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MWIP > SEC Filings for MWIP > Form 10-Q on 15-May-2013All Recent SEC Filings

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Form 10-Q for MEDISWIPE INC.


15-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following is management's discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words "believes," "anticipates," "may," "will," "should," "expect," "intend," "estimate," "continue," and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2012 and 2011, included in our annual report on Form 10-K filed with the SEC on April 13, 2013.

The independent auditors reports on our financial statements for the years ended December 31, 2012 and 2011 includes a "going concern" explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Management's plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 11 to the condensed consolidated financial statements filed herein.

(a) Liquidity and Capital Resources.

For the three months ended March 31, 2013, net cash used in operating activities was $52,019 compared to $2,613 for the three months ended March 31, 2012. The company had a net loss $248,688 for the three months ended March 31, 2013 compared to a net loss of $29,610 for the three months ended March 31, 2012. The net loss for the three months ended March 31, 2013 was impacted by stock compensation expense of $104,334 comprised of the amortization of deferred stock compensation of $88,834 from the previous issuance of Series B preferred stock and $15,500 for the issuance of 250,000 shares for services provided to the Company. Additional non-cash expenses for the three months ended March 31, 2013 were the amortization of the initial discounts of $25,324 on the convertible notes, the initial derivative liability expense, net of the change in the fair value of the derivatives of $5,093 and amortization of deferred financing fees of $2,120 also related to the convertible promissory notes.

During the three months ended March 31, 2013, net cash provided by financing activity was $60,000. This was comprised of issuance of convertible promissory notes of $65,000 and the payment of deferred financing fees of $5,000.

For the three months ended March 31, 2013, cash and cash equivalents increased by $7,981 compared to a decrease of $2,613 for the three months ended March 31, 2012. Ending cash and cash equivalents at March 31, 2013 was $9,873 compared to $1,892 at December 31, 2012.

During the three months ended March 31, 2013, 100% of our revenues were from our agreement with ACS. In April 2013, ACS and the Company terminated their agreements and accordingly, the Company will no longer be receiving fees related to the ACS agreement. The Company recently entered into an exclusive distributorship agreement with Chill Drinks, LLC (See Note 11) for sales of Chill Drink's products to dispensaries. Sales began in April 2013. Also during the quarter ending June 30, 2013 the Company plans to roll out its' DMS software (See note 1) and anticipates to begin a monthly recurring revenue model, whereby dispensaries will pay up to $400 per month for access to DMS. Additionally through DMS, the Company will be selling a patient digital health record storage system for an annual fee. The Company will be introducing additional products in the forthcoming quarters to supplement the initial products.

We have limited cash and cash equivalents on hand. We presently maintain our daily operations and capital needs through the receipts of our monthly account residuals. We will need to raise funds to continue to be able to support our operating expenses and to meet our other obligations as they become due. Sources available to us that we may utilize include the sale of unsecured convertible debentures from unaffiliated investors which may cause dilution to our stockholders. Additionally, our CEO has loaned the Company money in the past. The company expects to increase sales of additional merchant accounts over the course of this fiscal year.

(b) Results of Operations

Results of operations for the three months ended March 31, 2013 vs. March 31, 2012

REVENUES

Revenues for the three months ended March 31, 2013 were $49,818 compared to $26,124 for the three months ended March 31, 2012. Revenues in the current three month period are a result of the Company receiving agent commissions pursuant to an agreement with Alternative Capital Solutions ("ACS"). Revenues from 2012 period were all related to merchant processing fees the Company received from medical dispensaries. Effective July 1, 2012, the merchant processing fees ceased as a result of Mastercard and Visa declining to accept credit card charges from medical dispensaries.

OPERATING EXPENSES

Operating expenses were $263,483 for the three months ended March 31, 2013 compared to $54,322 for the three months ended March 31, 2012. The expenses for the three months ended March 31, 2013 and 2012 were comprised of:

Description                                 2013          2012
Administration and management fees       $  65,500     $ 25,900
Stock compensation expense, management      44,417           -
Stock compensation expense, other           59,917           -
Professional and consulting fees            29,002        2,350
Commissions                                 31,200        8,512
Advertising and promotional expenses         3,644           -
Rent and occupancy costs                     3,752        5,726
General and other administrative            26,051       11,384
Total                                    $ 263,483     $ 54,322

Administration and management fees increased as a result of the increase of the amount accrued for the salaries for our CEO from $22,500 for the quarter ended March 31, 2012 to $37,500 for the three months ended March 31, 2013, and compensation recorded for our CFO of $24,000 for the three months ended March 31, 2013.

Stock compensation expense, management was comprised of the amortization of preferred stock issued to our President in August, 2012. Stock compensation expense other is comprised of $15,500 related to the issuance of 250,000 shares of common stock issued to a consultant in the three months ended March 31, 2013 and amortization of $44,417 of preferred stock issued to consultants in August 2012.

Professional and consulting fees increased for the three months ended March 31, 2013 as a result of investor relation costs of $14,302 and consulting fees of $14,700 paid pursuant to the ACS agreement. Commissions of $31,200 were also incurred pursuant to the ACS Agreement.

General and other administrative costs for the three months ended March 31, 2013, included public company filing fees of $8,895, travel and entertainment costs of $5,636, internet and web based service costs of $5,447, certification station set up costs of $2,904 and $3,169 of other general and administrative costs.

OTHER INCOME (EXPENSE)

Other expense for the three months ended March 31, 2013 was $35,023 compared to $1,412 for the three months ended March 31, 2012. Included in the current period is interest expense of $29,930, comprised of $25,324 related to the amortization of the initial discount on convertible promissory notes, $2,120 for the amortization of the deferred financing costs and $2,486 for the interest expense on the face value of the notes. Also included in other expenses for the three months ended March 31, 2013 was $5,237 for the initial derivative liability expense for the embedded derivative in newly issued convertible notes and a credit to expense of $144 for the fair value change on the derivative liability associated with the convertible promissory notes. Other expenses for the three months ended March 31, 2012 included interest expense of $46,124. Interest expense was comprised of $40,329 related to the amortization of the initial discount on convertible promissory notes, $2,807 for the amortization of the deferred financing costs and $2,988 for the interest expense on the face value of the notes. These amounts were partially offset for the fair value change (decrease) of $44,712 in the derivative liability associated with convertible promissory notes.

OFF BALANCE SHEET ARRANGEMENTS

None

Critical Accounting Policies

See Note 2 to the condensed consolidated financial statements included herein.

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