UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549

FORM 10-K/A
(Amendment No. 1)
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2010

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

For the transition period from
Commission file number 33-25126-D

Medefile International, Inc.
(Exact name of small business issuer as specified in its charter)

Nevada
 
 85-0368333
(State or other jurisdiction of incorporation or organization)
 
 (I.R.S. Employer
 Identification No.)
 
301 Yamato Road, Suite 3155
Boca Raton, FL 33413
(Address of principal executive offices)
(973) 993-8001
(Issuer's telephone number)

Copies to:
Richard A. Friedman, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 nd Floor
New York, New York 10006
Phone: (212) 930-9700
Fax: (212) 930-9725

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes £      No R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  þ      No o

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 R      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 (§ 232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K .   £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company x

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

As of June 30, 2010, the aggregate market value of the issued and outstanding common stock held by non-affiliates of the registrant, based upon the closing price of the common stock as quoted on TC Bulletin Board of $0.006 was approximately $12,724,621.   For purposes of the above statement only, all directors, executive officers and 10% shareholders are assumed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for any other purpose.

Number of shares of common stock outstanding as of March 31, 2011 was 3,450,021,410.
 

DOCUMENTS INCORPORATED BY REFERENCE – None

 

 
1
 
 
 
FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
 
 
Explanatory Note
 
This Amendment No. 1 to Form 10-K for the year ended December 31, 2010, is being filed solely for the following purposes:
 
·  
To amend the cover page to disclose that the Company is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
 
·  
To amend Item 11, with respect to the compensation of Kevin Hauser for the 2010 fiscal year and with respect to employment agreements.
 
·  
To amend Item 9A, with respect to the Company’s evaluation of its disclosure controls and procedures.
 
·  
To include all required exhibits.
 
·  
To amend Exhibit 31.1.
 
·  
To amend Note 10 to the financial statements.
 
Except with respect to the six  items listed above, the originally filed 10-K has not been amended, updated or otherwise modified.

INDEX


     
   
Page
 
PART I
 
Item 1
Business                                                                                                                   
3
Item 1A
Risk Factors                                                                                                                   
6
Item 1B
Unresolved Staff Comments                                                                                    
10
Item 2
Properties                                                                                                                   
10
Item 3
Legal Proceedings                                                                                                                   
10
Item 4
Reserved 
10
 
PART II
 
Item 5
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
11
Item 6
Selected Financial Data                                                                                                                   
12
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
17
Item 8
Financial Statements and Supplementary Data 
17
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
18
Item 9A
Controls and Procedures                                                                                                                   
18 
Item 9B
Other Information                                                                                                                   
19
 
PART III
 
Item 10
Directors, Executive Officers, and Corporate Governance
19
Item 11
Executive Compensation                                                                                                                   
20
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
25
Item 13
Certain Relationships and Related Transactions                                                      
26
Item 14
Principal Accountant Fees and Services                                                                                   
26
 
PART IV
 
Item 15
Exhibits and Financial Statement Schedules                                                                
27
 
Signatures                                                                                                                   
28
   

 
 
2
 

 

 
 

PART I
 
ITEM 1. BUSINESS

Organizational History

On November 1, 2005, Bio-Solutions International, Inc. ("Bio-Solutions") entered into an Agreement and Plan of Merger (the "Agreement") with OmniMed Acquisition Corp., (the "Acquirer), a Nevada corporation and a wholly owned subsidiary of Bio-Solutions, OmniMed International, Inc., a Nevada corporation ("OmniMed"), and the shareholders of OmniMed (the "OmniMed Shareholders"). Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock of OmniMed from the OmniMed Shareholders. As consideration for the acquisition of OmniMed, Bio-Solutions agreed to issue 9,894,900 shares of Bio-Solutions' common stock to the OmniMed Shareholders. These issuances were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended since, among other things, the transaction did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about the company and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

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. Medefile's goal is to revolutionize the medical industry by bringing patient-centric digital technology to the business of medicine. Medefile intends to accomplish its objective by providing individuals with a simple and secure way to access their lifetime of actual medical records in an efficient and cost-effective manner. Medefile's products and services are designed to provide healthcare providers with the ability to reference their patient's actual past medical records, thereby ensuring the most accurate treatment and services possible while simultaneously reducing redundant procedures.

Interoperable with most electronic medical record systems utilized by physician practices, clinics, hospitals and other care providers, the highly secure, feature-rich MedeFile iPHR solution has been designed to gather all of its members’ actual medical records on behalf of each member, and create a single, comprehensive Electronic 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, not only do members empower themselves to take control of their own health and well-being, they 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 enjoys a number of direct, competitive advantages over others in the medical records marketplace:
 
·  
MedeFile has developed products and services geared to the patient, while containing the depth and breadth of information required by treating physicians and medical personnel.
·  
MedeFile does all the work of collecting and updating medical information on an ongoing basis; its dependence on the patient taking action is minimal – particularly when compared to patient action required to support competing solutions.
·  
MedeFile provides a complete medical record.  Other companies claim complete longitudinal records, but in reality only provide histories (usually completed by the member/patient), and are by no means complete or necessarily accurate records.
·  
MedeFile provides a coherent mix of services and products that are intended to affect the quality of healthcare by enabling the patient to manage and access the information normally retained by doctors and other care providers.
 
Industry Overview

Since the beginning of modern medicine, information about a patient's history, testing, treatment and care have been key factors in the provision and delivery of quality healthcare. Medical record information takes many forms, such as the patient's diagnosis, treatments, surgeries, medications, allergies, x-rays, and test results. The usage of medical record information has dramatically increased over the past two decades due to factors such as the complex reimbursement structure in the United States healthcare system, an ever more litigious society, and increased patient awareness.
 
 
 
3
 
 

 
Every patient visit generates a medical record. Today, this information is largely contained in a paper-based patient medical record. A patient's medical records are usually stored in physicians' offices as well as other healthcare facilities the patient has visited. A record that tracks a patient's medical treatment over time is called a "longitudinal record".

In today's healthcare environment, access to hospital-based medical records by patients and other authorized parties (e.g., insurance companies, attorneys, etc.) is controlled by Release of Information (ROI) policies and procedures. ROI processes are based on the premise that patients have a right to access their medical records and that they must specifically designate any other party to whom their medical information can be released. ROI policies and procedures are based on the following laws and policies: the federal Health Insurance Portability and Accountability Act (HIPPA), various state laws, and the policies and professional practice guidelines set forth by the American Health Information Management Association (AHIMA).

Congress passed the Health Insurance Portability & Accountability Act (HIPAA) in 1996. The purpose of HIPAA is to prevent fraud in the healthcare industry and to protect confidential patient information. HIPPA standardizes and provides enforcement mechanisms for ROI rules and guidelines to protect personal healthcare information. HIPAA effects entities involved with electronic health care information--including health care providers, health plans, employers, public health authorities, life insurers, clearinghouses, billing agencies, information systems vendors, service organizations, universities, and even single-physician offices. The final version of the HIPAA Privacy regulations was issued in December 2000, and went into effect on April 14, 2001. A two-year "grace" period was included; enforcement of the HIPAA Privacy Rules began on April 14, 2003.
  
Overview of Products and Services

MedeFile

MedeFile is a Business-to-Business and a Business-to-Consumer subscription service. MedeFile is designed to create a "cradle to grave" longitudinal record for each of its members by retrieving and consolidating copies of their medical records. When the records are received, the MedeFile system consolidates them into a single medically correct format. The records are then stored in Medefile's MedeVault, a secure repository that can be accessed by MedeFile members 24 hours a day, 7 days a week. Because of the unique security procedures incorporated into the MedeFile system through SecuroMed, the member is the only person to access or give permission to access their records.

A complete MedeFile file is comprised of copies of the member's actual medical records as well as a Digital Health Profile (DHP), which is an overview of the patient's and his family's medical history. In addition, every MedeFile member receives a MedeDrive, an external USB drive which stores all of a patient's Emergency Medical Information as well as a copy of the member's MedeFile.

MedeFile's Emergency Medical Information (EMI) Card

Upon becoming a MedeFile member each individual will receive a Membership / Emergency Medical Information (EMI) Card which contains instructions on how to contact MedeFile in order to retrieve the member's medical records.

The Digital Health Profile (DHP)

A part of a member's MedeFile is their Digital Health Profile (DHP). This form is completed by the patient in order to provide a summary of the patient's healthcare history which assists healthcare providers in understanding the patient's course of medical treatment. This document, along with Advanced Directives and medical record copies, complete the documents contained in the patient's MedeFile.

MedeDrive

The MedeDrive is an external USB drive which stores all of a patient's Emergency Medical Information and their MedeFile which can be viewed on a personal computer. MedeDrive self loads its own viewer, so no special program or software is required. The MedeDrive easily plugs into any PC USB port on most Windows-based computers built in the last four years. (Macintosh version is currently unavailable). The MedeDrive USB key can be updated easily and as frequently as the member desires at no additional cost.
 
MedeVault

The MedeVault is designed to serve as an electronic data and document repository that incorporates state-of-the-art security features in order to prevent unauthorized access to a patient's records. Access to the MedeVault is provided through an encrypted connection to a web service run by Medefile. This connection is provided by Secure Sockets Layer (SSL) technology.
 
 
 
 
4
 

 
Medefile Clinical Information Systems (CIS)

Medefile CIS is a Business-to-Business professional consulting service that is designed to generate revenue from two primary sources: consulting engagements and product commissions.

Medefile CIS intends to offer a full range of HIPPA assessment and compliance services. Medefile CIS' goal is to facilitate the transition to HIPAA compliance. In addition, Medefile CIS intends to offer services that will enable medical facilities to transition from paper-based medical records to electronic medical records. Medefile CIS plans to digitize medical facility offices and offer software to keep the records up-to-date, index the records, and make them queryable based on each facility's specific needs.
 
Medefile consulting engagements are generally fixed-price and fixed scope projects that also generate occasional time-and-materials income from ongoing support and training activities related to its services. In addition, Medefile CIS intends to resell technology from various vendors as needed and may incur commission revenue and revenue from the markup of these products.

Medefile CIS will offer several services, including the evaluation of the record keeping, security, and back office practices. After evaluation is complete, Medefile CIS staff will move forward to implement their own remediation plans for the client.  Other revenue streams may be created based on the licensing of the OmniViewer for the digitized records as well as the scanning software for those facilities wishing to implement a "go-forward" scanning system. Finally, the clients may be charged a contractual support fee for ongoing technical support and updates, which may be assessed on an annual basis.

MedeMinder

MedeMinder is MedeFile’s reminder service.  The member tells us when and where to call, and we automatically contact the member day or night with an appropriate reminder, spoken by real people. The member can even choose the voice they want to hear.  MedeMinder helps insure the member will not miss an appointment or forget to take their medication.
 
SecurMed

SecurMed is designed to serve as an authentication process that protects against any information being viewed by unauthorized persons.

Members

As of December 31, 2010, MedeFile had approximately 5,00   members. The Company’s marketing strategy includes issuing trial memberships on several levels.

Sales and Marketing

Medefile intends to employ the following marketing strategies in order to generate awareness of Medefile's products and services: direct sales, direct mail, a public relations campaign, speaking engagements by Medefile's executive officers, participation in trade shows, and alliances and partnerships with third parties.

Medefile's marketing strategy will target the following types of organizations: Health Maintenance Organizations, Preferred Provider Organizations, managed care organizations, insurance companies, unions, large groups of individuals such as AARP, large and medium sized corporations, nursing homes, and internet users.

In particular, the MedeFile service is designed to be sold in several distinct ways:

o MedeFile Website - Through normal e-commerce mechanisms, patients may enroll in the service directly from the MedeFile website. Membership may be purchased on an annual basis and may be paid all at once, or over time at the patient's discretion.

o Physician Referrals - Patients may enroll based on a doctor's referral. In the event that these physicians are also Medefile CIS customers, they may easily transfer their patients' information into the MedeFile system.

o Large group offerings (e.g., AARP, trade unions) - Large, membership-driven organizations may offer the MedeFile system to their members at a discounted rate, which may be negotiated with Medefile based on the size of the expected enrollment. An additional promotional advantage may be derived from the use of MedeFile through the website of the client organization. Hence, MedeFile functionality may be accessed using each organization's site.
 
o Insurance companies - Similar to large group offerings identified above, insurance companies may offer the MedeFile service to their insured as a means to decrease the cost of medical care.

Technology

Medefile will use and continue to update the most advanced security measures available. Data transmitted between Web browsers and Web servers over the Internet using TCP/IP is generally susceptible to unauthorized interception. To protect sensitive data, the most common method of protection is data encryption. MedeFile will use the industry standard Secure Sockets Layer (SSL), which is a mechanism to secure Internet traffic so that it cannot be intercepted. SSL utilizes digital certificates to verify the identity and integrity of a web site (such as MedeFile) and to protect the security of transactions by certifying their source and destination. 


 
5
 
 
 
Competition

There are other companies working in the medical information technology arena such as GE Healthcare, Bio-Imaging Technologies, and Cyber Records. Some competing companies offer a USB key for medical record storage but require the customer to provide or "self-populate" the information to be stored. The information in a self-populated record is limited and is only as accurate as the individual's memory and understanding of their health condition. Other companies expect each customer to obtain their own medical records from their various healthcare providers. Some offer a CD-Rom for record storage. Usually, the CD-Rom cannot be updated with any changes to an individual's medical status or treatment. Therefore, a new CD-Rom needs to be obtained from that company in order for the individual to have the most current, accurate information regarding their health. There are companies that are solely web-based that do not provide the customer the capability to have a copy of their records. In this case, an internet connection is required to view stored documents. In addition, there are companies that do not concentrate on digitizing an individual's medical records but on converting medical facilities' records from paper to electronic format.

The advantage to being a MedeFile member is that MedeFile gathers, consolidates, organizes and securely stores each member's actual medical records on their behalf. The MedeFile membership includes a Digital Health Profile (DHP) which contains the member's general health history, emergency contacts, doctor contacts, family medical history, allergies, medications, and current conditions. A MedeFile membership also includes a MedeDrive which easily plugs into any PC USB port on most Windows-based computers built in the last four years. (Macintosh version is currently unavailable). The MedeDrive contains the member's emergency medical information that can be easily accessed by emergency care personnel, and the client's actual medical records which are stored in a secure area of the subscriber's MedeFile. The MedeDrive USB key can be updated easily and as frequently as the member desires at no additional cost.

Employees
 
From our inception through the period ended December 31, 2010, we have primarily relied on the services of outside consultants.  As of December 31, 2010, MedeFile had a total ­­2 full time employees and 4 consultants.

The employees are covered by employment agreements, and we believe our relations with our employees favorable.
 
ITEM 1A.  RISK FACTORS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS TOGETHER WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. SOME OF THE INFORMATION CONTAINED IN THIS DISCUSSION AND ANALYSIS OR SET FORTH ELSEWHERE IN THIS ANNUAL REPORT, INCLUDING INFORMATION WITH RESPECT TO OUR PLANS AND STRATEGIES FOR OUR BUSINESS, INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. YOU SHOULD REVIEW THE "RISK FACTORS" SECTION OF THIS REPORT FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE RESULTS DESCRIBED IN OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD SUFFER.

RISKS RELATED TO OUR BUSINESS:

We have a history of operating losses, and we may not achieve or maintain profitability in the future.

We have experienced a net loss of $2,276,310 or $0.00 per share, for the year ended December 31, 2010. The accompanying  consolidated financial statements have been prepared contemplating a continuation of the Company as a going concern.


In the event that cash flow from operations is less than anticipated and we are unable to secure additional funding to cover our expenses, in order to preserve cash, we would be required to reduce expenditures and effect reductions in our corporate infrastructure, either of which could have a material adverse effect on our ability to continue our current level of operations. To the extent that operating expenses increase or we need additional funds to make acquisitions, develop new technologies or acquire strategic assets, the need for additional funding may be accelerated and there can be no assurances that any such additional funding can be obtained on terms acceptable to us, if at all. If we were not able to generate sufficient capital, either from operations or through additional debt or equity financing, to fund our current operations, we would be forced to significantly reduce or delay our plans for continued research and development and expansion. This could significantly reduce the value of our securities.
 
 
 
6
 
 
The commercial success of our products and services depends on the widespread market acceptance of digital technology in the healthcare industry.

The market for digitization of medical records is emerging. Our success will depend on acceptance of digital technology for use in and maintaining and accessing medical records by individuals and healthcare providers, as well as the success of the commercialization of the Medefile products and services. Presently, it is difficult to assess or predict with any assurance the potential size, timing and viability of market opportunities for our technology in this market. The healthcare records market sector is well established with entrenched competitors with whom we must compete.

We may be unable to effectively manage our growth or implement our expansion strategy.

Our growth strategy is subject to related risks, including pressure on our management and on our internal systems and controls. Our planned growth will require us to invest in new, and improve our existing, operational, technological and financial systems and to expand, train and retain our employee base. Our failure to effectively manage our growth could have a material adverse effect on our future financial condition. In addition, due to our lack of operating experience we may have difficulty in managing our growth.

We have limited marketing or sales capabilities, and if we are unable to develop sales and marketing capabilities, we may not be successful in commercializing our products.

We currently have limited sales, marketing or distribution capabilities. As a result, we may be forced to depend on collaborations or agreements with third parties that have established distribution systems and direct sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenues will depend upon the efforts of third parties, over which we may have little or no control.

We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.

We may acquire additional businesses, technologies and products if we determine that these additional businesses, technologies and products complement our existing business or otherwise serve our strategic goals. If we do undertake transactions of this sort, the process of integrating an acquired business, technology or product may result in operating difficulties and expenditures and may absorb significant management attention which would otherwise be available for ongoing development of our business. Moreover, we may never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of our securities, the incurrence of debt and contingent liabilities and amortization expenses related to intangible assets, which could adversely affect our results of operations and financial condition.
 


 
7
 
 
 
Dependence upon Major Customer

For the years ended December 31, 2010 and December 31, 2009, there was no primary customer which accounted for a majority of the revenues. We do not have a written agreement with our customers. Therefore, the provision of services to these customers is provided by us “at will” and the customers may decide not to use our services at any time.

RISKS RELATED TO OUR COMMON STOCK:
 
Because our Common Stock is not registered under the Exchange Act, we will not be subject to the federal proxy rules and our directors, executive offices and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year.
 
Our Common Stock is not registered under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and we do not intend to register our Common Stock under the Exchange Act for the foreseeable future (provided that, we will register our Common Stock under the Exchange Act if we have, after the last day of our fiscal year, more than 500 shareholders of record, in accordance with Section 12(g) of the Exchange Act). As a result, although, upon the effectiveness of the registration statement of which this prospectus forms a part, we will be required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our Common Stock is not registered under the Exchange Act, we will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the Securities and Exchange Commission (“SEC”) a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our Common Stock is not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding Common Stock will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than 10% of a registered class of equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common shares and other equity securities, on Forms 3, 4 and 5 respectively. Such information about our directors, executive officers, and beneficial holders will only be available through this (and any subsequent) registration statement, and periodic reports we file thereafter.  Furthermore, so long as our Common Stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.
 
Our Common Stock is subject to the "Penny Stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

●  that a broker or dealer approve a person's account for transactions in penny stocks; and
 
●  the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

●  obtain financial information and investment experience objectives of the person; and
 
●  make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
 
 
 
 
8
 
 

 
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

●  sets forth the basis on which the broker or dealer made the suitability determination; and
 
●  that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
 
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
 
 
We do not expect to pay dividends for some time, if at all.

No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future operations and growth. We do not expect to pay cash dividends in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors.

Our future capital needs could result in dilution to investors; additional financing could be unavailable or have unfavorable terms.

 Our future capital requirements will depend on many factors, including cash flow from operations, progress in our present operations, competing market developments, and our ability to market our products successfully. It may be necessary to raise additional funds through equity or debt financings. Any equity financings could result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense. Any financing, if available, may be on terms unfavorable to us. If adequate funds are not obtained, we may be required to reduce or curtail operations.


 
9
 

 
 
FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project" and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management's beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the headings "Risk Factors" and "Management Discussion and Analysis and Plan of Operation."

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified in this annual report which would cause actual results to differ before making an investment decision. We are under no duty to update any of the forward-looking statements after the date of this annual report or to conform these statements to actual results.  

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Medefile leases its main office, which is located at 301 Yamato Rd, Boca Raton, FL  33431, commencing March 01, 2009.  Medefile’s previous location was 240 Cedar Knolls Rd, Cedar Knolls, NJ 07927 , commencing September 2007 and expiring in August 2012. By mutual agreement the lease was cancelled and Medefile chose Florida for its main office location.  The current lease is for a term of 24 months.

   
2010
   
2009
12 Months ended 12/31
 
$
30,720
   
$
34,686

Due to increased business, the Company will be leasing a larger suite in April 2011.  The location of the new office space is within the building the Company is currently leasing.


ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company may become involved in litigation relating to claims arising out of it operations in the normal course of business. We are not currently involved in any legal proceedings or litigation and, to the best of knowledge, no governmental authority is contemplating any proceeding in which we are a party or to which any of our properties is subject, which would reasonable be likely to have a material adverse effect on the Company,

 ITEM 4. RESERVED


 
10
 

 
 PART II

 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the OTCQB under the symbol MDFI. Prior to February 23, 2011, our common stock was quoted on the OTC Bulletin Board under the symbol MDFI.

The following table sets forth, for the periods indicated, the range of high and low intraday closing bid information per share of our common stock as quoted on the OTC Bulletin Board.

   
High
   
Low
 
Quarter ended 03/31/09
 
$
0.004
   
$
0.0005
 
Quarter ended 06/30/09
 
$
0.0015
   
$
0.0004
 
Quarter ended 09/30/09
 
$
0.002
   
$
0.0004
 
Quarter ended 12/31/09
 
$
0.007
   
$
0.0008
 
Quarter ended 03/31/10
 
$
0.0148
   
$
0.0046
 
Quarter ended 06/30/10
 
$
0.0093
   
$
0.0041
 
Quarter ended 09/30/10
 
$
0.0068
   
$
0.0036
 
Quarter ended 12/31/10
 
$
0.0075
   
$
0.0037
 

The above prices are believed to reflect representative inter-dealer quotations, without retail markup, markdown or other fees or commissions, and may not represent actual transactions.

As of March 31, 2011, there were approximately 1,044 holders of record of the Company's common stock. As of March 31, 2011, the Company had 3,450,021,410 its common stock issued and outstanding

IN-KIND DIVIDEND

On January 20, 2006, the Company paid an in-kind dividend of 14 shares of common stock for each share of common stock held by shareholders of record at the close of business on January 16, 2006.

DIVIDEND POLICY

We do not currently pay any cash dividends on our common stock, and we currently intend to retain any future earnings for use in our business. Any future determination as to the payment of cash dividends on our common stock will be at the discretion of our Board of Directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by our Board of Directors. There are no restrictions in the Company's articles of incorporation or bylaws that prevent the Company from declaring dividends. The Nevada Revised Statutes, however, do prohibit the Company from declaring dividends where, after giving effect to the distribution of the dividend:

1. The Company would not be able to pay its debts as they become due in the usual course of business; or

2. The Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

The declaration of dividends on our common stock also may be restricted by the provisions of credit agreements that we may enter into from time to time.


 
11
 


EQUITY COMPENSATION PLAN INFORMATION

The following table shows information with respect to each equity compensation plan under which Medefile's common stock is authorized for issuance as of the fiscal year ended December 31, 2010.


Plan category
 
Number of securities
 
Weighted average
 
Number of securities
   
to be issued upon
 
exercise price of
 
remaining available for
   
exercise of
 
outstanding options,
 
future issuance under
   
outstanding options,
 
warrants and rights
 
equity compensation plans
   
warrants and rights
     
(excluding securities
           
reflected in column (a)
   
(a)
 
(b)
 
(c)
             
Equity compensation plans approved
 
-0-
 
-0-
 
-0-
by security holders
           
             
Equity compensation plans not
 
5,640,000
 
$ 0.80
 
4,360,000
approved by security holders
           
             
Total
 
5,640,000
 
$ 0.80
 
4,360,000

In January 2006, the Board of Directors of the Company approved an Incentive Stock Plan, which plan has not yet been presented to shareholders for their approval, pursuant to which they have initially reserved 10,000,000 shares of common stock for issuance. Under the 2006 Incentive Stock Plan, the Board has granted an aggregate of 5,640,000 options to employees pursuant to certain employment agreement that are more fully described below (See "ITEM 11. EXECUTIVE COMPENSATION - EMPLOYMENT AGREEMENTS").

SALES OF UNREGISTERED SECURITIES

On November 15, 2007, the Company and Vantage, the Company’s largest stockholder and primary source of funding, entered into a debt conversion agreement. Pursuant to the debt conversion agreement, Vantage agreed to convert the aggregate principal amount of $2,100,000 of its indebtedness into an aggregate of 14,000,000 restricted shares of common stock of the Company. In addition, the Company will issue to Vantage 8,400,000 three year warrants to purchase an aggregate of 8,400,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share.

On November 16, 2007, pursuant to the terms of a securities purchase agreement the Company sold subscriptions to 11,000,000 restricted shares of the Company’s common stock and three year warrants to purchase an aggregate of 6,600,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share for aggregate proceeds of $1,650,000.

On January 22, 2008, pursuant to the terms of the Purchase Agreement, the Company sold subscriptions to 2,000,000 restricted shares of the Company’s common stock and three year warrants to purchase an aggregate of 1,200,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share for aggregate proceeds of $140,000. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, these transactions did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

During the quarter ended March 31, 2008, pursuant to the terms of the Purchase Agreement, the Company issued and sold 2,000,000 restricted shares of the Company’s common stock and three year warrants to purchase an aggregate of 1,200,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share for aggregate proceeds of $300,000.  The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, these transactions did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.
 
 
 
12
 
 
 
The Company issued 37,500 shares of common stock to an employee per their employment agreement during the quarter ended March 31, 2008. The Company recognized compensation expense of $22,125 based on the closing price of the Company’s common stock as of the grant date.
 
On September 23, 2008, in connection with the Cancellation of Debt Agreement with Vantage Group (Note 6) 14,000,000 share of restricted common stock, previously issued on February 27, 2008 were cancelled and returned to the Company.
 
On September 30, 2008 the Company issued 2,000,000 shares of restricted common stock in exchange for $300,000
 
There were no sales of unregistered securities in 2009.

On May 24, 2010, Lyle Hauser, the brother of the Company's current Chief Executive Officer and the son of the Company’s former Chairman and Chief Executive Officer, agreed to convert notes in the aggregate principal amount of $900,000 into an aggregate of 450,000,000 shares of the Company's common stock.

ITEM 6.  SELECTED FINANCIAL DATA

Not Applicable. 
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

It should be noted that this Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain "forward-looking statements." The terms "believe," "anticipate," "intend," "goal," "expect," and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's current expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including customer acceptance of new products, the impact of competition and price erosion, as well as other risks and uncertainties. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation that the strategy, objectives or other plans of the Company will be achieved. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We undertake no duty to update this information. More information about potential factors that could affect our business and financial results is included in the section entitled "Risk Factors"

Sales and Marketing

Medefile intends to employ the following marketing strategies in order to generate awareness of Medefile's products and services: direct sales, direct mail, a public relations campaign, including radio and television infomercials, speaking engagements by Medefile's executive officers, participation in trade shows, and alliances and partnerships with third parties.

Medefile's marketing strategy will target the following types of organizations and market segments: Health Maintenance Organizations, Preferred Provider Organizations, managed care organizations, insurance companies, unions, large groups of individuals such as AARP, large and medium sized corporations, home healthcare agencies, retirement communities, nursing homes, public and private schools, summer camps and internet users.

In particular, the MedeFile service is designed to be sold in several distinct ways:

 
-
MedeFile Website - Through normal e-commerce mechanisms, patients may enroll in the service directly from the MedeFile website. Membership may be purchased on an annual basis and may be paid all at once, or over time at the patient's discretion.
 
-
Physician Referrals - Patients may enroll based on a doctor's referral. In the event that these physicians are also Medefile CIS customers, they may easily transfer their patients' information into the MedeFile system.
 
-
Large group offerings (e.g., AARP, trade unions) - Large, membership-driven organizations may offer the MedeFile system to their members at a discounted rate, which may be negotiated with Medefile based on the size of the expected enrollment. An additional promotional advantage may be derived from the use of MedeFile through the website of the client organization. Hence, MedeFile functionality may be accessed using each organization's site.
 
-
Insurance companies - Similar to large group offerings identified above, insurance companies will be able to offer the MedeFile service to their insured as a means to decrease the cost of medical care.
 
 
 
 
13
 
 

 
Technology

Medefile will use and continue to update the most advanced security measures available. Data transmitted between Web browsers and Web servers over the Internet using TCP/IP is generally susceptible to unauthorized interception. To protect sensitive data, the most common method of protection is data encryption. MedeFile will use the industry standard Secure Sockets Layer (SSL), which is a mechanism to secure Internet traffic so that it cannot be intercepted. SSL utilizes digital certificates to verify the identity and integrity of a web site (such as MedeFile) and to protect the security of transactions by certifying their source and destination.

Competition
 
There are other companies working in the medical information technology arena such as GE Healthcare, Bio-Imaging Technologies, and Cyber Records. Some competing companies offer a USB key for medical record storage but require the customer to provide or "self-populate" the information to be stored. The information in a self-populated record is limited and is only as accurate as the individual's memory and understanding of their health condition. Other companies expect each customer to obtain their own medical records from their various healthcare providers. Some offer a CD-Rom for record storage. Usually, the CD-Rom cannot be updated with any changes to an individual's medical status or treatment. Therefore, a new CD-Rom needs to be obtained from that company in order for the individual to have the most current, accurate information regarding their health.

There are companies that are solely web-based that do not provide the customer the capability to have a copy of their records. In this case, an internet connection is required to view stored documents. In addition, there are companies that do not concentrate on digitizing an individual’s medical records, but on converting medical facilities’ records from paper to electronic format

The advantage to being a MedeFile member is that MedeFile gathers, consolidates, organizes and securely stores each member's actual medical records on their behalf. The MedeFile membership includes a Digital Health Profile (DHP) which contains the member's general health history, emergency contacts, doctor contacts, family medical history, allergies, medications, and current conditions. A MedeFile membership also includes a MedeDrive, which easily plugs into any PC USB port on most Windows-based computers built in the last four years. (Macintosh version is currently unavailable). The MedeDrive contains the member's emergency medical information, which can be easily accessed by emergency care personnel, and the client's actual medical records which are stored in a secure area of the subscriber's MedeFile. The MedeDrive USB key can be updated easily and as frequently as the member desires at no additional cost.

Employees
 
From our inception through the period ended December 31, 2010, we have relied on the services of outside consultants. As of December 31, 2010, MedeFile had a total ­­2 full time employees and 4 consultants.

The employees are covered by employment agreements, and we believe our relations with our employees favorable.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2010 COMPARED TO YEAR ENDED DECEMBER 31, 2009

Revenues

Revenues for the year ended December 31, 2010 totaled $133,886, compared to revenues of $14,264 for the year ended December 31, 2009. The increase in revenue is primarily related to an increase in the amount of members and medical record reimbursement revenue received from members. Medical record reimbursement revenue is a dollar for dollar reimbursement for charges from member’s doctors for sending updated medical records to Medefile. The Company has increased its marketing and advertising efforts, and as a result there has been a substantial increase in memberships over the previous period.  As of December 31, 2010, there were approximately 5,100 members.  Revenues received from annual memberships are recognized through the period of the membership and therefore revenue recognized represents a fraction of the membership in the quarter being reported. 
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses for the year ended December 31, 2010 totaled $1,134,371consisting primarily of consultant compensation, marketing costs and professional fees. This was a decrease of $1,005,010, or approximately 47.07%, compared to selling, general and administrative expenses of $2,139,381 for the year ended December 31, 2009. The overall decrease in expenses is a result of decreased compensation expense while experiencing an increase in sales and marketing expenses. Compensation expenses for the year ended December 31, 2010 totaled $250,000 compared to $1,723,630 for the year ending December 31, 2009. This compensation was for stock-based compensation.  We expect expenses to increase in future periods as we continue to solicit new MedeFile members.
 
 
 
 
14
 
 

 
A payroll liability has been set up for the Company’s CEO in the amount of $216,000 for umpaid payroll according to the CEO’s employment contract.

Marketing Expense

Marketing expense for the year ended December 31, 2010 totaled $170,488 compared to $0.00 for the year ended December 31, 2009.  The increased marketing expense of $170,488 was due to lead generation for new members.  The Company relies on one source for generation of leads through the Company’s telemarketing efforts to increase revenues.

Depreciation Expense
 
Depreciation and amortization expense totaled $29,911 and $19,975 for the years ended December 31, 2010 and 2009, respectively.
 
Interest Expense
 
Interest expense for the year ended December 31, 2010 was $1,229,799, an increase of $1,210,252, compared to interest expense of $19,547 during the year ended December 31, 2009. The reason for the increase of interest expense is the expensing of interest from conversion of a note payable through a stock issuance explained in Note 5 of the financial statements.

Net Loss

For the reasons stated above, our net loss for year ended December 31, 2010 was $2,492,310, or $0.00 per share, an increase of $313,407, or approximately 14.4%, compared to a net loss of $2,178,903, or $0.01 per share, during the year ended December 31, 2009.


Liquidity and Capital Resources

As of December 31, 2010, we had cash of approximately $499,652.  Our current liabilities as of December 31, 2010 aggregated $326,325. Working capital at December 31, 2010 was $203,649. We had an accumulated deficit of $16,162,556 and stockholders' equity of $272,562 at December 31, 2010.

The Company used $820,720 of cash for operating activities during the year ended December 31, 2010. Cash used in investing activities for the year ended December 31, 2010 was $21,801. Cash provided by financing activities for the year ended December 31, 2010 was $1,340,660 consisting of net proceeds from loans by related and non-related parties .

The Company currently estimates that it will require approximately $650,000 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 the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

Off Balance Sheet Arrangements
 
We do not have any off balance sheet arrangements as of December 31, 2010 or as of the date of this report.

Critical Accounting Policies
 
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.
 
 
 
15
 
 
 
We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policy involves the most complex, difficult and subjective estimates and judgments:

Revenue Recognition

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

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

New Accounting Pronouncements

Certain reclassifications have been made in prior period’s financial statements to conform to classifications used in the current period.
 
Recent Accounting Pronouncements
 
In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
 
In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements.  Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated.  This ASU is effective upon the issuance of this ASU.  The adoption of this ASU did not have a material impact on our consolidated financial statements.
 
In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”).  Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors.  The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  The amendments are to be applied prospectively.  Early adoption is permitted.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements
 
 
 
 
16
 
 

 
In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310):  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.  As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.  This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010.  The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.
 
On December 21, 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010.  We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements.
.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.

ITEM 8. FINANCIAL STATEMENTS

Our financial statements and related notes are set forth at pages  F - 1 to F- 18.
 



 
17
 
 
 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors and
Stockholders of Medefile International, Inc.
Boca Raton, Florida
 
We have audited the accompanying balance sheets of Medefile International, Inc. as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2010. Medefile International, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Medefile International, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that The Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations with a significant accumulated deficit, all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
/s/ L.L. Bradford & Company, LLC
Las Vegas, Nevada
March 31, 2011
 
 
 
 
 
 
F-1
 
 
 
 
Medefile International, Inc
Balance Sheets
 
 
             
   
December 31,
   
December 31,
 
Assets
 
2010
   
2009
 
Current assets
           
Cash
  $ 499,652     $ 1,513  
Inventory
    22,184       -  
Merchant services reserve
    6,173          
Accounts receivable, net
    2,468       -  
Total current assets
    530,477       1,513  
Website development, net of accumulated amortization
    47,210       41,145  
Furniture and equipment, net of accumulated depreciation
    20,364       34,539  
Deposits and other assets
    -       14,475  
Intangibles
    1,339       1,339  
Total assets
  $ 599,390     $ 93,011  
                 
Liabilities and Stockholders' Equity (Deficit)
               
Accounts payable and accrued liabilities
  $ 310,325     $ 146,556  
Cash overdraft
    6,928       862  
Deferred revenues
    9,575       1,362  
Notes payable
    -       411,253  
Notes Payable - related parties
    -       132,924  
Total Current Liabilities
    326,828       692,957  
                 
                 
Stockholders' Equity (Deficit)
               
Preferred stock, $.0001 par value: 10,000 authorized,
               
no shares issued and outstanding
    -       -  
Common stock, $.0001 par value: 5,000,000,000 authorized;
               
3,450,021,410 and 1,463,021,410 shares issued and outstanding on
               
December 31, 20010 and 2009, respectively
    345,002       146,302  
Additional paid in capital
    16,090,116       12,923,998  
Accumulated deficit
    (16,162,556 )     (13,670,246 )
Total stockholders' equity (deficit)
    272,562       (599,946 )
Total liability and stockholders' equity (deficit)
  $ 599,390     $ 93,011  
                 
 

 
The accompanyng notes are an integral part of these financial statements
 
 
 
 
F-2
 
 
Medefile International, Inc.
Statements of Operations
For the Years Ended December 31, 2009 and 2010
 
 
             
   
2010
   
2009
 
Revenue
  $ 133,869     $ 14,264  
                 
Cost of goods sold
    61,610       -  
Gross profit
    72,259       14,264  
                 
Operating expenses
               
Selling, general and administrative expenses
    1,134,371       2,139,381  
Maketing expense
    170,488       -  
Depreciation and amortization expense
    29,911       19,975  
Total operating expenses
    1,334,770       2,159,356  
                 
Loss from operations
    (1,262,511 )     (2,145,092 )
                 
Other Income (Expenses)
               
Interest expense  - note payable
    (10,166 )     (12,871 )
Interest expense - related party note payable
    (1,219,633 )     (6,676 )
Total other income (expense)
    (1,229,799 )     (19,547 )
                 
Loss before income tax
    (2,492,310 )     (2,164,639 )
Provision for income tax
    -       -  
Net Loss
  $ (2,492,310 )   $ (2,164,639 )
                 
Net loss per share: basic and diluted
  $ (0.00 )   $ (0.00 )
                 
Weighted average share outstanding
    2,346,081,850       1,463,021,410  
basic and diluted
               
 
 
The accompanyng notes are an integral part of these financial statements
 
 
 
F-3
 
Medefile International, Inc
Statement of Stockholders' Equity
For the Years Ended December 31, 2010 and 2009
 
 
                               
   
Shares
               
Accumulated
   
   
Outstanding
   
Amount
   
APIC
   
Deficit
   
Total
 
December 31, 2008
    218,493,971     $ 21,849     $ 11,324,821     $ (11,505,607 )   $ (158,937 )
                                         
S-8 Share issued
                                       
for consultants anc
                                       
employees
    1,244,527,439       124,453       1,599,177               1,723,630  
                                         
Net loss
                            (2,164,639 )     (2,164,639 )
December 31, 2009
    1,463,021,410     $ 146,302     $ 12,923,998     $ (13,670,246 )   $ (599,946 )
                                         
Common stock issued
                                 
for consultants and
                                 
employees
    47,000,000       4,700       245,300               250,000  
                                         
Common stock issued
                                 
for note payable
    450,000,000       45,000       2,070,000               2,115,000  
                                         
Common stock sale
    1,490,000,000       149,000       850,818               999,818  
                                         
Net loss
                            (2,492,310 )     (2,492,310 )
December 31, 2010
    3,450,021,410     $ 345,002     $ 16,090,116     $ (16,162,556 )   $ 272,562  
                                         
 
The accompanyng notes are an integral part of these financial statements
 
 
 
 
F-4
 
 
 
Medefile International , Inc
Statements of Cash Flows
For the Years Ended December 31, 2010 and 2009
 
             
   
2010
   
2009
 
Cash flows from operating activities
           
Net loss
  $ (2,492,310 )   $ (2,164,639 )
Adjustments to reconcile net loss to net
               
cash used in operating activities
               
Depreciation and amortization
    29,911       19,975  
Stock based services
    250,000       1,723,630  
Interest expense
    10,166       12,871  
Interest expense - related party
    1,219,815       6,676  
                 
Changes in operating assets and liabilities
               
Accounts receivable
    (2,468 )        
Inventory
    (22,184 )        
Prepaid expenses
    -       17,810  
Deposits and other assets
    14,475       -  
Accounts payable and accrued liabilities
    163,769       67,487  
Merchant services reserve
    (6,173 )        
Cash overdraft
    6,066       862  
Deferred revenue
    8,213       (4,580 )
Net Cash used in operating activities
    (820,720 )     (319,908 )
Cash flows from investing activities
               
Website development
    (21,801 )     (41,145 )
Net cash used in investing activities
    (21,801 )     (41,145 )
Cash flow from financing activities
               
Proceeds from common stock subscription
    999,818          
Proceeds from note payable related party
            32,730  
Proceeds from note payable
    340,842       321,992  
Net cash provided by financing activities
    1,340,660       354,722  
Net increase (decrease) in cash and cash equivalents
    498,139       (6,331 )
Cash and cash equivalents at beginning of period
    1,513       7,844  
Cash and cash equvalents at end of period
  $ 499,652     $ 1,513  
                 
Supplemental disclosure of cash flow information
               
Cash paid during period for
               
Cash paid for interest
  $ -     $ -  
Cash paid for income taxes
  $ -     $ -  
Conversion of note payable and accrued interest
  $ 900,000     $ -  
                 
   
                 
 
The accompanying notes are an integral part of these financial statements
 
 
 
F-5
 
 
 
 
MEDEFILE INTERNATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
 
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

Basis of Presentation
 
The accompanying financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Nature of Business Operations
 
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 9,894,900 shares of Bio-Solutions' common stock to the OmniMed Shareholders. These issuances were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended since, among other things, the transaction did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about the company and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

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").

Medefile has developed a system for gathering, digitizing, storing and distributing information for the healthcare field. Medefile's goal is to bring digital technology to the business of medicine. Medefile intends to accomplish its objective by providing individuals with a simple and secure way to access their lifetime of actual medical records in an efficient and cost-effective manner. Medefile's products and services are designed to provide Healthcare providers with the ability to reference their patient's actual past medical records, thereby ensuring the most accurate treatment and services possible while simultaneously reducing redundant procedures. Medefile's primary product is the MedeFile system, a highly secure system for gathering and maintaining medical records. The MedeFile system is designed to gather all of its members' medical records and create a single, comprehensive medical record that is accessible 24 hours a day, seven days a week.

Going Concern
 
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has reported a net loss of $2,276,310 and $2,164,639 for the years ended December 31, 2010 and 2009, respectively and had an accumulated deficit of $16,162,556 as of December 31, 2010.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The operating losses raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to obtain additional financing depends on the availability of its borrowing capacity, the success of its growth strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond the Company's control.
 
 
 
 
F-6
 
 

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

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

For purposes of these financial statements, cash equivalents include a highly liquid debt instruments with a 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.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company incurred advertising costs for the year ended December 31, 2010 of approximately $2,568. The Company incurred $51,1061 advertising costs for the year ended December 31, 2009.   
 
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 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, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition .
 
 
 
 
F-7
 
 

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 Costs

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 determine 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) collectibility 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 collectibility 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

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 which are potentially refundable. At December 31, 2010 the amount of $9,575 was in deferred revenue compared to $1,362 at December 31, 2009.
 

 
F-8
 

Reclassifications

Certain reclassifications have been made in prior year's financial statements to conform to classifications used in the current year.

Fair Value of Financial Instruments

The Company's financial instruments, which include cash, prepaid expenses, securities, and accounts payable approximate fair value due to the short-term nature of these assets and liabilities.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expense during the reporting period. Actual results could differ from those estimates.

Net Loss Per Share
 
Basic and diluted loss per share amounts are computed based on net loss divided by the weighted average number of common shares outstanding.  Outstanding options to purchase 5,640,000 common shares, warrants to the purchase of 8,175,000 common shares were not included in the computation of diluted loss per share because the assumed conversion and exercise would be anti-dilutive for the year ended December 31, 2010.  The warrants to the purchase of 8,175,000 common shares and outstanding options to purchase 5,640,000 common shares were not included in the computation of diluted loss per share because the assumed conversion and exercise would be anti-dilutive for the year ended December 31, 2010.
 
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

New Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310):  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.  As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.  This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010.  The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.
 
 
 
 
F-9
 
 

 
On December 21, 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010.  We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements.
 
2. FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following at December 31, 2010 and 2009:

   
December 31, 2010
   
December 31, 2009
 
             
Computer and Equipment
  $ 169,286     $ 169,286  
Furniture and Fixtures
    38,618       38,618  
      Subtotal
    207,904       207,904  
Less: Accumulated depreciation
    (187,540 )     (173,365 )
Total Furniture and Fixtures
  $ 20,364     $ 34,539  

Depreciation is calculated by using the straight-line method over the estimated useful life. Depreciation and amortizations expense totaled $14,175 and $19,975 for the year ended December 31, 2010 and 2009, respectively.
 
3. WEBSITE DEVELOPMENT
 
The Website consists of the following:
 
    December 31, 2010     December 31, 2009  
Website Development
  $ 62,946     $ 41,145  
Accumulated amortization
    (15,736 )     -  
 Net website development
  $ 47,210     $ 41,145  
 
Amortization is calculated over a three year period beginning in the second quarter of 2010. Amortization expense for the year ending December 31, 2010 and 2009 is $15,736 and $0.
 
4. INVENTORY
 
As of December 31, 2010, the Company has inventory of $22,184 consisting of USB drives and welcome kits which are utilized by members when signing up for one of our membership products. The company mantians a high inventory to take advantage of price breaks due to volume discounts.
 
5. INTANGIBLE ASSETS
 
The Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby the Company periodically tests its intangible assets for impairment.  On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets are tested for impairment,  and write-downs will be included in results from operations. There was no impairment of acquired intangibles as of December 31, 2008.

Identifiable intangible assets consist of the carrying value of a trademark totaling $1,339 as of December 31, 2010 and 2009. The trademark acquired is considered to have an undeterminable life, and as such will not be amortized. Instead, the trademark is tested annually for impairment, with any impairment charged against earnings in the Company’s consolidated statement of earnings. Management determined the fair value of the trademark  acquired exceeded its recorded book value at December 31, 2010.
 
 
 
 
F-10
 
 

 
6. NOTES PAYABLE.

The Company has issued two Demand Notes.
 
The Company issued an unsecured Demand Note to Digital Health Inc.  The Note bears interest at a rate of seven percent per annul and is due on demand. On May 14, 2010, Lyle Hauser, the son of the Company's Chief Executive Officer, purchased and converted  a note held by Digital Health, Inc. in the amount of $680,531.
 
   
December 31,
2010
   
December 31,
2009
 
Beginning Balance
  $ 329,341     $ -  
Borrowings
    341,024       321,992  
Accrued Interest
    10,166       7,349  
Purchased and converted by Lyle Hauser
    (680,531 )     -  
Balance at December 31, 2010
  $ -     $ 329,341  

 
On September 26, 2008 the Company issued a Demand Note in the principle amount of $75,000 to an individual.  This Note bears interest at a rate of seven percent per annum, with interest accruing until note maturity in September 2010.  On April 26, 2010, Lyle Hauser, the son of the Company's Chief Executive Officer, purchased and converted the note payable in the amount of $83,749 including principle and accrued interest through April 26, 2010
 
   
December 31,
2010
   
December 31,
2009
 
Beginning Balance
  $ 81,912     $ -  
Borrowings
    -       75,000  
Accrued Interest
    1,837       5,522  
Purchased and converted  by Lyle Hauser
    (83,749 )     -  
Balance at December 31, 2010
  $ -     $ 81,912  

7. NOTES PAYABLE – RELATED PARTY

On July 31, 2008 the Company issued an unsecured Demand Note in the principle amount of $89,771 to Cybervault LLC, a company wholly owned by Medefile CEO.  The Note bears interest at a rate of seven percent per annum.  On April 26, 2010, Lyle Hauser, the son of the Company's Chief Executive Officer, purchased from Cybervault its demand note payable in the amount of $104,007 including principle and accrued interest through April 26, 2010.
 
   
September 30,
 2010
   
December 31,
2009
 
Beginning Balance
  $ 101,724     $ 91,518  
Borrowings
    -       3,530  
Accrued Interest
    2,283       6,676  
Purchased by Lyle Hauser
    (104,007 )     -  
Balance at December 31, 2010
  $ -     $ 101,724  
 
During the years ended December 31, 2009 and 2008 the Company received funds totaling $29,200 and $2,000 respectively from a relative of the Company’s CEO.  The amount totaling $31,200 as of June 30, 2010, are due on demand and bears no interest.  On May 3, 2010, Lyle Hauser, the son of the Company's Chief Executive Officer, purchased the note payable from another related party in the amount of $31,200.
 

 
F-11
 
 
On April 26, 2010, Lyle Hauser, the son of the Company’s Chief Executive Officer, purchased the demand notes, including principle and interest from Cybervault and a note payable from an unrelated party.  On May 3, 2010, Lyle Hauser purchased the note payable from another related party.  On May 14, 2010, Lyle Hauser purchased note held by Digital Health.
 
 On May 24, 2010, Lyle Hauser, the son of the Company's Chief Executive Officer, agreed to convert notes in the aggregate principal amount of $900,000 into an aggregate of 450,000,000 shares of the Company's common stock.  Based on current market value of stock an additional $1,214,841 was incurred as interest in the transaction.  Total interest for the nine months ended Septermber 30, 2010 totaled $1,215,513 which includes accrued interest of $672 through the date of conversion on May 13, 2010.  The additional interest on the conversion of the note is a non cash charge.
 
Lyle Hauser Note
 
 
December 31,
 2010
 
Beginning Balance
  $ -  
Purchase Digital Note
    680,531  
Purchase Cybervault Note
    104,007  
Purchase Note – Unrelated Party
    83,749  
Purchase Note – Related Party
    31,200  
Interest Expense
    1,215,513  
Transferred to stock subscriptions
    (2,115,000 )
Balance at December 31, 2010
  $ -  

8. EQUITY

Common Stock
 
The Company has authorized 10,000 shares of Series A Preferred Stock with a par value of $0.0001 per share.

Milton Hauser is entitled to receive 10,000 shares of the Company’s newly designated Series A preferred stock (the “Series A Preferred”).  Each share of Series A Preferred is convertible at the option of the holder, into 50 shares of the Company’s common stock.  In addition, the holders of the Series A Preferred shall be entitled that number of votes at any regular or special meeting of the shareholders of the Company .equal to that number of common shares which is not less than 51% of the vote required to approve any action.

The Company has authorized 5,000,000,000 shares of common stock with a par value of $0.0001 per share. As of December 31, 2010, the Company has 3,450,021,410 shares of common stock issued and outstanding.
 
On January 20, 2006, the Company paid an in-kind dividend of 14 shares of common stock for each share of common stock held by shareholders of record at the close of business on January 16, 2006. There were 11,915,594 shares of common stock outstanding immediately before the in-kind dividend. A total of 166,818,316 shares of common stock were issued pursuant to the in-kind dividend, and there were 178,733,910 shares of common stock outstanding immediately after the in-kind dividend.

On November 15, 2007, the Company and Vantage, the Company’s largest stockholder and primary source of funding, entered into a debt conversion agreement. Pursuant to the debt conversion agreement, Vantage agreed to convert the aggregate principal amount of $2,100,000 of its indebtedness into an aggregate of 14,000,000 restricted shares of common stock of the Company. As of December 31, 2007, the shares of common stock had not been issued
 
 
 
F-12
 
 

 
On November 16, 2007, pursuant to the terms of a securities purchase agreement the Company sold subscriptions for 11,000,000 restricted shares of the Company’s common stock and three year warrants to purchase an aggregate of 6,600,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share for aggregate proceeds of $1,650,000.  As of December 31, 2007, the shares of common stock had not been issued and the funds were recorded as capital in excess of par value until issuance.

During the quarter ended March 31, 2008, pursuant to the terms of the Purchase Agreement, the Company issued and sold 2,000,000 restricted shares of the Company’s common stock and three year warrants to purchase an aggregate of 1,200,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share for aggregate proceeds of $300,000.  The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, these transactions did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.
 
The Company issued 37,500 shares of common stock to an employee per their employment agreement during the quarter ended March 31, 2008. The Company recognized compensation expense of $22,125 based on the closing price of the Company’s common stock as of the grant date.
 
On September 23, 2008, in connection with the Cancellation of Debt Agreement with Vantage Group (Note 6) 14,000,000 share of restricted common stock, previously issued on February 27, 2008 were cancelled and returned to the Company.
 
On September 30, 2008 the Company issued 2,000,000 shares of restricted common stock in exchange for $300,000
 
On December 16, 2008 the Company issued 24,722,561 shares of common stock for amount due of $29402 to consultants.  The market value of the shares issued was $346,116.

On January 23, 2009 the Company issued 109,579,135 shares of common stock for amounts due to consultants.  The share issuance had a market value of $202,381.

On January 28, 2009 the Company issued 14,027,439 shares of common stock for amounts due to consultants. The share issuance had a market value of $28,410.

On February 20, 2009 the Company issued 28,410,864 shares of common stock for amounts due to consultants.  The share issuance had a market value of $28,410.

On March 04, 2009 the Company issued 87,826,007 shares of common stock for amounts due to consultants.  The share issuance had a market value of $70,261.

On March 16, 2009 the Company issued 45,689,216 shares of common stock for amounts due to consultants.  The share issuance had a market value of $27,413.
 
On April 08, 2009 the Company issued 11,397,420 shares of common stock for amounts due to  consultants.  The share issuance had a market value of $6,838.

On May 05, 2009 the Company issued 120,189,675 shares of common stock for amounts due to consultants.  The share issuance had a market value of $96,152.

On May 19, 2009 the Company issued 7,142,857 shares of common stock for amounts due to  consultants.  The share issuance had a market value of $3,572.
 
 
 
F-13
 
 

 
On May 26, 2009 the Company issued 8,000,000 shares of common stock for amounts due to consultants.  The share issuance had a market value of 6,400.

On June 11, 2009 the Company issued 107,189,500 shares of common stock for amounts due to consultants.  The share issuance had a market value of $96,470.

On June 22, 2009 the Company issued $25,000,000 shares of common stock for amounts due to consultants.  The share issuance had a market value of $20,000

On July 20, 2009  the Company issued 64,147,106 share of common stock for amounts due to consultants.  The share issuance had a market value of $32,074.

On July 27, 2009 the Company issued 2,500,000 shares of common stock for amounts due to  consultants.  The share issuance had a market value of $2,500.

On July 29, 2009 the Company issued 60,073,553 shares of common stock for amounts due to consultants.  The share issuance had a market value of $72,088.

On July 31, 2009 the Company issued 25,000,000 shares of common stock for amounts due to consultants.  The share issuance had a market value of $20,000.

On August 1, 2009 the Company issued 500,000 shares of common stock for amounts due to consultants.  The share issuance had a market value of $450.

On August 6, 2009 the Company issued 65,972,222 shares of common stock for amounts due to consultants.  The share issuance had a market value of59,375.

On August 13, 2009 the Company issued 21,040,667 shares of common stock for amounts due to consultants.  The share issuance had a market value of $16,833.

On August 28, 2009 the Company issued 98,000,000 shares of common stock for amounts due to consultants.  The share issuance had a market value of $58,800.

On September 30, 2009 the Company issued 12,841,778 shares of common stock for amounts due to consultants.  The share issuance had a market value of $11,558.

On December 29, 2009 the Company issued 211,500,000 shares of common stock for amounts due to consultants.  The shares had a market value of $401,850.

On December 31, 2009 the Company issued 118,500,000 shares of common stock for amounts due to consultants.  The shares had a market value of $462,150 .

On May 24, 2010, Lyle Hauser, the son of the Company's Chief Executive Officer, agreed to convert notes in the aggregate principal amount of $900,000 into an aggregate of 450,000,000 shares of the Company's common stock.
 
On July 20, 2010, the Company sold 1,000,000,000 shares of common stock for a net amount of 990,818.
 
On August 18, 2010 the Company issued 10,000,000 shares of common stock for amounts due to consultants.  The shares had a market value of $65,000.

On November 9, 2010 the Company issued 37,000,000 shares of common stock for amounts due to consultants.  The shares had a market value of $185,000.
 

Stock Options
  In January 2006, the Board of Directors of the Company approved an Incentive Stock Plan,pursuant to which they have initially reserved 10,000,000 shares of common Stock for issuance. Under the 2006 Incentive Stock, the Board has granted an aggregate of 5,640,000 options to employees pursuant to certain employment agreement that are more fully described below


 
F-14
 
 
A summary of option activity under the Plan as of December 31, 2010, and changes during the period then ended are presented below:

   
Options
   
Weighted Average Exercise Price
 
Outstanding at December 31, 2008
    5,640,000     $ 0.80  
Granted
    --       --  
Exercised
    --       --  
Forfeited or Expired
    --       --  
Outstanding at December 31, 2009
    5,640,000     $ 0.80  
Granted
               
Excercised
               
Forfeit or Expired
               
Outstanding at December 31, 2010
    5,640,000     $ 0.80  
Non-vested at December 31 2010
    --          
Exercised at December 31, 2010
    5,640,000     $ 0.80  
                 
                 
 
The options outstanding as of December 31, 2010 have been segregated for additional disclosure as follows:
 
Options Outstanding
   
Options Exercisable
 
                 
Weighted
             
           
Weighted
   
Average
         
Weighted
 
Range of
         
Average
   
Remaining
         
Average
 
Exercise
   
Number
   
Exercise
   
Contractual
   
Number
   
Exercise
 
Price
   
Outstanding
   
Price
   
Life
   
Exercisable
   
Price
 
$
0.80
     
5,640,000
   
$
0.80
     
1.00
     
5,640,000
   
$
0.80
 

 
Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share based compensation expense for the year ended December 31, 2009 and December 31, 2008 was $0 and $102,678 respectively.
 
 
 
 
F-15
 
 
 
Warrants
 
On June 19, 2006 the Company issued 200,000 warrants to consultants for services to be provided. The warrants vested in 50,000 increments on June 19, 2006; September 18, 2006, December 17, 2006 and March 17, 2007. 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 :
 
Risk-free interest rate at grant date
4.75
%
Expected stock price volatility
86
%
Expected dividend payount
--
 
Expected option in life-years
4
 

 
As of December 31, 2007, all warrants were fully vested. During the quarter ended March 31, 2008, the Company issued 16,200,000 three year warrants to purchase an aggregate of 16,200,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share as part of the common stock sales.   On September 23, 2008, in connection with the Vantage Group Ltd Cancellation of Debt Agreement, 8,400,000 warrants previously mentioned were cancelled (See Note 8).  A summary of the warrants outstanding and exercisable appears below:
 
Warrants Outstanding
   
Warrants Excercisable
 
Exercise Price
   
Number Outstnding
   
Weighted Average Remaining Contractual Life(years)
   
Weighted Average Exercise Price
   
Number Excercisable
   
Weighted Average Remaining Contractual Life (years)
 
$ 3.50       50,000       .97       3.50       50,000       .97  
$ 5.00       50,000       1.22       5.00       50,000       1.22  
$ 6.50       50,000       1.47       6.50       50,000       1.47  
$ 8.00       50,000       1.72       8.00       50,000       1.72  
$ 0.60       7,800,000       1.50       0.60       7,800,000       1.50  
$ 0.56       175,000       3.50       0.56       175,000       3.50  
          8,175,000       1.54       .073       8,175,000       1.54  

The Company awarded 175,000 Common Stock warrants, at an exercise price of $0.56 per share, to former board members at the quoted stock price on the effective date of the awards. The warrants have an expiration date of five years from the issue date and contain provisions for a cash exercise. The estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions:

Risk-free interest rate at grant date
4.75
%
Expected stock price volatility
155
%
Expected dividend payount
--
 
Expected option in life-years
3
 
 
 
 
 
F-16
 

 
Transactions involving warrants are summarized as follows:
 
   
Number of Warrants
   
Weighted Average Price Per Share
 
Outstanding at December 31, 2007
    200,000     $ 5.75  
Granted
    16,375,000       0.60  
Exercised
    --       --  
Canceled or expired
    (8,400,000 )     0.60  
Outstanding at December 31, 2008
    8,175,000       0.73  
Granted
    --       --  
Exercised
    --       --  
Canceled or expired
    --       --  
Outstanding at December 31, 2009
    8,175,000       0.73  
Granted
    --       --  
Exercised
    --       --  
Canceled or expired
    --       --  
Outstanding at December 31, 2010
    8,175,000       0.73  


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:

Risk-free interest rate at grant date
4.75%
Expected stock price volatility
86%
Expected dividend payout
--
Expected option in life-years
4
 
9. INCOME TAXES

The Company’s recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between 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. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.
 
10. COMMITMENTS

Medefile leases its main office, which is located at 301 Yamato Rd, Boca Raton, FL  33431, commencing March 01, 2009.  Medefile’s previous location was 240 Cedar Knolls Rd, Cedar Knolls, NJ 07927 , commencing September 2007 and expiring in August 2012. By mutual agreement the lease was cancelled and Medefile chose Florida for its main office location.  With new business development and more favorable conditions and costs with the transition to operations in Florida. The current lease is for a term of 24 months.

   
2009
   
2010
 
12 Months ending 12/31
  $ 34,686     $ 30,720  
 
On December 10, 2008, Medefile entered into an employment agreement with Kevin Hauser pursuant to which Kevin Hauser agreed to continue to serve as the Company’s Vice President of Sales and New Business Development for a term of three years.  The term of his agreement shall automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the agreement.  Pursuant to his agreement, Kevin Hauser shall be entitled to receive an annual salary of $216,000.  He shall also be entitled to a discretionary bonus from time to time during the term of the agreement in an amount determined by the sole discretion of the Company’s board of directors. During the year ended December 31, 2010, the Company accrued $216,000 which has been included in accounts payable and accrued liabilities.
 
 
 
 
F-17
 
 

 
On December 10, 2008, Medefile entered into an employment agreement with Rachel Hauser pursuant to which Rachel Hauser agreed to serve as the Company’s Director of Marketing and Public Relations for a term of three years.  The term of his agreement shall automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the agreement.  Pursuant to her agreement, Rachel Hauser shall be entitled to receive an annual salary of $216,000.  She shall also be entitled to a discretionary bonus from time to time during the term of the agreement in an amount determined by the sole discretion of the Company’s board of directors.  The employment agreement was terminated in January 2010.
 
On April 3, 2009, Realty Associates Fund VI, LP filed suit against the Company in the Superior Court of New Jersey, Law Division, Morris County, alleging amounts owed under the Company’s lease with Realty Associates.  On August 5, 2009, Realty Associates requested that the court enter a default judgment against the Company,  The Company has reached a settlement with the Plaintiff in the amount of $40,000 which shall be payable $20,000 upon execution of the settlement agreement and $20,000 within 120 days of execution.  The initial payment was made on March 26, 2010. The final payment was made July 16, 2010.


11. MAJOR CUSTOMERS

For the years ended December 31, 2010 and 2009, there was no single customer which accounted for a majority of the revenues. We do not have a written agreement with our customers. Therefore, the provision of services to these customers is provided by us “at will” and the customers may decide not to use our services at any time.
 
12. SUBSEQUENT EVENTS

None

 

 
 
F-18
 
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.
 
ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

As of the end of the period covered by this Annual Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (Principal Executive, Financial and Accounting 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, Financial and Accounting Officer) concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and which also are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (Principal Executive, Financial and Accounting Officer), to allow timely decisions regarding required disclosure.
 
In January 2009 the Board of Directors approved an amendment to the Company’s articles of incorporation to increase the Company’s number of authorized shares of common stock from 300,000,000 to 5,000,000,000. Notwithstanding this approval, the amendment to the Company’s articles of incorporation filed with the Secretary of State of Nevada increased the Company’s authorized shares of common stock to 1,500,000,000. Further, although the amendment filed with the Secretary of State of Nevada increased the number of authorized shares of common stock to 1,500,000,000, the Company’s 10-Q’s for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 disclosed that the Company had 5,000,000,000 authorized shares of common stock. The Company discovered these discrepancies during the first quarter of 2010, and determined that these discrepancies were the result of inadequate disclosure controls and procedures; in particular, the Company determined that it had inadequate levels of review of its SEC filings and related documentation, such as board approvals, contracts, and Nevada Secretary of State filings. Accordingly, the Company determined that its disclosure controls and procedures were ineffective as of March 31, 2010, June 30, 2010 and September 30, 2010, as disclosed in the Company’s 10-Q filings for these periods. During the fourth quarter of 2010, the Company instituted new controls and procedures by instituting additional levels of review of its SEC filings and related documentation such as board approvals, contracts, and Nevada Secretary of State filings. As a result, the Company determined that its disclosure controls and procedures were effective as of December 31, 2010.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management, with the participation of our principal executive officer, financial and accounting officer, have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2010 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that, as of December 31, 2010, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to permanent rules of the SEC that permit the Company to provide only management’s report in this annual report.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer (Principal Executive, Financial and Accounting Officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
 
 
18
 
 

 
Changes in internal controls

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

   
 
PART III

 ITEM 10. DIRECTORS, OFFICERS AND CORPORATE GOVERNANCE.

The following tables set forth certain information with respect to our directors and officers as of December 31, 2010. The following persons serve as our directors and executive officers:
 
Name
 
Age
 
Position
         
Kevin Hauser
 
38
 
President, Chief Executive Officer, Acting Chief Financial Officer, Director
Michael S. Delin
 
46
 
Director
 
Our executive officers are appointed by and serve at the discretion of our Board of Directors. There are no family relationships between any director and/or any executive officer.

Background of Executive Officers and Directors

Kevin Hauser, President, Chief Executive Officer and Acting Chief Financial Officer. Kevin Hauser was appointed as the Company’s President, Chief Executive Officer, Acting Chief Financial Officer and Chairman on August 15, 2010. Kevin has been working with MedeFile since 2005.  Kevin has been instrumental in developing business and key components of the Personal Health Record industry since that time.  Prior to joining MedeFile in early 2005 as the Company's Director of Business Development, Kevin worked primarily with Raymond James Financial Services. In 1996, Kevin established a branch office for Raymond James in New York City's Wall Street district. Earning placement in Raymond James' President Club, Kevin was the youngest Independent Sales Associate to receive that honor at that time. Kevin attended the George Washington University from 1990-1994.
 
Michael Delin, Director. Mr. Delin is the sole proprietor and operator of an accounting and tax preparation service.  He has previously provided consulting services to the Company.  Mr. Delin also currently serves as the Chief Financial Officer of a construction company based in southwest Florida.  Mr. Delin graduated from the University of South Florida with a Bachelor of Arts degree in accounting
 
COMMITTEES

We currently do not maintain any committees of the Board of Directors. Given our size and the development of our business to date, we believe that the board through its meetings can perform all of the duties and responsibilities which might be contemplated by a committee.  Our board of directors is expected to appoint an audit committee, nominating committee and compensation committee, and to adopt charters relative to each such committee, in the near future. We intend to appoint such persons to the committees of the board of directors as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange, although we are not required to comply with such requirements until we elect to seek listing on a national securities exchange, and we are under no obligation to do so.
 
 
 
 
19
 
 
 
Except as may be provided in our bylaws, we do not currently have specified procedures in place pursuant to which whereby security holders may recommend nominees to the Board of Directors.
 
Board Leadership Structure and Role in Risk Oversight
 
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles.  Kevin Hauser  has served as our Chairman and Chief Executive Officer since August 2010. We believe it is in the best interest of the Company to have the Chairman and Chief Executive Officer roles combined due to our small size and limited resources.
 
Our Board of Directors is primarily responsible for overseeing our risk management processes.  The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensure that risks undertaken by our company are consistent with the Board’s appetite for risk. While the Board oversees our company, our company’s management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.

CODE OF ETHICS

We have adopted a Code of Ethics and Business Conduct that applies to our officers, directors and employees.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors, and persons who beneficially own more than 10% of our common stock to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than 10% beneficial owners are also required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(e) during the fiscal year ended December 31, 2009, we believe that during the year ended December 31, 2009, our executive officers, directors and all persons who own more than ten percent of a registered class of our equity securities complied with all Section 16(a) filing requirements.  

 ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation for services in all capacities rendered to us for the two fiscal years ended December 31, 2010, of our Chief Executive Officer and our other executive officers whose annual compensation exceeded $100,000 in the fiscal year ended December 31, 2010, if any. We refer to the Chief Executive Officer and these other officers as the named executive officers.

SUMMARY COMPENSATION TABLE
 
 
Name and
Principal
Position
 
 
 
Year
   
 
 
Salary
($)
   
 
 
Bonus
($)
   
 
Stock
Awards
($)
   
 
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings
($)
   
 
All Other
Compensation
($)
   
 
 
Total
($)
 
Kevin Hauser (1)
President, CEO, Acting CFO and Director
   
2010
     
  216,000(5)
     
   --
     
--
     
 --
     
 --
     
 --
     
  --
     
216,000 (5)
 
     
2009
     
--
     
--
     
270,343
 (3)
   
--
     
--
     
--
     
--
     
270,343 
 
                                                                         
Milton Hauser(2)
 
   
2010
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
     
2009
     
--
     
--
     
70,593
(4)
   
--
     
--
     
--
     
--
     
70,593
 
(1) On August 15, 2010 the Board of Directors appointed Kevin Hauser as President and Chief Executive Officer and to fill the vacancy on the Board created by the resignation of Milton Hauser.
(2) On August 15, 2010, Milton Hauser resigned as the President, Chief Executive Officer and as a director to the Board of Directors.
(3) Kevin Hauser’s stock awards represent 250,917,415 share of S-8 stock issued throughout 2009, based on market value at date of award.
(4) Milton Hauser’s stock awards represents 69,677,856 shares of S-8 stock issued throughout 2009, based on market value at date of award.
(5) Represents amount unpaid but accrued.
 
 
 
20
 
 
Outstanding Equity Awards at Fiscal Year-End as of December 31, 2010
 

   
Option Awards
   
Stock Awards
 
Name
 
Number of Securities Underlying Unexercised Options
(#)
Exercisable
   
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
   
Option Exercise Price
($)
   
Option Expiration Date
   
Number of Shares or Units of Stock That Have Not Vested
(#)
   
Market Value of Shares or Units of Stock That Have Not Vested
($)
   
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
   
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
 
Kevin Hauser
President, CEO, Acting CFO and Director
    --       --       --       --       --       --       --       --       --  
Mitlon Hauser
    --       --       --       --       --       --       --       --       --  
 
  Director Compensation

Name
 
Fees Earned
or Paid in
Cash
($)(1)
   
Stock
Awards
($)
   
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings
($)
   
All Other
Compensation
($)
   
Total
($)
 
Kevin
 Hauser(1)
    --       --       --       --       --       --       --  
                                                         
Michael
Delin (2)
    --       --       --       --       --       --       --  
                                                         
(1) Mr Hauser became a Director effective August 15, 2010 
(2) Mr. Delin became a Director effective December 12, 2008

OPTION GRANTS IN FISCAL 2010

The Company issued no option grants during 2010.
 
EMPLOYMENT AGREEMENTS

On December 10, 2008, Medefile entered into an employment agreement with Kevin Hauser pursuant to which Kevin Hauser agreed to continue to serve as the Company’s Vice President of Sales and New Business Development for a term of three years.  The term of his agreement shall automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the agreement.  Pursuant to his agreement, Kevin Hauser shall be entitled to receive an annual salary of $216,000.  He shall also be entitled to a discretionary bonus from time to time during the term of the agreement in an amount determined by the sole discretion of the Company’s board of directors. For the year ended December 31, 2010, the amount of $216,000 due under the employment agreement was accrued but unpaid.

 
 
 
 
21
 

 

LONG TERM INCENTIVES

STOCK OPTIONS AND RESTRICTED STOCK . Executive officers, together with our other employees, are eligible to receive grants of awards under our 2006 Stock Option Plan. These awards may be in the form of stock options and/or restricted stock grants. The number of shares underlying options or shares, together with all other terms of the options and shares, are established by the Board of Directors.
 
STOCK INCENTIVE PLANS

2006 Incentive Stock Plan

The 2006 Incentive Stock Plan has initially reserved 10,000,000 shares of common Stock for issuance. Under the 2006 Incentive Stock Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.

Purpose . The primary purpose of the 2006 Incentive Stock Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.

Administration . The 2006 Incentive Stock Plan is administered by our Board of Directors, as the Board of Directors may be composed from time to time. Notwithstanding the foregoing, the Board of Directors may at any time, or from time to time, appoint a committee of at least two members of the Board of Directors, and delegate to the committee the authority of the Board of Directors to administer the 2006 Incentive Stock Plan. Upon such appointment and delegation, the committee shall have all the powers, privileges and duties of the Board of Directors, and shall be substituted for the Board of Directors, in the administration of the 2006 Incentive Stock Plan, subject to certain limitations.

Eligibilit . Under the 2006 Stock Incentive Plan, options may be granted to key employees, officers, directors or consultants of the Company.

Terms of Options . The term of each option granted under the 2006 Incentive Stock Plan shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the 2006 Incentive Stock Plan, including the following:

(a) Purchase Price . The purchase price of the common stock subject to each incentive stock option shall not be less than the fair market value (as set forth in the 2006 Incentive Stock Plan), or in the case of the grant of an incentive stock option to a principal stockholder, not less that 110% of fair market value of such common stock at the time such option is granted. The purchase price of the common stock subject to each non-incentive stock option shall be determined at the time such option is granted, but in no case less than 85% of the fair market value of such common stock at the time such option is granted;
 
 
 
 
22
 

 
(b) Vesting . The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Board of Directors, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the 2006 Incentive Stock Plan;

(c) Expiration . The expiration of each option shall be fixed by the Board of Directors, in its discretion, at the time such option is granted; however, unless otherwise determined by the Board of Directors at the time such option is granted, an option shall be exercisable for ten years after the date on which it was granted, or five years for grants to certain executive officers. Each option shall be subject to earlier termination or repurchase as expressly provided in the 2006 Incentive Stock Plan or as determined by the Board of Directors, in its discretion, at the time such option is granted;

(d) Transferability . No option shall be transferable, except by will or the laws of descent and distribution, and any option may be exercised during the lifetime of the optionee only by such optionee. No option granted under the 2006 Incentive Stock Plan shall be subject to execution, attachment or other process;

(e) Option Adjustments. The aggregate number and class of shares as to which options may be granted under the 2006 Incentive Stock Plan, the number and class shares covered by each outstanding option and the exercise price per share thereof (but not the total price), and all such options, shall each be proportionately adjusted for any increase decrease in the number of issued common stock resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend; and

(f) Termination, Modification And Amendment . The 2006 Incentive Stock Plan (but not options previously granted under the plan) shall terminate ten years from the date of its adoption by the Board of Directors, and no option or shares shall be granted after termination of the 2006 Incentive Stock Plan. Subject to certain restrictions, the 2006 Incentive Stock Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Nevada.

2008 Amended and Restated Incentive Stock Plan

The 2008 Plan, as amended, reserved 750,000,000 shares of common Stock for issuance. Under the 2008 Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.

Purpose . The primary purpose of the 2008 Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.

Administration . The 2008 Plan is administered by our Board of Directors, as the Board of Directors may be composed from time to time. Notwithstanding the foregoing, the Board of Directors may at any time, or from time to time, appoint a committee of at least two members of the Board of Directors, and delegate to the committee the authority of the Board of Directors to administer the 2008 Plan. Upon such appointment and delegation, the committee shall have all the powers, privileges and duties of the Board of Directors, and shall be substituted for the Board of Directors, in the administration of the 2008 Plan, subject to certain limitations.

Eligibility .  Under the 2008 Plan, options may be granted to key employees, officers, directors or consultants of the Company.

Terms of Options . The term of each option granted under the 2008 Plan shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the 2008 Stock Plan, including the following:

(a) Purchase Price . The purchase price of the common stock subject to each incentive stock option shall not be less than the fair market value (as set forth in the 2008 Plan), or in the case of the grant of an incentive stock option to a principal stockholder, not less that 110% of fair market value of such common stock at the time such option is granted. The purchase price of the common stock subject to each non-incentive stock option shall be determined at the time such option is granted, but in no case less than 85% of the fair market value of such common stock at the time such option is granted;

(b) Vesting . The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Board of Directors, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the 2008 Plan;
 
 
 
 
23
 

 
(c) Expiration . The expiration of each option shall be fixed by the Board of Directors, in its discretion, at the time such option is granted; however, unless otherwise determined by the Board of Directors at the time such option is granted, an option shall be exercisable for ten years after the date on which it was granted, or five years for grants to certain executive officers. Each option shall be subject to earlier termination or repurchase as expressly provided in the 2008 Plan or as determined by the Board of Directors, in its discretion, at the time such option is granted;

(d) Transferability . No option shall be transferable, except by will or the laws of descent and distribution, and any option may be exercised during the lifetime of the optionee only by such optionee. No option granted under the 2008 Plan shall be subject to execution, attachment or other process;

(e) Option Adjustments. The aggregate number and class of shares as to which options may be granted under the 2008 Plan, the number and class shares covered by each outstanding option and the exercise price per share thereof (but not the total price), and all such options, shall each be proportionately adjusted for any increase decrease in the number of issued common stock resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend; and

(f) Termination, Modification and Amendment . The 2008 Plan (but not options previously granted under the plan) shall terminate ten years from the date of its adoption by the Board of Directors, and no option or shares shall be granted after termination of the 2006 Incentive Stock Plan. Subject to certain restrictions, the 2008 Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Nevada.

2010 Incentive Stock Plan

The 2010 Plan has initially reserved 330,000,000 shares of common Stock for issuance. Under the 2010 Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.

Purpose . The primary purpose of the 2010 Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.

Administration . The 2010 Plan is administered by our Board of Directors, as the Board of Directors may be composed from time to time. Notwithstanding the foregoing, the Board of Directors may at any time, or from time to time, appoint a committee of at least two members of the Board of Directors, and delegate to the committee the authority of the Board of Directors to administer the 2010 Plan. Upon such appointment and delegation, the committee shall have all the powers, privileges and duties of the Board of Directors, and shall be substituted for the Board of Directors, in the administration of the 2010 Plan, subject to certain limitations.

Eligibility . Under the 2010 Plan, options may be granted to key employees, officers, directors or consultants of the Company.

Terms of Options . The term of each option granted under the 2010 Plan shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the 2008 Stock Plan, including the following:

(a) Purchase Price . The purchase price of the common stock subject to each incentive stock option shall not be less than the fair market value (as set forth in the 2010 Plan), or in the case of the grant of an incentive stock option to a principal stockholder, not less that 110% of fair market value of such common stock at the time such option is granted. The purchase price of the common stock subject to each non-incentive stock option shall be determined at the time such option is granted, but in no case less than 85% of the fair market value of such common stock at the time such option is granted;

(b) Vesting . The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Board of Directors, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the 2010 Plan;

(c) Expiration . The expiration of each option shall be fixed by the Board of Directors, in its discretion, at the time such option is granted; however, unless otherwise determined by the Board of Directors at the time such option is granted, an option shall be exercisable for ten years after the date on which it was granted, or five years for grants to certain executive officers. Each option shall be subject to earlier termination or repurchase as expressly provided in the 2010 Plan or as determined by the Board of Directors, in its discretion, at the time such option is granted;

(d) Transferability . No option shall be transferable, except by will or the laws of descent and distribution, and any option may be exercised during the lifetime of the optionee only by such optionee. No option granted under the 2010 Plan shall be subject to execution, attachment or other process;
 
 
 
 
24
 

 
(e) Option Adjustments. The aggregate number and class of shares as to which options may be granted under the 2010 Plan, the number and class shares covered by each outstanding option and the exercise price per share thereof (but not the total price), and all such options, shall each be proportionately adjusted for any increse decrease in the number of issued common stock resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend; and

(f) Termination, Modification and Amendment . The 2010 Plan (but not options previously granted under the plan) shall terminate ten years from the date of its adoption by the Board of Directors, and no option or shares shall be granted after termination of the 2006 Incentive Stock Plan. Subject to certain restrictions, the 2010 Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Nevada
 
 
ITEM 12. EQUITY COMPENSATION PLAN INFORM AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
PRINCIPAL STOCKHOLDERS
 
The following table sets forth certain information relating to the ownership of common stock by (i) each person known by us be the beneficial owner of more than five percent of the outstanding shares of our common stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all of our executive officers and directors as a group. Unless otherwise indicated, the information relates to these persons, beneficial ownership as of March 31, 2011.  Except as may be indicated in the footnotes to the table and subject to applicable community property laws, each person has the sole voting and investment power with respect to the shares owned.

 
Name of Beneficial Owner (1)
 
Common Stock
Beneficially Owned(2)(3)
   
Percentage of Common Stock (2)
 
             
Lyle Hauser(3)
    1,289,631,250       37.4 %
Kevin Hauser (4)
    39,620,000       1.1 %
Michael S. Delin
    -       -  
All officers and directors as
 a group (2 persons)
    39,620,000       1.1 %
                 


(1) Except as otherwise indicated, the address of each beneficial owner is c/o Medefile International, Inc., 301 Yamato Rd, Ste 3155, Boca Raton, FL  33413.

(2) Applicable percentage ownership is based on 3,450,021,410 shares of common stock outstanding as of March 31, 2011, together with securities exercisable or convertible into shares of common stock within 60 days of March 31, 2011 for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of March 31, 2011 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(3) Lyle Hauser owns 1,196,312,500 shares in his individual capacity and 93,318,750 shares through Vantage Holding Ltd. Lyle Hauser is the owner of The Vantage Group Ltd. and Vantage Holding Ltd. Lyle Hauser is the brother of Kevin Hauser.

The information as to shares beneficially owned has been individually furnished by our respective directors, named executive officers and other stockholders, or taken from documents filed with the SEC.



 
25
 
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Medefile has been able to continue operations due to the payment of Company obligations by The Vantage Group Ltd., a company owned and controlled by Lyle Hauser.  Lyle Hauser is the control person of Vantage Holding Ltd., the majority stockholder of the Company.

During the period July 16, 1997 (inception) to December 31, 2007, The Vantage Group Ltd., has (i) paid an aggregate of $905,318 of the Company's obligations, (ii) contributed $275,000 of assets to the capital of the Company, and (iii) made loans of approximately $3,192,466 to the Company.

On April 11 2007, Medefile issued two promissory notes to The Vantage Group as evidence of this indebtedness. One of the notes, in the principal amount of $700,000, was payable on demand. The other note, with a principal amount of $1,115,379, was payable no later than July 1, 2008. On November 15, 2007, the Company and Vantage, the Company’s largest stockholder and primary source of funding, entered into a debt conversion agreement. Pursuant to the debt conversion agreement, Vantage agreed to convert the aggregate principal amount of $2,100,000 of its indebtedness into an aggregate of 14,000,000 restricted shares of common stock of the Company. In addition, the Company issued to Vantage 8,400,000 three year warrants to purchase an aggregate of 8,400,000 restricted shares of the Company’s common stock at an exercise price of $0.60 per share. During the twelve months ended December 31, 2007, the Company borrowed a total of $1,245,000 against the note. During the twelve months ended December 31, 2007 and 2006, and the Company charged related party interest expense of $161,504 and $95,670, respectively.

On September 23, 2008. the Company received a Cancellation of Debt from Vantage Group Ltd., canceling the remaining balance of the Loan Payable, including all outstanding interest as of that date.  In addition, Vantage Group Ltd. surrendered 14,000,000 shares of common stock and 8,400,000 warrants at $0.60.
 
On December 10, 2008, the Company entered into an employment agreement with Rachel Hauser, the daughter-in-law of the Company’s Chief Executive Officer, Milton Hauser, pursuant to which Mrs. Hauser agreed to serve as the Company’s Director of Marketing and Public Relations for a term of three years.  The term of his agreement shall automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the agreement.  Pursuant to his agreement, Mrs. Hauser shall be entitled to receive an annual salary of $216,000.  She shall also be entitled to a discretionary bonus from time to time during the term of the agreement in an amount determined by the sole discretion of the Company’s board of directors.
 
Prior to his appointment as a director, Michael Delin performed certain accounting services for the Company.  Mr. Delin received an aggregate of 3,200,000 shares of the Company’s common stock as consideration for such services, which shares were valued at approximately $4,500 at the time of grant.

On July 31, 2008, the Company issued an unsecured Demand Note to Cybervault LLC, a company wholly owned by Medefile’s former CEO.  The Note bears interest at a rate of seven percent per annum.  As of December 31, 2009 the Company had received a total of $93,301 in principal payments, with the additiona of accrued interest of $8,423 the total owed amounts to $101,724.

On April 26, 2010, Lyle Hauser, the brother of the Company’s current Chief Executive Officer and the son of the former Chief Executive Officer and control person for Vantage Group Ltd., purchased the demand notes, including principle and interest from Cybervault and a note payable from an unrelated party.  On May 3, 2010, Lyle Hauser purchased the note payable from another related party.  On May 14, 2010, Lyle Hauser purchased a note held by Digital Health.

On May 24, 2010, Lyle Hauser, the brother of the Company's current Chief Executive Officer and the son of the former Chief Executive Officer and control person for Vantage Group Ltd.,  , agreed to convert notes in the aggregate principal amount of $900,000 into an aggregate of 450,000,000 shares of the Company's common stock.  

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
AUDIT FEES

The aggregate fees billed by L.L. Bradford for the audit and review of the Company's annual financial statements and services that are normally provided by an accountant in connection with statutory and regulatory filings or engagements for the fiscal year ended December 31, 2010 and 2009 were as follows.

 
       
     
2010
     
2009
 
                 
Audit Fees
 
$
41,000
   
$
45,000
 
Audit Related Fees
           
1,200
 
Tax Fees
           
-
 
All Other Fees
           
-
 
Total Fees
 
$
41,000    
$
46,200
 

TAX FEES

No tax fees were billed by L.L. Bradford for professional services rendered for tax compliance; tax advice and tax planning for the fiscal year ended December 31, 2010 and 2009.   
 
 
ALL OTHER FEES

No other fees were billed by L.L. Bradford for the fiscal year ended December 31, 2010 and 2009.
 

 
26
 
 

ITEM 13. EXHIBITS
 
2.1
 Agreement and Plan of Merger made as of November 1, 2005 among Bio-Solutions International, Inc., OmniMed Acquisition Corp., OmniMed International, Inc., and the shareholders of OmniMed International, Inc. (as incorporated by reference to the Company's Current Report on Form 8-K filed on November 3, 2005).
   
3.1
Articles of Incorporation (as incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 17, 2006).
   
3.2
Bylaws of the Issuer (as incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 17, 2006).
   
3.3
Certificate of Amendment to Articles of Incorporation filed on August 31, 2004 (as incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 17, 2006).
   
3.4
Articles of Merger changing the Registrant's name to OmniMed International, Inc. (as incorporated by reference to the Company's Current Report on Form 8-K filed on November 22, 2005).
   
3.5
Articles of Merger changing the Registrant's name to Medefile International, Inc. (as incorporated by reference to the Company's Current Report on Form 8-K filed on January 18, 2006).
   
3.6
Certificate of Designation of Series A Preferred (as incorporated by reference to the Company's Current Report on Form 8-K filed on January 16, 2009).
   
3.7
Certificate of Amendment to Articles of Incorporation, filed January 21, 2009 (incorporation be referenced to the Company’s Form 8-K filed on January 23, 2009)
   
3.8
Certificate of Amendment to Articles of Incorporation filed April 13, 2010
   
3.9
Certificate of Amendment to Articles of Incorporation filed July 20, 2010
   
10.6
2006 Stock Incentive Plan (as incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 17, 2006).
   
10.7
HSA Bank Marketing Agreement (as incorporated by reference to the Company's Annual Report on Firm 10-KSB/A filed on April 17, 2007).
   
10.8
Promissory Note dated April 11, 2007 (as incorporated by reference to the Company's Annual Report on Firm 10-KSB/A filed on April 17, 2007).
   
10.9
Promissory Note dated April 11, 2007 (as incorporated by reference to the Company's Annual Report on Firm 10-KSB/A filed on April 17, 2007).
   
10.10
Demand Promissory Note dated July 31, 2008 - Cybervault (as incorporated by reference to the Company's Annual Report on Form 10-K/A filed on February 11, 2011).
   
10.11
Demand Promissory Note dated July 31, 2008 – Roth (as incorporated by reference to the Company's Annual Report on Form 10-K/A filed on February 11, 2011).
   
10.12
Demand Promissory Note dated March 31, 2009 – Digital Health (as incorporated by reference to the Company's Annual Report on Form 10-K/A filed on February 11, 2011).
   
10.13
Form of Subscription Agreement (as incorporated by reference to the Company's Current Report on Form 8-K filed on July 13, 2010).
   
10.14
Executive Employment Agreement, dated December 10, 2008, between the Company and Milton Hauser (incorporated by reference to the Company's 8-K filed on January 16, 2009).
   
10.15
Executive Employment Agreement, dated December 10, 2008, between the Company and Kevin Hauser (incorporated by reference to the Company's 8-K filed on January 16, 2009).
   
10.16
Executive Employment Agreement, dated December 10, 2008, between the Company and Rachel Hauser (incorporated by reference to the Company's 8-K filed on January 16, 2009).
   
10.17
Amendment to Employment Agreement, dated effective March 26, 2011, between the Company and Kevin Hauser (incorporated by reference to the Company's 8-K filed on May 16, 2011).
   
10.18
Letter Agreement, dated January 15, 2010, between the Company and Rachel Hauser
   
10.19
Promissory Note amendment, dated June 30, 2009
   
10.20
Promissory Note amendment, dated September 30, 2009
   
10.21
Promissory Note amendment, dated December 31, 2009
   
16.1
Letter from Former Accountant (as incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on March 7, 2006)
   
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 
27
 
   

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
MEDEFILE INTERNATIONAL, INC.
 
       
Date: July 15, 2011
By:
/s/ Kevin Hauser
 
   
Kevin Hauser
 
   
President, Chief Executive Officer, Acting Chief Financial
Officer and Director
 
       


KNOWN BY ALL MEN THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kevin Hauser his attorney-in-fact and agent with full power of substitution and re-substitution, for him and his name, place and stead, in any and all capacities, to sign any or all amendments to this Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
 SIGNATURE
 
TITLE
 
DATE
         
/s/ Kevin Hauser
 
President, Chief Executive Officer and Chairman of
 
July 15, 2011
Kevin Hauser
 
the Board of Directors
(Principal Executive, Financial and Accounting Officer)
   
         
/s/ Michael S. Delin
 
Director
 
July 15, 2011
Michael S. Delin
       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28

Exhibit 3.8
SEAL EXHIBIT 3.8
 
 
 
USE BLACK INK ONLY- DO NOT HIGHLIGHT
ABOVE SPACE IS FOR OFFICE USE ONLY
   
 

 
Certificate of Amendment to Articles of Incorporation
 
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
 
1. Name of corporation:
 
 
Medefile International, Inc.
 
 
2. The articles have been amended as follows: (provide article numbers, if available) :Article IV is hereby deleted in its entirety and replaced with the following:
 
 
The total number of shares of Common Stock that the corporation will have the authority to issue is 3,000,000,000. The shares of Common Stock shall have par value of $0.0001 per share. All of the Common Stock authorized herein shall have equal voting rights and powers without restrictions in preference. The total number of shares of Preferred Stock that the corporation will have the authority to issue is 10,000,000. The shares of Preferred Stock shall have par value of $0.001. The Corporation may issue any class of the  Preferred Stock in any series. The Board shall have authority to establish and designate series, to fix the number  of shares included in each such series and set the rights and preferences of shares in each series.
 
 
 
3. The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be
required by the provisions of the articles of incorporatio*' have voted in favor of the amendment is:
51%
 
4.   Effective date of filing: (optional)
 
 
(must not be later than 90 days after the certificate is filed)
 
5.   Signature: required)
SIGNATURE EXHIBIT 3.8
Signature of officer
 
 
*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.
 
IMPORTANT: Failure to Include any of the above information and submit with the proper fees may cause this filing to be rejected.
 
  This form must be accompanied by appropriate fees.    Nevada Secretary of State Amend  profit-After
   Revised: 3-8-09
 
 
   
Exhibit 3.9
 
GRAPHIC EXHIBIT 3.9
 
 
 
USE BLACK INK ONLY- DO NOT HIGHLIGHT
ABOVE SPACE IS FOR OFFICE USE ONLY
   
 
 
Certificate of Amendment to Articles of IncorporatIon
 
For Nevada Profit Corporations
 
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
 
1.   Name of corporation:
 
Medefile International.
 
2.   The articles have been amended as follows; (provide article numbers, it available)
 
Article IV is hereby deleted in its entirety and replaced with the following:
 
The total number of shares of Common Stock that the corporation will have the authority to issue is 5,000,000,000. The shares of Common Stock shall have per value of $0.0001 per share. All of the Common Stock authorized herein shall have equal voting rights and powers without restrictions in preference. The total number of shares of Preferred Stock that the corporation will have the authority to issue us 10,000,000. The shares of Preferred Stock shall have par value of $0,0001. The corporation may issue any class of the Preferred Stock in any series. The Board shall have authority to establish and designate series, to fix the number of shares included in each such series and set the rights and preferences of shares in each series.
 
3.   The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted In favor of the amendment is:        51%
 
4.   Effective date of filing: (optional) 
 
 
(must not be later than 90 days after !ha certificate Is filed)
5. Signature  (required)
 
SIGNATURE
 
Signature of Officer
 
 
*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.
EXHIBIT 10.18
 
January 15 th , 2010
 
Rachel Hauser
301 Yamato Road, Suite 3155
Boca Raton, FL 33431
 
Gentlemen:
 
Reference is hereby made to the employment agreement, dated December 10, 2008 (the "Employment Agreement"), by and between Rachel Hauser (the "Executive") and Medeflle International, Inc. (the "Company").
 
The Company and the Executive hereby agree to cancel the Employment Agreement. There are no disputes between the two parties and the action taken is directly related to the current lack of business. As business picks up, the Company shall retain the services of Rachel Hauser based on the circumstances at the time and compensation reflected by the duties and business at that time.
 
This letter agreement may be executed in counterparts,
 
   
Very truly yours,
 
       
     
    Milton Hauser, Director  
       
     
    Michael Delia, Director  
 
 
 
AGREED AND ACCEPTED:
 
MEDEFILE INTERNATIONAL, INC
 
 
By:
       
 
Rachel Hauser
       
 
EXHIBIT 10.19
 
 PROMISSARY NOTE

 
$ Open  June 30, 2009
 
FOR VALUE RECEIVED Medefile International, Inc, a corporation under the laws of Nevada (the ‘Maker”), hereby promises to pay to Digital Health Inc, or its assigns (the “Holder”), the accumulated value of the note, as update on a quarterly basis in Schedule A, in lawful money of the United States, plus interest thereupon at the rate set forth below,   The note shall include the previous note payable in the amount of $36,171.46.

1. 
Payments

Maker promises to pay interest on the principal amount of this Note outstanding at a rate equal to seven percent (7%) per annum.  Maker hereby agrees to repay the amount of this Note, and the interest which shall accrue on this Note, at the expiration of this note.  The value of the principle amount of the note shall be updated on a quarterly basis, until paid in full, as updated on Schedule A.  When any date on which principal and interest are due and payable falls on a Saturday, Sunday or legal holiday, then such payment shall be due and payable on the first business day immediately following.

Prepayment of all or any part of the principal due and owing on this Note may be made on any date without any additional premium or penalty.  All payments made on this Note shall be applied first to amounts other than principal and interest which may be then due hereunder, then to interest accrued to the date of payment and then to the outstanding principal amount of this Note.

2.  
Waivers

No delay or failure on the part of the Holder in exercising any rights, privilege or option hereunder shall operate as a waiver thereof or of any event of default, nor shall any single or partial exercise of any such rights, privilege or option preclude any further exerciser thereof, or the exercise of any other right, privilege or option.

Maker waives demand, presentment for payment, notice of dishonor, protest and notice of protest and any notice or demands of any kind are hereby expressly waived.

3. 
Miscellaneous

(a)           Maker shall be responsible for all costs and expenses, including court costs and reasonable attorney’s fees incurred in connection with collection of payment due under this Note.
 
 
 
 
 
1
 
 

 
(b)           This Note shall be governed by and interpreted in accordance with the laws of the state of New York applicable to agreements made and to be performed with such state.  Maker (a) hereby irrevocably submits to the jurisdiction of the state courts of the Sate of New York and the jurisdiction of the United States District Courts in the State of New York for the purpose of any suit, action or other proceeding arising our of or based upon this Note, or the subject matter hereof brought by Holder and (b) hereby waive and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in any inconvenient forum, that the venue of the suit, action or proceeding is improper or this Note or the subject matter hereof may not be enforced in or by such court, and (c) Hereby waive in any such action, suit, or proceeding any offsets or counterclaims.  Maker hereby consents to service of process by certified mail at their address set forth herein and agree that this submission to jurisdiction and this consent to service of process by mail is made for the express benefit of the Holder.  Final judgement against Maker in any such action, suit or proceedings shall be conclusive, and may be enforced in other jurisdictions (i) by suit, action or proceeding on the conclusive evidence of the fact and of the amount of any indebtedness or liability of Maker therein described or (ii) in any other manner provided by or pursuant to the laws of such other jurisdiction; provided, however, that Holder may at its option bring suit, or institute other judicial proceedings, against Maker, or any its assets in any state or Federal court of the United States or of any country or place where Maker or its assets may be found.
 
 
(c)            MAKER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE .  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that related to the subject matter of this Note, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims.  Maker hereby acknowledges that this waiver is a material inducement to enter into a business relationship, that Holder has already relined on the waiver in entering into this Note and that Holder will continue to rely on the waiver in related future dealings.  This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Note.

(d)           All Notices, consents and other communications provided for in this Note or otherwise required by law shall be in writing and may be given to or made upon the respective parties at the address specified below.

If to Maker

Medefile International, Inc
240 Cedar Knolls Rd
Cedar Knolls, NJ  07927
Fax (973) 993-8180


With a copy to:

Richard A. Friedman
Suchenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006
Fax (212) 930-9725

If to Holder

Digital Health Inc
1000 Quaysude Terrace, Ste 510
Miami Shores, Fl  33138

Notices shall be effective upon the date of receipt: provided, however, that a notice sent by certified or registered U.S. mail, with postage prepaid, shall be presumed received no later than three (3) business days following the date of the mailing.  Notices may also be given by facsimile transmission to the FAX number specified in the first paragraph of this Note and shall be deemed received on the date transmitte.

(e)           Time is of the essence with respect to this Note.



 
2
 
 
 

 
( SIGNATURE PAGE FOLLOWS)



IN WITNESS WHEREOF, this Note has been executed and delivered by Maker on the 30th day of June, 2009

  Medefile International, Inc  
       
Date
By:
/s/ Milton Hauser  
    Name: Milton Hauser  
    Title: Chief Executive Officer  
       
  Digital Health Inc  
       
  By: /s/ Barry Tenzer  
    Name:  Barry Tenzer  
       

 

3
Exhibit 10.20
 
 
 PROMISSARY NOTE

 
 $ Open     September 30, 2009
                                                                                                
FOR VALUE RECEIVED Medefile International, Inc, a corporation under the laws of Nevada (the ‘Maker”), hereby promises to pay to Digital Health Inc, or its assigns (the “Holder”), the accumulated value of the note, as update on a quarterly basis in Schedule A, in lawful money of the United States, plus interest thereupon at the rate set forth below,   The note shall include the previous note payable in the amount of $36,171.46.

1.           Payments

Maker promises to pay interest on the principal amount of this Note outstanding at a rate equal to seven percent (7%) per annum.  Maker hereby agrees to repay the amount of this Note, and the interest which shall accrue on this Note, at the expiration of this note.  The value of the principle amount of the note shall be updated on a quarterly basis, until paid in full, as updated on Schedule A.  When any date on which principal and interest are due and payable falls on a Saturday, Sunday or legal holiday, then such payment shall be due and payable on the first business day immediately following.

Prepayment of all or any part of the principal due and owing on this Note may be made on any date without any additional premium or penalty.  All payments made on this Note shall be applied first to amounts other than principal and interest which may be then due hereunder, then to interest accrued to the date of payment and then to the outstanding principal amount of this Note.

2.  
Waivers

No delay or failure on the part of the Holder in exercising any rights, privilege or option hereunder shall operate as a waiver thereof or of any event of default, nor shall any single or partial exercise of any such rights, privilege or option preclude any further exerciser thereof, or the exercise of any other right, privilege or option.

Maker waives demand, presentment for payment, notice of dishonor, protest and notice of protest and any notice or demands of any kind are hereby expressly waived.

3.           Miscellaneous

(a)           Maker shall be responsible for all costs and expenses, including court costs and reasonable attorney’s fees incurred in connection with collection of payment due under this Note.
 
 
 
1
 
 

 
(b)           This Note shall be governed by and interpreted in accordance with the laws of the state of New York applicable to agreements made and to be performed with such state.  Maker (a) hereby irrevocably submits to the jurisdiction of the state courts of the Sate of New York and the jurisdiction of the United States District Courts in the State of New York for the purpose of any suit, action or other proceeding arising our of or based upon this Note, or the subject matter hereof brought by Holder and (b) hereby waive and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in any inconvenient forum, that the venue of the suit, action or proceeding is improper or this Note or the subject matter hereof may not be enforced in or by such court, and (c) Hereby waive in any such action, suit, or proceeding any offsets or counterclaims.  Maker hereby consents to service of process by certified mail at their address set forth herein and agree that this submission to jurisdiction and this consent to service of process by mail is made for the express benefit of the Holder.  Final judgment against Maker in any such action, suit or proceedings shall be conclusive, and may be enforced in other jurisdictions (i) by suit, action or proceeding on the conclusive evidence of the fact and of the amount of any indebtedness or liability of Maker therein described or (ii) in any other manner provided by or pursuant to the laws of such other jurisdiction; provided, however, that Holder may at its option bring suit, or institute other judicial proceedings, against Maker, or any its assets in any state or Federal court of the United States or of any country or place where Maker or its assets may be found.
 
 
(c)            MAKER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE .  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that related to the subject matter of this Note, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims.  Maker hereby acknowledges that this waiver is a material inducement to enter into a business relationship, that Holder has already relined on the waiver in entering into this Note and that Holder will continue to rely on the waiver in related future dealings.  This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Note.

(d)           All Notices, consents and other communications provided for in this Note or otherwise required by law shall be in writing and may be given to or made upon the respective parties at the address specified below.

If to Maker

Medefile International, Inc
301 Yamato Rd, Ste 1200
Boca Raton, NJ  33431
Fax (973) 993-8180
 
With a copy to:

Richard A. Friedman
Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006
Fax (212) 930-9725

If to Holder

Digital Health Inc
1000 Quayside Terrace, Ste 510
Miami Shores, Fl  33138

Notices shall be effective upon the date of receipt: provided, however, that a notice sent by certified or registered U.S. mail, with postage prepaid, shall be presumed received no later than three (3) business days following the date of the mailing.  Notices may also be given by facsimile transmission to the FAX number specified in the first paragraph of this Note and shall be deemed received on the date transmitted.

(e)  
Time is of the essence with respect to this Note.




( SIGNATURE PAGE FOLLOWS)


 
2
 

IN WITNESS WHEREOF, this Note has been executed and delivered by Maker on the 30 th day of September 30, 2009

 


Medefile International, Inc

By  /s/ Milton Hauser
Name:  Milton Hauser
Title:    Chief Executive Officer



Digital Health Inc

By /s/ Barry Tenzer
Name:  Barry Tenzer
 
 
 
 
 
 
 
3
Exhibit 10.21
 
 PROMISSARY NOTE


 
 $ Open     December 31, 2009
                                                                                               
FOR VALUE RECEIVED Medefile International, Inc, a corporation under the laws of Nevada (the ‘Maker”), hereby promises to pay to Digital Health Inc, or its assigns (the “Holder”), the accumulated value of the note, as update on a quarterly basis in Schedule A, in lawful money of the United States, plus interest thereupon at the rate set forth below,   The note shall include the previous note payable in the amount of $36,171.46.

1.           Payments

Maker promises to pay interest on the principal amount of this Note outstanding at a rate equal to seven percent (7%) per annum.  Maker hereby agrees to repay the amount of this Note, and the interest which shall accrue on this Note, at the expiration of this note.  The value of the principle amount of the note shall be updated on a quarterly basis, until paid in full, as updated on Schedule A.  When any date on which principal and interest are due and payable falls on a Saturday, Sunday or legal holiday, then such payment shall be due and payable on the first business day immediately following.

Prepayment of all or any part of the principal due and owing on this Note may be made on any date without any additional premium or penalty.  All payments made on this Note shall be applied first to amounts other than principal and interest which may be then due hereunder, then to interest accrued to the date of payment and then to the outstanding principal amount of this Note.

2.  
Waivers

No delay or failure on the part of the Holder in exercising any rights, privilege or option hereunder shall operate as a waiver thereof or of any event of default, nor shall any single or partial exercise of any such rights, privilege or option preclude any further exerciser thereof, or the exercise of any other right, privilege or option.

Maker waives demand, presentment for payment, notice of dishonor, protest and notice of protest and any notice or demands of any kind are hereby expressly waived.

3.           Miscellaneous

(a)           Maker shall be responsible for all costs and expenses, including court costs and reasonable attorney’s fees incurred in connection with collection of payment due under this Note.

(b)           This Note shall be governed by and interpreted in accordance with the laws of the state of New York applicable to agreements made and to be performed with such state.  Maker (a) hereby irrevocably submits to the jurisdiction of the state courts of the Sate of New York and the jurisdiction of the United States District Courts in the State of New York for the purpose of any suit, action or other proceeding arising our of or based upon this Note, or the subject matter hereof brought by Holder and (b) hereby waive and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in any inconvenient forum, that the venue of the suit, action or proceeding is improper or this Note or the subject matter hereof may not be enforced in or by such court, and (c) Hereby waive in any such action, suit, or proceeding any offsets or counterclaims.  Maker hereby consents to service of process by certified mail at their address set forth herein and agree that this submission to jurisdiction and this consent to service of process by mail is made for the express benefit of the Holder.  Final judgment against Maker in any such action, suit or proceedings shall be conclusive, and may be enforced in other jurisdictions (i) by suit, action or proceeding on the conclusive evidence of the fact and of the amount of any indebtedness or liability of Maker therein described or (ii) in any other manner provided by or pursuant to the laws of such other jurisdiction; provided, however, that Holder may at its option bring suit, or institute other judicial proceedings, against Maker, or any its assets in any state or Federal court of the United States or of any country or place where Maker or its assets may be found.
 
 
 
1
 
 

(c)            MAKER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE .  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that related to the subject matter of this Note, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims.  Maker hereby acknowledges that this waiver is a material inducement to enter into a business relationship, that Holder has already relined on the waiver in entering into this Note and that Holder will continue to rely on the waiver in related future dealings.  This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Note.

(d)           All Notices, consents and other communications provided for in this Note or otherwise required by law shall be in writing and may be given to or made upon the respective parties at the address specified below.

If to Maker

Medefile International, Inc
301 Yamato Rd, Ste 1200
Boca Raton, NJ  33431
Fax (973) 993-8180


With a copy to:

Richard A. Friedman
Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006
Fax (212) 930-9725

If to Holder

Digital Health Inc
1000 Quayside Terrace, Ste 510
Miami Shores, Fl  33138

Notices shall be effective upon the date of receipt: provided, however, that a notice sent by certified or registered U.S. mail, with postage prepaid, shall be presumed received no later than three (3) business days following the date of the mailing.  Notices may also be given by facsimile transmission to the FAX number specified in the first paragraph of this Note and shall be deemed received on the date transmitted.

(e)  
Time is of the essence with respect to this Note.




( SIGNATURE PAGE FOLLOWS)


 
2
 

IN WITNESS WHEREOF, this Note has been executed and delivered by Maker on the 31 th day of December, 2009



Medefile International, Inc

By  /s/ Milton Hauser
Name:  Milton Hauser
Title:    Chief Executive Officer



Digital Health Inc

By /s/ Barry Tenzer
Name:  Barry Tenzer
 
 
 
 
 
 
 
3
EXHIBIT 31.1
 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
 
I, Kevin Hauser, certify that:
 
1.    I have reviewed this report on Form 10-K/A of Medefile International, Inc.;
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 
 
       
Dated:  July 15, 2011
By:
/s/ Kevin Hauser
 
   
Kevin Hauser
 
   
President , Chief Executive Officer, and Acting Chief Financial Officer
 
       
 
 


Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Medefile International, Inc. (the “Company”) on Form 10-K/A for the period ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Hauser, Chief Executive Officer and Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section  1350 of the Sarbanes-Oxley Act of 2002, that:

(1)  
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 (2)  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

       
Date: July 15, 2011
By:
/s/ Kevin Hauser
 
   
Kevin Hauser
 
   
President, Chief Executive Officer and Acting Chief Financial Officer