the fair market value (as set forth in the 2010 Plan), or in the case of the grant of an incentive stock option to a principal stockholder, not less than 110% of fair market value of such common stock at the time such option is granted. The purchase price of the common stock subject to each non-incentive stock option shall be determined at the time such option is granted, but in no case less than 85% of the fair market value of such common stock at the time such option is granted;
(b) Vesting. The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Board of Directors, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the 2010 Plan;
(c) Expiration. The expiration of each option shall be fixed by the Board of Directors, in its discretion, at the time such option is granted; however, unless otherwise determined by the Board of Directors at the time such option is granted, an option shall be exercisable for ten years after the date on which it was granted, or five years for grants to certain executive officers. Each option shall be subject to earlier termination or repurchase as expressly provided in the 2010 Plan or as determined by the Board of Directors, in its discretion, at the time such option is granted;
(d) Transferability. No option shall be transferable, except by will or the laws of descent and distribution, and any option may be exercised during the lifetime of the optionee only by such optionee. No option granted under the 2010 Plan shall be subject to execution, attachment or other process;
(e) Option Adjustments. The aggregate number and class of shares as to which options may be granted under the 2010 Plan, the number and class shares covered by each outstanding option and the exercise price per share thereof (but not the total price), and all such options, shall each be proportionately adjusted for any increse decrease in the number of issued common stock resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend; and
(f) Termination, Modification and Amendment. The 2010 Plan (but not options previously granted under the plan) shall terminate ten years from the date of its adoption by the Board of Directors, and no option or shares shall be granted after termination of the 2006 Incentive Stock Plan. Subject to certain restrictions, the 2010 Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Nevada
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information relating to the ownership of common stock by (i) each person known by us be the beneficial owner of more than five percent of the outstanding shares of our common stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all of our executive officers and directors as a group. Unless otherwise indicated, the information relates to these persons, beneficial ownership as of March 31, 2013. Except as may be indicated in the footnotes to the table and subject to applicable community property laws, each person has the sole voting and investment power with respect to the shares owned.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o MedeFile International, Inc., 301 Yamato Rd, Ste 3155, Boca Raton, FL 33413.
(2) Applicable percentage ownership is based on 11,813,189 shares of common stock outstanding as of April 8, 2013, together with securities exercisable or convertible into shares of common stock within 60 days of April 8, 2013 for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of April 8, 2013 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(3) Lyle Hauser owns 6,022,857 shares in his individual capacity and 18,665 shares through Vantage Holding Ltd. Lyle Hauser is the owner of The Vantage Group Ltd. and Vantage Holding Ltd. Lyle Hauser is the brother of Kevin Hauser.
The information as to shares beneficially owned has been individually furnished by our respective directors, named executive officers and other stockholders, or taken from documents filed with the SEC.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
On July 6, 2011, Kevin Hauser (the Company’s chief executive officer) (with respect to 60,000 shares of common stock) and Lyle Hauser (the Company’s largest shareholder) (with respect to 197,926 shares of common stock) entered into six month lock-up agreements with the Company. Under their respective lock-up agreements, Kevin Hauser was granted anti-dilution protection for a period of six months under the same terms as the investors under the securities purchase agreement entered into on July 6, 2011, and Lyle Hauser were granted anti-dilution protection for a period of four years under the same terms as the investors. In January 2012, Kevin Hauser’s lock-up agreement such that the lock-up period was extended to July 20, 2012, and anti-dilution protection was extended to July 20, 2014. In April 2012, Kevin Hauser’s lock-up agreement was further amended such that the anti-dilution protection will terminate following the Company’s next capital raise.
Director Independence
None of our directors is independent as term is defined under the Nasdaq Marketplace Rules.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The aggregate fees billed by L.L. Bradford for the audit and review of the Company's annual financial statements and services that are normally provided by an accountant in connection with statutory and regulatory filings or engagements for the fiscal year ended December 31, 2012 and 2011 were as follows.
TAX FEES
No tax fees were billed by L.L. Bradford for professional services rendered for tax compliance; tax advice and tax planning for the fiscal year ended December 31, 2012 and 2011.
ALL OTHER FEES
No other fees were billed by L.L. Bradford for the fiscal year ended December 31, 2012 and 2011.
ITEM 15.
ITEM 15. EXHIBITS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ Kevin Hauser
President, Chief Executive Officer and Chairman of
April 15, 2013
Kevin Hauser
the Board of Directors
(Principal Executive, Financial and Accounting Officer)
/s/ Michael S. Delin
Director
April 15, 2013
Michael S. Delin