UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Amendment No. 1)

(Mark One)

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

For the quarterly period ended March 31, 2015

OR

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

For the transition period from ____________ to __________

Commission File Number 033-25126-D

MedeFile International, Inc.

(Exact name of registrant as specified in its charter)

301 Yamato Rd, Suite 1200

Boca Raton, FL 33431

(Address of principal executive offices) (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes     ☐  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒  Yes     ☐  No

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

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

Number of shares outstanding of registrant’s common stock, par value $0.0001: 572,953,67228,756,010 as of May 18, 2015.November 10, 2016.

Explanatory Note

This Amendment No. 1 to Form 10-Q for the period ended March 31, 2015, amends our Quarterly Report on Form 10-Q for the period ended March 31, 2015, which was originally filed with the Securities and Exchange Commission on May 19, 2015 (the “Original 10-Q”) This amendment is being filed solely to restate the financial statements as of and for the quarter ended March 31, 2015 for a failure to properly account for the derivative liability on a convertible note. Except with respect to the financial statements, and corresponding changes to Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Original 10-Q has not been amended, updated or otherwise modified.

Table of ContentsContent

Item 1. Financial1.Financial Statements.

MedefileMedeFile International, Inc.

Condensed Consolidated Balance Sheets

(unaudited)(Unaudited)

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

MedeFile International, Inc.

Consolidated Statements of Operations

(Unaudited)

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

MedefileMedeFile International, Inc.

Condensed Consolidated Statements of OperationsCash Flows

(unaudited)(Unaudited)

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

Medefile International, Inc.

Consolidated Statement of Stockholders' Equity

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

Medefile International, Inc.

Condensed Consolidated Statements of Cash Flows

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

Medefile International, Inc.

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONSGOING CONCERN

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of MedeFile International Inc., a Nevada corporation (the "Company"), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-K for the fiscal year ended December 31, 2014.2015. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of March 31, 2015,September 30, 2016, and the results of operations and cash flows for the three and nine months ended March 31, 2015September 30, 2016 and 2014.2015. The results of operations for the three and nine months ended March 31, 2015September 30, 2016 are not necessarily indicative of the results that may be expected for the entire fiscal year.

Restatement

The Company entered into two 10% Secured Convertible Debentures with a significant shareholder.  The debentures carry a one year term.  The debentures were issued in the amount of $50,000 on November 4, 2013 and $60,000 on December 17, 2013.

The company assessed the fair value of the conversion option using the Black Scholes pricing model and recorded a derivative liability for the value.  The adjustment for this valuation to Derivative Liability is $33,243.  An adjustment to change in fair value of derivative liability is a loss of $33,243 for the quarter ended March 31, 2015.  

During the first quarter 2015, the company recognized a change in derivative for the convertible debenture in amount of $33,243, the resulting derivative liability balance at March 31, 2015 is $33,243.

The following table provides additional details regarding the changes to the balance sheet, statement of operations and statement of cash flows as of and for the three months ended March 31, 2015.

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 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 patients’ actual past medical records, thereby ensuring the most accurate treatment and services possible while simultaneously reducing redundant procedures.

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

By subscribing to the MedeFile system, members 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:

Going Concern

The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. However, the Company has reported an operating loss of $174,640 and a net loss of $209,880$318,249 for the threenine months ended March 31, 2015. During the comparable three month period of 2014, the Company had an operating loss of $158,066September 30, 2016 and net income (as a result of the change in the valuation of the Company’s warrant derivative) of $760,930. The Company had an accumulated deficit of $27,564,423 as of March 31, 2015.  The Company has negative working capital of $374,954$322,019 as of March 31, 2015.September 30, 2016.

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

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

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

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.

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 March 31, 2015 and December 31, 2014, deferred revenue totaled $1,018 and $684, respectively.

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15,Presentation of Financial Statements—Going Concern. The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s financial statements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company beginning November 1, 2017 and, at that time the Company may adopt the new standard under the full retrospective approach or the modified retrospective approach. Early adoption is not permitted. The Company is currently evaluating the method and impact the adoption of ASU 2014-09 will have on the Company’s condensed consolidated financial statements and disclosures.

In January 2014, the FASB issued ASU 2014-04, an update to ASC 310, "Receivables." The ASU clarifies that an in substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition method or a prospective transition method. Early adoption of the guidance is permitted. The impact of this guidance is currently being evaluated by the Company, but is not expected to have a significant impact on the Company's financial position, results of operations or disclosures.

Fair Value of Financial Instruments

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

The carrying amounts of these items approximated fair value.

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

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

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

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

The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities as of September 30, 2016 and December 31, 2015 are described below:

Derivative liability as of September 30, 2016 is $11,662, compared to $19,067 as of December 31, 2015.

Impairment of Long Lived Assets2. NOTE PAYABLE – RELATED PARTY

During the nine months ended September 30, 2016, the Company entered into five unsecured 7% Promissory Notes with a significant shareholder. The notes mature four to twelve months from issuance and total $175,000.

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 orThe changes in circumstances indicate that the carrying amount of an asset may not be recoverable. ASC 360-10 relatesnotes payable 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 comparisonrelated party consisted of the asset’s carrying amount to future undiscounted net cash flowsfollowing during 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.nine months ended September 30, 2016:

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 year ended December 31, 2014On July 15, 2016, the Company hadentered into an inventory write downunsecured 7% Promissory Notes in the amount of $30,000. There was no write down$100,000 with a significant shareholder. The note has a one year term.

The changes in notes payable consisted of inventory in the threefollowing during the nine months ended March 31, 2015.

Net Loss per Share

Basic loss per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method.  

September 30, 2016:

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, the Company does not maintain an allowance for doubtful accounts.  Recognition of a specific uncollectible account is written directly against the invoice in accounts receivable and expensed in the current period. Accounts receivables as of March 31, 2015 totaled $4,938 and $5,425 as of December 31, 2014.

3. WEBSITE DEVELOPMENT

Website development consists of the following:

The Company completed the redesign in January 2015. The redesign is being amortized over a three year period. Amortization expense for the three month period ending March 31, 2015 was $22,149 compared to $0 for the three month period ended March 31, 2014, 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. Furniture and equipment was fully depreciated as of March 31, 2015. Depreciation expense for the three months ended March 31, 2015 and 2014 totaled $0 and $106, respectively.

5. CONVERTIBLE DEBENTUREDEBEBTURE – RELATED PARTY

The Company has entered into two 10% Secured Convertible Debentures with a significant shareholder.  The debentures carry ashareholder, one year term.  The debentures were issued in the amount of $50,000 on November 4, 2013 and the other in the amount of $60,000 on December 17, 2013. The debentures carry a one year term. Both debentures are convertible into common stock at a conversionshare price of the lower of $0.10 (subject to adjustments for the events of stock splits, stock dividends and similar transactions)$2.00 or 80% of the previous day’s market priceclosing price. During the year ended December 31, 2015, the lender converted $40,000 of common stock.the note principal and the Company made a payment of $70,000.

The outstanding notes payable to related party consisted of the following as of September 30, 2016 and December 31, 2015:

6. WARRANT LIABILITY4. DERIVATIVE LIABILITIES

In connection with certain securities purchase agreements entered into during the third quarter of 2011 and the second quarter of 2012, , the Company granted warrants with ratchet provisions. The warrants contain an expiration date ofexpired four years from the date of grant. During the first two years of grant, if the Company issues anywere to issue additional shares of common stock at a price per share less than the exercise price in effect, the exercise price willwould be adjusted to equal the average price per share received by the Company for the additional shares issued. After the first two years following the issuance date, if the Company issueswere to issue any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price willwould 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 iswas also subject to adjustment.

Upon grant, the Company assesses the fair value of the warrants using the Black Scholes pricing model and records a warrant liability for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the warrant liability to the new value, and records a corresponding gain or loss (see below for variables used in assessing the fair value). 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 March 31, 2015, 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 1,808,511. 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 then-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 during the nine months ended September 30, 2016 are as follows: All remaining warrants have expired.

AsThe change in fair value of March 31, 2015 and December 31, 2014, the warrant derivative liability consisted of the following:following during the nine months ended September 30, 2016:

Change in fair market value of warrant liability resulted in a gain of $51 and a loss of $948,857$1,271 for the threenine months ended March 31 2015 and 2014, respectively.

7. DERIVATIVE LIABILITY

The following Secured Convertible Debentures entered into in November and December 2013 contain ratchet provisions regarding the conversion of debt into shares of common stock.

September 30, 2016.

The Company entered into two 10% Secured Convertible Notes in November 2013 and December 2013, both forDebentures with a term of 12 months. The debentures aresignificant shareholder, one in the amount of $50,000 on November 4, 2013 and the other in the amount of $60,000 respectively.on December 17, 2013. The conversiondebentures carry a one year term. The Debentures are convertible into common stock at a share price of the note is based onlower of $2.00 or 80% of the previous day’s marketclosing price.

T heThe Company assesses the fair value of the conversion optionconvertible debenture using the Black Scholes pricing model and records a derivative expense and a corresponding derivative liability for the value. The Company then assesses the fair value of the derivative liabilitywarrants quarterly based on the Black Scholes Model and increases or decreases the liability to the new value, and records a corresponding gain or loss. The Company uses expected volatility based primarily on historical volatility using daily pricing observationsloss (see below for recent periods that correspond tovariables used in assessing the expected life of the warrants. The risk-free interest rate is based on U.S. Treasury securities rates.

fair value).

Due to the ratchet provisions,variable conversion rates, the Company treats the convertible debenture as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock. The fair value of the conversion options was determined using the Black-Scholes Option Pricing Model and the following significant assumptions during the nine months ended September 30, 2016:

AsThe change in fair value of March 31 2015,the conversion option derivative liability for this note is $33,243 andconsisted of the changefollowing during the nine months ended September 30, 2016:

Change in fair market value of derivativeconversion option liability resulted in a gain of $6,134 for the threenine months ended March 31, 2015 was $33,243.

September 30, 2016.

8.6. SUBSEQUENT EVENTEQUITY

Common Stock

On October 8, 2012,27, 2016 the Company filedentered into an additional 7% Promissory Note with a Certificatesignificant shareholder in the amount of Amendment to its Articles of Incorporation with the Secretary of State of Nevada, pursuant to which (i) the Company effected$12,000. The note has 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. On December 19, 2013 the Company increased its authorized shares of common stock from 100,000,000 to 500,000,000. On February 10, 2015 the Company increased its authorized shares of common stock from 500,000,000 to 700,000,000.six month term.

2013

On January 17, 2013 the Company entered into a Securities Purchase Agreement pursuant to which the Company sold 400,000 shares of common stock for an aggregate purchase price of $200,000

On April 15, 2013, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 2,000,000 shares of common stock for an aggregate purchase price of $400,000. 

On May 1, 2013 the Company issued an aggregate of 11,872,281shares of common stock to purchasers under the securities purchase agreements entered into by the Company in July 2011 and April 2012 pursuant to anti-dilution rights held by such purchasers.

On August 27, 2013, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 42,743 shares of common stock for an aggregate purchase price of $29,920. 

On September 23, 2013, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 21,429 shares of common stock for an aggregate purchase price of $15,000. 

On December 17, 2013, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 2,000,000 shares of common stock for an aggregate purchase price of $40,000.

On December 20, 2013, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 15,000,000 shares of common stock for an aggregate purchase price of $300,000.

2014

On April 17, 2014, the Company issued an aggregate of 150,129,655 shares of common stock to certain shareholders of the Company, in accordance with anti-dilution rights held by such shareholders, including 125,584,200 shares to Lyle Hauser and 24,545,455 shares to purchasers under Securities Purchase Agreements entered into by the Company in July 2011. Lyle Hauser is the Company's largest shareholder.

On July 3, 2014, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 15,000,000 shares of common stock for an aggregate purchase price of $200,000. 

On July 6, 2014, the Company entered into a Securities Purchase Agreement with accredited investors pursuant to which the Company sold 20,000,000 shares of common stock for an aggregate purchase price of $150,000. 

2015

During the first quarter of 2015, the Company issued an aggregate of 279,099,100 shares of common stock to purchasers under the securities purchase agreements entered into by the Company in January and February 2015 for aggregate price of $620,000.

On March 18, 2015 the Company issued 18,018,018 shares of common stock in exchange for $40,000 of debt owed by the Company

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:

On April 12, 2012, the Company entered into a securities 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 then-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. On April 23, 2012, 100,000 Series B Preferred shares were converted to 200,000 shares of common stock.

Stock Options

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.

Other Warrants

On June 22, 2011, the Company awarded 2,000 Common Stock warrants, at an exercise price of $50 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 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. These warrants have expired.

Transactions involving warrants are summarized as follows:

9.RELATED PARTY TRANSACTIONS

The Company entered into two 10% Secured Convertible Debentures with a significant shareholder.  The debentures carry a one year term.  The debentures were issued in the amount of $50,000 on November 4, 2013 and $60,000 on December 17, 2013.  Both debentures are convertible into common stock at a conversion price of the lower of $0.10 (subject to adjustments for the events of stock splits, stock dividends and similar transactions) or 80% of the previous day’s market price of common stock.

10.  SUBSEQUENT EVENTS

Management has evaluated all events through the date of issuance and there are no reportable subsequent events.

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

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

OVERVIEW

Organizational History

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

Overview of Business

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

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

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

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

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2015SEPTEMBER 30, 2016 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2014SEPTEMBER 30, 2015

Revenues

Revenues for the three months ended March 31, 2015September 30, 2016 totaled $13,100$9,608 compared to revenues of $15,926$10,869 during the three months ended March 31, 2014.September 30, 2015. The decrease in membership revenue is primarily related to amount of members and medical record reimbursement revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors for sending updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative expense. Revenues received from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a fraction of the membership in the quarter being reported.   

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2015September 30, 2016 totaled $165,275,$106,041, a decrease of $8,332$16,804 or approximately 4.8%13.7% compared to selling, general and administrative expenses of $173,607$122,845 for the three months ended March 31, 2014.September 30, 2015. The decrease was due mainly to decreased payroll, legal expense, and consulting fees.

Depreciation Expense

Depreciation expense totaled $0 for the three months ended March 31, 2015, compared to depreciation expense of $106 during the three months ended March 31, 2014. The decrease in depreciation was due to some assets being fully depreciated. All assets are fully depreciated.

Amortization Expense

Amortization expense for the three months ended March 31, 2015September 30, 2016 was $22,149,$0, compared to $0$22,148 the three months ended March 31, 2014.September 30, 2015. Amortization expense in 2015 is the expensing of the website development. Website costs were impaired in the previous year and the Company incurred an impairment expense of $182,195

Interest Expense

Interest expense on convertible debentures for the three months ended March 31,September 30, 2016 and 2015, was $5,021 and 2014, was $2,048 and $2,737$370 respectively. The Company entered into two secured convertible debentures during the third quarter of 2013. The notes have a one year term at a 10% interest rate. The Company entered into additional 7% promissory notes in 2016 (see Note 2 and 3 to the accompanying financial statements).

Interest expenseOther Expense

Gain on the discount for convertible noteschange in fair value of derivate liabilities for the three months ended March 31, 2015 and 2014September 30, 2016 was $0 and $27,124 respectively.  The conversion feature$7,460 compared to a gain of the debentures allows the note to be converted at a share price of $0.10.

Change in derivative liability for convertible debenture$1,072 for the three months ended March 31, 2015 and 2014, was $33,243 and $0 respectively.September 30, 2015.

Net IncomeLoss

For the reasons stated above, our operatingnet loss for the three months ended March 31, 2015September 30, 2016 was $174,640 compared to an operating loss of $158,066 for the three months ended March 31, 2014. The increase in operating loss of $16,574 is primarily the result of increased amortization expense (partially offset by$93,994, or $0.00 per share, a decrease in our selling, general and administrative expenses) as detailed above. We had aof $39,708, compared to net loss of $209,880,$133,702, or $.00$0.00 per share, for the three months ended March 31, 2015, a decrease of $970,810 comparedSeptember 30, 2015. The significant change is primarily related to net income of $760,930 (due to a changeadjustments in the fair value of our derivative liability), or $0.02 per share,liability and a decrease in our general and administrative and compensation expenses.  

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2015

Revenues

Revenues for the threenine months ended March 31, 2014.September 30, 2016 totaled $25,101 compared to revenues of $36,199 during the nine months ended September 30, 2015.  The decrease in membership revenue is primarily related to amount of members and medical record reimbursement revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from members’ doctors for sending updated medical records to MedeFile. The off-setting expense is charged to selling general and administrative expense. Revenues received from memberships are recognized through the period of the membership, and, therefore, revenue recognized represents a fraction of the membership in the quarter being reported.   

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2016 totaled $342,236, a decrease of $220,333 or approximately 39.2% compared to selling, general and administrative expenses of $562,569 for the nine months ended September 30, 2015. The decrease was due mainly to decreased payroll, legal expense, and consulting fees.

Amortization Expense

Amortization expense for the nine months ended September 30, 2016 was $0, compared to $66,447 the nine months ended September 30, 2015.  Amortization expense in 2015 is the expensing of the website development. Website costs were impaired in the previous year and the Company incurred an impairment expense of $182,195

Interest Expense

Interest expense for the nine months ended September 30, 2016 and 2015, was $8,519 and $2,763 respectively.   The Company entered into two secured convertible debentures during the third quarter of 2013.  The notes have a one year term at a 10% interest rate. The Company entered into 7% promissory notes in 2016 (see Note 2 and 3 to the accompanying financial statements).

Other Expense

Change in fair value of derivate liabilities for the nine months ended September 30, 2016 was a gain of $7,405 compared to a loss of $1,958 for the nine months ended September 30, 2015.

Net Loss

For the reasons stated above, our net loss for the nine months ended September 30, 2016 was $318,249, or $0.01 per share, a decrease of $280,113, compared to net loss of $598,362, or $0.03 per share, for the nine months ended September 30, 2015. The significant change is primarily related to adjustments in the fair value of our derivative liability and a decrease in our general and administrative and compensation expenses.  

FINANCIAL CONDITION

Liquidity and Capital Resources

As of March 31, 2015,September 30, 2016, we had cash and cash equivalents of $512,714, inventory of $23,096,$2,584, and merchant services reserve of $2,939, and accounts receivable of $4,938.$2,938.  Net cash used in operating activities for the threenine months ended March 31, 215September 30, 2016 was approximately $143,456. Current$310,787. Our current liabilities as of $168,733September 30, 2016 of $327,541 consisted of: $49,886$16,525 for accounts payable and accrued liabilities, deferred revenues of $1,018,$154, convertible debenture of $84,586$16,868, note payable – related party of $282,332, and derivative liability of $33,243. As of March 31, 2015, we$11,662. We have netnegative working capital of $374,954.$322,019 as of September 30, 2016.

The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company has reported a net loss of $209,880$318,249 for the threenine months ended March 31 2015September 30, 2016 and had an accumulated deficit of $27,564,423$28,829,648 as of March 31, 2015. The Company has net working capital of $374,954 as of March 31, 2015.September 30, 2016.

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

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements as of March 31, 2015September 30, 2016 or as of the date of this report.

Critical Accounting Policies

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

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

Revenue Recognition

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

Stock-based Compensation

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

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15,Presentation of Financial Statements—Going Concern. The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s financial statements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company beginning November 1, 2017 and, at that time the Company may adopt the new standard under the full retrospective approach or the modified retrospective approach. Early adoption is not permitted. The Company is currently evaluating the method and impact the adoption of ASU 2014-09 will have on the Company’s condensed consolidated financial statements and disclosures.

In January 2014, the FASB issued ASU 2014-04, an update to ASC 310, "Receivables." The ASU clarifies that an in substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition method or a prospective transition method. Early adoption of the guidance is permitted. The impact of this guidance is currently being evaluated by the Company, but is not expected to have a significant impact on the Company's financial position, results of operations or disclosures. 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required for a smaller reporting company.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

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

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

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2015,September 30, 2016, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not party to any material legal proceedings.

Item 1A. Risk Factors

Not required for a smaller reporting company.

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

On May 12, 2015, the Company issued an aggregate of 50,000,000 shares of common stock to employees for services provided, including 45,000,000 shares to the Company’s chief executive officer. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information

None. 

Item 6. Exhibits

SIGNATURES

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

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