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MWIP > SEC Filings for MWIP > Form 10-Q on 19-Nov-2013All Recent SEC Filings

Show all filings for MEDISWIPE INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for MEDISWIPE INC.


19-Nov-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 nine months ended September 30, 2013, net cash used in operating activities was $266,636 compared to $25,543 for the nine months ended September 30, 2012. The company had a net loss $3,782,545 for the nine months ended September 30, 2013 compared to a net loss of $330,388 for the nine months ended September 30, 2012. The net loss for the nine months ended September 30, 2013 was impacted by stock and warrant compensation expense of $3,253,197 comprised of $2,821,275 of preferred stock compensation, the amortization of deferred stock compensation of $192,472 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, 500,000 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 $19,750 and $15,500 for the issuance of 250,000 shares for services provided to the Company. Additional non-cash expenses for the nine months ended September 30, 2013 were the amortization of the initial discounts of $103,517 on the convertible notes, the initial derivative liability expense and the change in the fair value of the derivatives of $25,288, amortization of deferred financing fees of $26,396 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 nine months ended September 30, 2013, net cash provided by financing activity was $420,500. This was comprised of issuance of convertible promissory notes of $157,500, proceeds of $300,000 related to the Typenex convertible note (see note 6 to the condensed consolidated unaudited financial statements contained herein) and the payment of deferred financing fees of $37,000.

For the nine months ended September 30, 2013, cash and cash equivalents increased by $151,355 compared to a decrease of $2,543 for the nine months ended September 30, 2012. Ending cash and cash equivalents at September 30, 2013 was $153,247 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 nine months ended September 30, 2013 vs. September 30, 2012

REVENUES



Revenues during the three and nine months ended September 30, 2013 were
comprised of the following:



                                  2013                            2012
                       Three months   Nine months     Three months     Nine months
                          ended          ended           ended            ended
                       September 30   September 30    September 30     September 30
Cloud based software $       14,946 $       22,860 $              - $             -
ACS                               -         49,818                -               -
Chillo products              32,385         62,738                -               -
Processing fees                   -              -              781          50,239
Total                $       47,331 $      135,416 $            781 $        50,239

In April 2013, Alternative Capital Solutions ("ACS") and the Company terminated their agreements and accordingly, the Company will no longer be receiving fees related to the ACS agreement. During 2013, the Company 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 began generating revenues related to its' cloud based 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 the Company's cloud based patient software. Additionally through the Company's cloud based patient 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 $156,378 and $3,667,378 for the three and nine months ended September 30, 2013 compared to $161,479 and $282,905 for the three and nine months ended September 30, 2012. The expenses were comprised of:

                                            2013                       2012
                                     Three                      Three        Nine
                                    months      Nine months    months       months
                                     ended         ended        ended       ended
                                   September     September    September   September
Description                           30            30           30           30
Administration and management
fees                            $      66,449 $     201,630 $    17,579 $     78,367
Stock compensation expense,
management                              9,975     3,126,655     135,062      135,062
Stock compensation expense,                                                        -
other                                  22,208       126,542           -
Professional and consulting                                                   11,500
fees                                    9,950        58,821       4,100
Commissions                                 -        31,200           -        8,512
Advertising and promotional
expenses                                9,043        17,914           -            -
Rent and occupancy costs                5,341        24,124       3,582       15,265
General and other                                                             34,199
administrative                         33,412        80,492       1,156
Total                           $     156,378 $   3,667,378 $   161,479 $    282,905

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 nine months ended September 30, 2012 to $37,500 and $112,500 for the three and nine months ended September 30, 2013, compensation recorded for our CFO of $24,000 and $72,000 for the three and nine months ended September 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, 500,000 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 $19,750. Stock compensation expense, other for 2013 includes the amortization of deferred stock compensation of $22,208 (three months) and $111,042 (nine months) from the previous issuance of Series B preferred stock and $15,500 (for the nine months ended September 30, 2013) for the issuance of 250,000 shares for services provided to the Company.

Professional and consulting fees increased for the three and nine month periods in 2013 compared to 2012 as a result of investor relation costs of $7,150 and $29,546 for the three and nine months ended September 30, 2013, respectively, compared to $6,200 for the nine months ended September 30, 2012. Professional fees of $2,500 and $9,775 were incurred for the three and nine months ended September 30, 2013, respectively, compared to $4,100 and $11,250 for the three and nine months ended September 30, 2012. Consulting fees of $19,200 were incurred for the nine months ended September 30, 2013, of which $16,700 was pursuant to the ACS agreement. Commissions of $31,200 were also incurred for the nine months ended September 30, 2013 pursuant to the ACS Agreement.

General and other administrative costs for the three and nine months ended September 30, 2013, were $33,412 and $80,492, respectively, compared to $1,156 and $34,199 for the three and nine months ended September 30, 2012, respectively. Expenses for the nine months ended September 30, 2013, include public company filing and transfer agent fees of $19,976, travel and entertainment costs of $24,140, internet and web based service costs of $10,677, office supplies of $5,261 and $20,438 of other general and administrative costs.

OTHER INCOME (EXPENSE)

Other expense for the three and nine months ended September 30, 2013 was $27,850 and $180,703, respectively, compared to $86,161 and $98,417 for the three and nine months ended September 30, 2012. Included in the current period is interest expense of $53,268 (three months) and $175,828 (nine months), comprised of $41,519 (three months) and $103,517 (nine months) related to the amortization of the initial discount on convertible promissory notes, $10,311 (three months) and $26,396 (nine months) for the amortization of the deferred financing costs and $2,158 (three months) and $16,354 (nine months) for the interest expense on the face value of the notes. Also included in other expenses for the nine months ended September 30, 2013 was $25,288 for the initial derivative liability expense for the embedded derivative in newly issued convertible notes and a (decrease)of $17,038 for the fair value change on the derivative liability associated with the convertible promissory notes. Other expenses for the three and nine months ended September 30, 2012 included interest expense of $35,045 (three months) and $127,981 (nine months). Interest expense was comprised of $31,449 (three months) and $113,255 (nine months) related to the amortization of the initial discount on convertible promissory notes, $1,806 (three months) and $7,352 (nine months) for the amortization of the deferred financing costs and $1,790 (three months) and $7,374 (nine months) for the interest expense on the face value of the notes. For the three months ended September 30, 2012 the fair value change in the derivative associated with convertible promissory notes resulted in an expense of $51,116 and for the nine months ended September 30, 2012, expenses were partially offset for the fair value change (decrease) of $33,072 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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