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MWIP > SEC Filings for MWIP > Form 10-Q on 14-Aug-2013All Recent SEC Filings

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Form 10-Q for MEDISWIPE INC.


14-Aug-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 six months ended June 30, 2013, net cash used in operating activities was $151,505 compared to $29,577 for the six months ended June 30, 2012. The company had a net loss $3,600,137 for the six months ended June 30, 2013 compared to a net loss of $83,529 for the six months ended June 30, 2012. The net loss for the six months ended June 30, 2013 was impacted by stock and warrant compensation expense of $3,221,015 comprised of $2,821,275 of preferred stock compensation, the amortization of deferred stock compensation of $170,265 from the previous issuance of Series B preferred stock, $124,200 warrant based compensation for the issuance of a warrant to purchase 3,000,000 shares of common stock to our advisor to the board of directors, $80,000 for the one time issuance of 2,000,000 shares of common stock to the same advisor, 250,000 shares of common stock (with an additional 250,000 shares to be issued each quarter the advisor continues his relationship with the Company) valued at $9,775 and $15,500 for the issuance of 250,000 shares for services provided to the Company. Additional non-cash expenses for the six months ended June 30, 2013 were the amortization of the initial discounts of $61,998 on the convertible notes, the initial derivative liability expense and the change in the fair value of the derivatives of $30,293, amortization of deferred financing fees of $13,916 also related to the convertible promissory notes and a beneficial conversion feature related to the conversion of the contingent liability to common stock of $29,561.

During the six months ended June 30, 2013, net cash provided by financing activity was $266,500. This was comprised of issuance of convertible promissory notes of $92,500, proceeds of $200,000 related to the Typenex convertible note
(see note 6 to the condensed consolidated financial statements contained herein)
and the payment of deferred financing fees of $26,000.

For the six months ended June 30, 2013, cash and cash equivalents increased by $114,995 compared to a decrease of $2,577 for the six months ended June 30, 2012. Ending cash and cash equivalents at June 30, 2013 was $116,887 compared to $1,892 at December 31, 2012.

We have limited cash and cash equivalents on hand. We presently maintain our daily operations and capital needs through the sale of our products. 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. The company expects to increase sales of additional products over the course of this fiscal year.

(b) Results of Operations

Results of operations for the three and six months ended June 30, 2013 vs. June 30, 2012

REVENUES

During the three and six months ended June 30, 2013, the Company's revenues were $38,267 and $88,065, respectively, compared to $23,334 and $49,458 for the three and six months ended June 30, 2012, respectively. The revenues for the six months ended June 30, 2013, were comprised of $49,818 from Alternative Capital Solutions ("ACS"), $30,354 from our sales of our Chillo and C+ Swiss products and $7,914 related to our Cloud based products. 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 1) for sales of Chill Drink's products to dispensaries. Sales began in April 2013. Also during the quarter ending June 30, 2013 the Company generated revenues related to its' patient 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 Cloud based software. Additionally through Cloud based software, 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.

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 $3,247,517 and $3,511,000 for the three and six months
ended June 30, 2013, compared to $67,104 and $121,426 for the three and six
months ended June 30, 2012. The expenses were comprised of:



                                                   2013                                    2012
                                     Three months        Six months       Three months ended    Six months ended
Description                          ended June 30      ended June 30          June 30              June 30
Administration and management
fees                                $      69,680      $     135,180      $      34,888         $     60,788
Stock compensation expense,
management                              2,990,833          3,035,250                 -                    -
Stock compensation expense,
other                                     125,848            185,765                 -                    -
Professional and consulting fees           19,869             48,871              5,050                7,400
Commissions                                    -              31,200                 -                 8,512
Advertising and promotional
expenses                                    5,227              8,871                 -                    -
Rent and occupancy costs                   15,031             18,783              5,957               11,683
General and other administrative           21,029             47,080             21,209               33,043
Total                               $   3,247,517      $   3,511,000      $      67,104         $    121,426

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 three and six months ended June 30, 2012 to $37,500 and $75,000 for the three and six months ended June 30, 2013, compensation recorded for our CFO of $24,000 and $48,000 for the three and six months ended June 30, 2013.

Stock compensation expense, management was comprised of $2,821,275 of preferred stock compensation, $124,200 warrant based compensation for the issuance of a warrant to purchase 3,000,000 shares of common stock to our advisor to the board of directors, $80,000 for the one time issuance of 2,000,000 shares of common stock to the same advisor, 250,000 shares of common stock (with an additional 250,000 shares to be issued each quarter the advisor continues his relationship with the Company) valued at $9,775. Stock compensation expense, other includes the amortization of deferred stock compensation of $170,265 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.

Professional and consulting fees increased for the three and six month periods in 2013 compared to 2012 as a result of investor relation costs of $8,094 and $22,396 for the three and six months ended June 30, 2013, respectively, compared to $2,650 and $6,200 for the three and six months ended June 30, 2012, respectively. Consulting fees of $4,500 and $19,200 were incurred for the three nd six months ended June 30, 2013, respectively of which $16,700 was pursuant to the ACS agreement. Commissions of $31,200 were also incurred for the six months ended June 30, 2013pursuant to the ACS Agreement.

General and other administrative costs for the three and six months ended June 30, 2013, were $21,029 and $47,080, respectively, compared to $21,029 and $33,043 for the three and six months ended June 30, 2012, respectively. Expenses for the six months ended June 30, 2013, include public company filing fees of $14,141, travel and entertainment costs of $11,547, internet and web based service costs of $8,386, certification station set up costs of $2,904 and $10,102 of other general and administrative costs.

OTHER INCOME (EXPENSE)

Other expense for the three and six months ended June 30, 2013 was $117,830 and $152,853, respectively, compared to $10,844 and $12,256 for the three and six months ended June 30, 2012. Included in the current period is interest expense of $63,069 (three months) and $92,999 (six months), comprised of $36,674 (three months) and $61,998 (six months) related to the amortization of the initial discount on convertible promissory notes, $14,685 (three months) and $16,085 (six months) for the amortization of the deferred financing costs and $11,710 (three months) and $14,196 (six months) for the interest expense on the face value of the notes. Also included in other expenses for the six months ended June 30, 2013 was $17,210 for the initial derivative liability expense for the embedded derivative in newly issued convertible notes and an expense of $13,083 for the fair value change on the derivative liability associated with the convertible promissory notes. Other expenses for the three and six months ended June 30, 2012 included interest expense of $46,812 (three months and $92,936 (six months). Interest expense was comprised of $41,477 (three months) and $81,806 (six months) related to the amortization of the initial discount on convertible promissory notes, $2,719 (three months) and $5,526 (six months) for the amortization of the deferred financing costs and $2,596 (three months) and $5,584 (six months) for the interest expense on the face value of the notes. For the three months ended June 30, 2012 the fair value change in the derivative associated with convertible promissory notes resulted in an expense of $26,668 and for the six months ended June 30, 2012, expenses were partially offset for the fair value change (decrease) of $18,044 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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