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EX-32.1 - DMH INTERNATIONAL, INC.exh32_1.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


(Mark One)

x   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.


For the quarterly period ended June 30, 2016


¨   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


For the transition period from              to            


Commission file numbers 000-32141


DMH INTERNATIONAL, INC.


(Name of registrant as specified in its charter)


Nevada

 

27-2689205

(State or Other Jurisdiction of Organization)

 

(IRS Employer Identification Number)


12502 West Atlantic Blvd, Coral Springs, Florida

 

33071

(Address of principal executive offices)

 

(Zip Code)


(954) 509-0911

(Registrant's telephone number, including area code)


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 x     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 x     No ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

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 in Rule 12b-2 of the Exchange Act). Yes ¨   No x


The number of shares outstanding of the registrant's common stock, par value $0.001 per share, as of August 19, 2016 there were 435,961,936 shares of common stock.











TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

4

 

 

Condensed Consolidated Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015

4

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015 (Unaudited)

5

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 (Unaudited)

6

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

 

 

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

15

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

22

 

 

Item 4. Controls and Procedures

22

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

24

 

 

Item 1A. Risk Factors

24

 

 

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

24

 

 

Item 3.Defaults Upon Senior Securities

24

 

 

Item 4. Mine Safety Disclosure

24

 

 

Item 5. Other Information

24

 

 

Item 6. Exhibits

24











FINANCIAL STATEMENTS AND FOOTNOTES


DMH International, Inc. is referred to hereinafter as “we”, “us” or “our”


Forward Looking Statements


This Quarterly Report on Form 10-Q for the period ending June 30, 2016, contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they never materialize or prove incorrect, could cause our results of to differ materially from those expressed or implied by such forward-looking statements. The words or phrases "would be," "will allow, "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." We are subject to risks detailed in Item 1(a).  All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including: (a) any projections of revenue, gross margin, expenses, earnings or losses from operations, synergies or other financial items; and (b) any statements of the plans, strategies and objectives of management for future operations; and (c) any statement concerning developments, plans, or performance. Unless otherwise required by applicable law, we do not undertake and we specifically disclaim any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.



3





PART I. FINANCIAL INFORMATION


Item 1. Financial Statements


DMH INTERNATIONAL, INC.

Condensed Consolidated Balance Sheets


 

 

June 30,

 

December 31,

 

 

2016

 

2015

 

 

 $

 

 $

 

 

(Unaudited)

 

 

ASSETS  

 

 

 

 

 

 

 

 

 

Cash  

 

1,194

 

40

Total Assets  

 

1,194

 

40

 

 

 

 

 

LIABILITIES  

 

 

 

 

 

 

 

 

 

Current Liabilities  

 

 

 

 

Accounts payable and accrued liabilities

 

274,639

 

249,965

Accounts payable – related party

 

371,522

 

341,522

Due to related parties

 

670,404

 

661,954

Notes payable

 

60,000

 

-

Convertible debt in default-net of discount of $0 and $18,055, respectively

 

61,000

 

62,945

Derivative liability

 

90,372

 

132,287

Total Current Liabilities  

 

1,527,937

 

1,448,673

Total Liabilities  

 

1,527,937

 

1,448,673

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

Authorized: 10,000,000 preferred shares with a par value of $0.001 per share; Issued and outstanding: 7,432,099 preferred shares at June 30, 2016 and December 31, 2015

 

7,432

 

7,432

Common stock

 

435,962

 

415,962

Authorized: 450,000,000 common shares with a par value of $0.001 per share
Issued and outstanding: 435,961,936 and 415,961,936 common shares at June 30, 2016 and December 31, 2015, respectively.

 

 

 

 

Preferred stock issuable

 

410,864

 

410,864

Common stock issuable

 

35,000

 

35,000

Additional paid-in capital

 

2,906,001

 

2,900,662

Accumulated deficit

 

(5,322,002)

 

(5,218,553)

Total Stockholders’ Equity (Deficit)

 

(1,526,743)

 

(1,448,633)

Total Liabilities and Stockholders’ Equity (Deficit)

 

1,194

 

40



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



4






DMH INTERNATIONAL, INC.

Condensed Consolidated Statements of Operations

(Unaudited)


 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

June 30,

 

 

2016

 

2015

 

2016

 

2015

 

 

$

 

$

 

$

 

$

Revenues

 

-

 

-

 

-

 

-

Operating Expenses

 

 

 

 

 

 

 

 

General and administrative

 

7,636

 

8,715

 

11,885

 

11,392

Management fees

 

15,000

 

15,000

 

30,000

 

30,000

Professional fees

 

48,530

 

83,681

 

73,630

 

144,246

Research and development

 

2,007

 

2,007

 

4,084

 

14,014

Total Operating Expenses

 

73,173

 

109,403

 

119,599

 

199,652

Other (Income) Expense

 

 

 

 

 

 

 

 

Interest expense

 

8,425

 

11,659

 

20,426

 

38,622

Change in fair value of derivatives

 

(19,045)

 

11,840

 

(3,220)

 

2,197

Gain on settlement of debt

 

-

 

(31,091)

 

(73,818)

 

(30,454)

Imputed interest

 

20,076

 

14,382

 

40,462

 

30,839

Total Other (Income) Expense

 

9,456

 

6,790

 

(16,150)

 

41,204

Net Loss

 

(82,629)

 

(116,193)

 

(103,449)

 

(240,856)

Net Loss per Share – Basic and Diluted

 

(0.00)

 

(0.00)

 

(0.00)

 

(0.00)

Weighted Average Shares Outstanding –
Basic and Diluted

 

435,961,936

 

414,709,189

 

428,489,409

 

396,053,811



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




5






DMH INTERNATIONAL, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


 

 

For the six months ended June 30,

 

 

2016

 

2015

 

 

$

 

$

Operating Activities

 

 

 

 

Net loss for the period

 

(103,449)

 

(240,856)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Imputed interest

 

40,462

 

30,839

Amortization of debt discount

 

18,055

 

33,589

Change in fair value of derivatives

 

(3,220)

 

2,197

Gain on settlement of convertible debt

 

(73,818)

 

(30,454)

Stock issued for services

 

-

 

10,556

Changes in operating assets and liabilities:

 

 

 

 

Accounts Payable – Related Party

 

30,000

 

30,000

Accounts payable and Accrued liabilities

 

24,674

 

52,145

Net Cash Used in Operating Activities

 

(67,296)

 

(111,984)

Financing Activities

 

 

 

 

Due to related parties – borrowings

 

51,750

 

101,500

Due to related parties – repayments

 

(43,300)

 

(34,000)

Proceeds from convertible debt

 

-

 

-

Proceeds from notes payable

 

60,000

 

50,000

Net Cash Provided By Financing Activities

 

68,450

 

117,500

Increase(decrease) in Cash

 

1,154

 

5,516

Cash – Beginning of Period

 

40

 

984

Cash – End of Period

 

1,194

 

6,500

Non-cash financing activities:

 

 

 

 

Common stock issued for debt conversions

 

20,000

 

300,156

Settlement of derivative liability due to equity conversions

 

38,695

 

60,534

Recognition of discount due to derivative

 

-

 

50,000

Preferred shares issued from payables

 

-

 

1,179,616



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




6





DMH INTERNATIONAL, INC.

Notes to Condensed Consolidated Financial Statements


1.     Description of Business and Reverse Acquisition


a)

Description of Business


DMH International, Inc. (the “Company”) was incorporated in the state of Florida on March 26, 2010.


b)

Going Concern


These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the six months ended June 30, 2016, the Company has a working capital deficit of $1,526,743 and accumulated deficit of $5,322,002. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


c)

Reverse Acquisition


On December 11, 2012, the Company entered into a share exchange agreement with DMH International, Inc. (“DMHI”), a public shell company. Pursuant to the agreement, DMHI acquired all of the outstanding shares of common stock of the Company (100 common shares) by issuing 125,000,000 common shares, comprised of 100,000,000 common shares from the President and Director of the Company and 25,000,000 newly issued common shares.  Furthermore, the President and Director of DMHI cancelled 100,000,000 common shares as part of the share exchange agreement.  As a result of the share exchange, the former shareholders of the Company controlled approximately 78% of the issued and outstanding common shares of DMHI resulting in a change in control.  The transaction was accounted for as a reverse recapitalization transaction, as DMHI qualifies as a non-operating public shell company given the fact that the Company held nominal net monetary assets, consisting of only cash at the time of merger transaction.  As Touch Medical Solutions, Inc. is deemed to be the purchaser for accounting purposes under recapitalization accounting, the equity of the Company is presented as the equity of the combined company and the capital stock account of the Company is adjusted to reflect the part value of the outstanding and issued common stock of the legal acquirer (DMHI) after giving effect to the number of shares issued in the share exchange agreement. Shares retained by DMHI are reflected as an issuance as of the acquisition date for the historical amount of the net assets of the acquired entity, which in this case is zero.


d)

Merger


Effective July 22, 2014, the Company acquired all of the outstanding shares of Virtual Physician’s Network through issuance of 10,000,000 shares of the Company’s convertible preferred stock. Each share of our preferred stock is convertible into 20 shares of our common stock. Virtual Physician’s Network was merged into the Company and became the Company’s wholly owned subsidiary. As of June 30, 2016, 7,432,099 shares were issued, and the remaining shares have not been issued due to administrative delay. The remaining 2,567,901 shares of convertible preferred stocks were accrued in preferred stocks issuable with a fair value of $410,864. Each share of convertible preferred stock was valued at 20 times of closing price of common stock price of $0.008 on the date of merger.


2.     Summary of Significant Accounting Policies


a)

Basis of Presentation and Principles of Consolidation


The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. All the intercompany accounts and transactions have been eliminated. The Company’s fiscal year end is December 31.



7





DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


2.     Summary of Significant Accounting Policies (continued)


b)

Use of Estimates


The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and valuation of long-lived assets, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.


c)

Interim Financial Statements

These interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

d)

Cash and cash equivalents


The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.  As at June 30, 2016 and December 31, 2015, the Company had no cash equivalents.


e)

Property and Equipment


Property and equipment is comprised of computer equipment and is recorded at cost.  The Company amortizes the cost of equipment on a straight-line basis over their estimated useful lives of three years. The Company reviews all property and equipment for impairment annually.


f)

Revenue Recognition


Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is assured.  The Company is not exposed to any credit risks as amounts are prepaid prior to performance of services.


g)

Basic and Diluted Net Loss per Share


The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As of June 30, 2016 and 2015, the Company has 129,102,489 and 88,593,908 shares convertible under note agreements that are anti-dilutive and not included in diluted loss per share.



8





DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


2.     Summary of Significant Accounting Policies (continued)


h)

Financial Instruments


The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.


Level 1.

Observable inputs such as quoted prices in active markets;

Level 2.

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3.

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


The Company’s financial instruments are cash, accounts payable, accrued liabilities and amounts due to related parties. The recorded values of cash, accounts payable, accrued liabilities and amounts due to related parties approximate their fair values based on their short-term nature.


The following table presents assets and liabilities that were measured and recognized at fair value as of June 30, 2016 and December 31, 2015 on a recurring basis:


 

 

Fair Value Measurements at June 30, 2016

Description

 

Level 1

 

Level 2

 

Level 3

 

Total Realized (Gain) Loss

Derivative Liability

$

-

$

-

$

90,372

$

(3,220)

Totals

$

-

$

-

$

90,372

$

(3,220)


 

 

Fair Value Measurements at December 31, 2015

Description

 

Level 1

 

Level 2

 

Level 3

 

Total Realized Loss

Derivative Liability

$

-

$

-

$

132,287

$

28,172

Totals

$

-

$

-

$

132,287

$

28,172


i)

Income Taxes


Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.


j)

Recent Accounting Pronouncements


In March, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.  2016-08—Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.




9




DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


2.     Summary of Significant Accounting Policies (continued)


In January, 2016, the FASB issued ASU No. 2016-1, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.


Early application of the following amendments in this Update are permitted for all entities upon issuance of this Update as of the beginning of the fiscal year of adoption:


1.

An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

2.

Entities that are not public business entities are not required to apply the fair value of financial instruments disclosure guidance in the General Subsection of Section 825-10-50.


Except for the early application guidance discussed above, early adoption of the amendments in this Update is not permitted.


In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) (“ASU 2015-16”). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.


In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.


In August, 2015, the FASB issued ASU No. 2015-13, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets (“ASU 2015-13”). Effective upon issuance and should be applied prospectively. Therefore, an entity will have the ability to designate on or after the date of issuance any qualifying contracts as normal purchases or normal sales.


In April 2015, the FASB issued ASU No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.


3.     Related Party Transactions


a)

As of June 30, 2016 and December 31, 2015, the Company owes $89,216 to the director, former CFO of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand. Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $3,558 and $3,539 for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016 and December 31, 2015, $270,000 and $240,000 included in accounts payable is the management fees owed to the director, former CFO, respectively. At June 30, 2016 and December 31, 2015, $101,522 included in accounts payable and accrued liabilities is owed to a company formerly controlled by the director, former CFO of the Company. These amounts owing are unsecured, non-interest bearing, and due on demand. Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $13,923 and $11,468 for the six months ended June 30, 2016 and 2015, respectively.


10



DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


3.     Related Party Transactions (continued)


b)

As of June 30, 2016 and December 31, 2015, the Company owes $531,388 and $522,938, respectively to the CFO, former CEO and the companies controlled by him. The amounts owing are unsecured, non-interest bearing, and due on demand. The amount owing has an imputed interest at 8%.  Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $21,086 and $14,605 for the six months ended June 30, 2016 and 2015, respectively.


c)

As of June 30, 2016 and December 31, 2015, the Company owes $2,300 to a company controlled by a shareholder of the Company. On May 12, 2015, the 850,017 convertible preferred shares were issued to this shareholder of the Company pursuant to the merger agreement at the price of $0.16 per share.


d)

As of June 30, 2016 and December 31, 2015, the Company owes $47,500 to the CEO of the Company. The amount owing has an imputed interest at 8%.  Imputed interest at 8% has been expensed and recorded as additional paid-in capital of $1,895 and $1,227 for the six months ended June 30, 2016 and 2015, respectively.  On May 12, 2015, the 1,133,356 preferred shares were issued to the CEO of the Company pursuant to the merger agreement at the price of $0.16 per share.


4.     Convertible Notes


On March 31, 2014, the Company issued a convertible redeemable Note in the amount of $50,000. The proceeds were received on April 2, 2014. The Note carries interest at 9% annum and matures on March 31, 2015. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of 55% the average two lowest closing bid price in the 20 trading days prior to the conversion date. In connection with the issuance of this convertible note, the Company encountered a day-one derivative loss of $13,171. The convertible note payable, at fair value, was recorded at $63,171 on the issuance date. In addition, the proceeds of $50,000 attributable to the value of the call option embedded in the note was recorded as a debt discount and amortized over the term of the note under the interest method. Amortization for the years ended December 31, 2015 and 2014 is $2,660 and $47,340, respectively. During the year ended December 31, 2014, the debt holder made four conversions of a total of 19,893,000 shares of the company’s restricted stock satisfying $32,438 of the note with a fair value of $81,451, included in the fair value of debt balance of $81,451 was settlement of derivative liability of $49,013.The Company recorded a gain of $12,550 for less shares issued during the conversion than what was called for in the original agreement. During the year ended December 31, 2015, the debt holder made two conversions of a total of 19,962,450 shares of the company’s restricted stock satisfying the remaining $17,562 of the note in full with a fair value of $46,450, included in the fair value of debt balance of $46,450 was settlement of derivative liability of $26,488. The Company recorded a gain of $10,468 for less shares issued during the conversion than what was called for in the original agreement (See Note 7).


On May 5, 2014, the Company issued a convertible redeemable Note in the amount of $50,000. The proceeds were received on May 7, 2014. The Note carries interest at 9% annum and matured on May 5, 2015. The Company continued to accrue the default interest rate at 16%. At June 30, 2016 and December 31, 2015, the accrued interest was $4,787 and $3,293, respectively. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of 55% the average two lowest closing bid price in the 20 trading days prior to the conversion date. In connection with the issuance of this convertible note, the Company encountered a day-one derivative loss of $14,892. The convertible note payable, at fair value, was recorded at $54,892 on the issuance date. In addition, the proceeds of $50,000 attributable to the value of the call option embedded in the note was recorded as a debt discount and amortized over the term of the note under the interest method. Amortization for the years ended December 31, 2015 and 2014 is $16,528 and $33,472, respectively. During the year ended December 31, 2015, the debt holder made a conversion of a total of 19,000,000 shares of the company’s restricted stock satisfying $19,000 of the note with a fair value of $25,769, included in the fair value of debt balance of $25,769 was settlement of derivative liability of $25,769.The Company recorded a gain of $31,091 for less shares issued during the conversion than what was called for in the original agreement (See Note 7). During the six months ended June 30, 2016, the debt holder made a conversion of a total of 20,000,000 shares of the company’s restricted stock satisfying $20,000 of the note with a fair value of $38,695, included in the fair value of debt balance of $38,695 was settlement of derivative liability of $38,695.The Company recorded a gain of $73,818 for less shares issued during the conversion than what was called for in the original agreement (See Note 7). This Note is currently in default.


On May 15, 2015, the Company issued a convertible redeemable Note in the amount of $50,000. The Note carries interest at 9% annum and matured on May 15, 2016. The Company continued to accrue the default interest rate at 24%. At June 30, 2016 and December 31, 2015, the accrued interest was $1,533 and $0, respectively. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of 55% the average two lowest closing bid price in the 20 trading days prior to the conversion date. In connection with the issuance of this convertible note, the Company encountered a day-one derivative loss of $6,021. The convertible note payable, at fair value, was recorded at $56,021 on the issuance date. In addition, the proceeds of $50,000 attributable to the value of the call option embedded in the note was recorded as a debt discount and amortized over the term of the note under the interest method. Amortization for the six months ended June 30, 2016 and 2015 is $18,055 and $6,389, respectively. This Note is currently in default.



11




DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


4.     Convertible Notes (continued)


On July 25, 2014, the Company issued a convertible redeemable Note in the amount of $250,000. $125,000 each of the proceeds was received on June 25, 2014 and July 25, 2014, respectively (Total $250,000). The Note carries interest at 8% annum and matured on January 25, 2015. The Note holder is entitled to convert all or a portion of the principal into shares of common stock at a conversion price of the lower of $0.01 or 60% the average three lowest VWAP prices in the 15 trading days prior to the conversion date. The Holder shall not be entitled to convert the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Note would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the issued and outstanding shares of Common Stock of the Borrower on such Conversion Date. Also, the aggregate conversion by the Holder may not exceed 9.99% if a form 13d or equivalent is filed. In connection with the issuance of this convertible note, the Company encountered a day-one derivative gain of $68,597. The convertible note payable, at fair value, was recorded at $181,403 on the issuance date. In addition, the debt discount of $68,597 was amortized over the term of the note under the interest method. Amortization for the years ended December 31, 2015 and 2014 is $8,014 and $60,583, respectively. On January 28, 2015, the note was satisfied in full with 25,000,000 shares of common stocks per settlement agreement with a fair value of $269,471, included in the fair value of debt balance of $269,471 was accrued interest of $11,194 and settlement of derivative liability of $8,277. The Company recorded a loss of $11,105 for more shares issued during the conversion than what was called for in the original agreement.


In the evaluation of the financing arrangements, the Company concluded that the conversion features did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company elected to account for the hybrid contract under the guidance of ASC 815-15-25-4. The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a binomial option pricing model. In connection with the issuance of these convertible notes payable, the Company encountered a day-one derivative loss of $41,902 related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received from the arrangement. Therefore, the Company was required to record a loss on the derivative financial instrument. In addition, the fair value will change in future periods, based upon changes in the Company’s common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be recognized in changes in fair value of derivatives on the Company’s statement of operations.  At June 30, 2016 and December 31, 2015, the derivative, at fair value, was recorded at $90,372 and $132,287, respectively (See Note 5). Accordingly, the company recognized gain and loss of $3,220 and $2,197, in changes in fair value of derivative on the Company’s statement of operations at June 30, 2016 and 2015, respectively.


In addition, the proceeds of $208,597 and $50,000 received as a result of the issuance of these convertible notes is attributable to the value of the call option embedded in the note as of December 31, 2014 and 2015, respectively, which was recorded as a debt discount and is amortized over the term of the note under the interest method. Amortization for the six months ended June 30, 2016 and 2015 is $18,055 and $33,589, respectively.


5.     Derivative Liabilities


As discussed in Note 4 under Convertible Notes, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion shares to be issued were recorded as derivative liabilities on the issuance date. The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a binomial option pricing model. The loss (gain) in fair value of derivatives was for ($3,220) and $2,197 on the Company’s statement of operations as of June 30, 2016 and 2015, respectively.


The following is a summary of changes in the fair market value of the derivative liability during the six months ended June 30, 2016:


 

 

Derivative

Liability

Convertible

Debts Total

Balance, December 31, 2015

$

$132,287

Increase in derivative value due to issuances of convertible promissory notes

 

-

Decrease in derivative value due to issuances of common stocks for conversions

 

(38,695)

Change in fair market value of derivative liabilities due to the mark to market adjustment

 

(3,220)

Balance, June 30, 2016

$

90,372


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DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


6. Notes payable


During February through May, 2016, the Company issued four promissory notes to a non-related party in the amount of $60,000 ($15,000 each) bearing interest at 10% annually. The notes are due in one year from the execution and funding of the note. In the event of default, the noteholder will receive 500,000 shares of the Company’s restricted common stock on the date that is 10 business days after the maturity date. The interest expense for the six months ended June 30, 2016 is $1,383.


7.     Common shares


Common stock issued for services


During May, 2015, the Company signed an agreement to pay the consultant for a monthly fee of $2,500 in cash and $5,000 in stock for a term of one year. The number of shares will be based on an average of the three lowest VWAP’s for the last two weeks of that month started from May 2015.  During year ended December 31, 2015, the total of 10,555,556 shares were granted with a fair value of $10,556. The shares were valued using April 21, 2015 closing value of shares on date of agreement.  The number shares are calculated using an average of the three lowest VWAP’s for the last two weeks of May and June 2015. On August 25, 2015, the agreement was terminated and the common stocks that have been granted were cancelled due to nonperformance.


Convertible preferred stock issued for merger


On July 22, 2014, the Company acquired all of the outstanding shares of Virtual Physician’s Network through issuance of 10,000,000 shares of convertible preferred stock. Each share of convertible preferred stock has the voting rights of 20 shares of the Company’s common stock. Upon the occurrence of a mandatory conversion event, which occurs immediately following the business day on which the Corporation’s shareholders have approved an amendment to the Corporation’s Articles of Incorporation which provide for a sufficient number of authorized common stock which will permit the holders of the convertible preferred stock to convert such shares into the Company’s Common Stock, the outstanding shares of convertible preferred stock shall automatically be converted at a conversion rate of 20 shares of Common Stock for every 1 share of convertible preferred stock. As of June 30, 2016, the 7,432,099 shares were issued at the price of $0.16 per share, and the remaining shares have not been issued due to administrative delay. The remaining 2,567,901 shares of convertible preferred stocks were accrued in preferred stocks issuable with a fair value of $410,864. Each share of convertible preferred stock was valued at 20 times of closing price of common stock price of $0.008 on the date of merger.


Common Stock Issued for Debt Conversions


During the year ended December 31, 2015, the debt holder made the following two conversions of a total of 19,962,450 shares of the company’s restricted stock satisfying the remaining $17,562 of the note in full with a fair value of $46,450, included in the fair value of debt balance of $46,450 was settlement of derivative liability of $26,488.The Company recorded a gain of $10,468 for less shares issued during the conversion than what was called for in the original agreement (See Note 4).  


Date

 

Number of shares converted

 

Fair Value of Debt Converted

02/5/2015

 

14,400,000

 

$33,578

03/27/2015

 

5,562,450

 

$12,872


On January 28, 2015, following the convertible note agreement in the amount of $250,000 on July 25, 2014, the note was satisfied in full with 25,000,000 shares of common stocks per settlement agreement with a fair value of $269,471, included in the fair value of debt balance of $269,471 was accrued interest of $11,194 and settlement of derivative liability of $8,277. The Company recorded a loss of $11,105 for more shares issued during the conversion than what was called for in the original agreement (See Note 4).


On April 1, 2015, following the convertible note agreement in the amount of $50,000 on May 5, 2014,  the debt holder made a conversion of a total of 19,000,000 shares of the company’s restricted stock satisfying $19,000 of the note with a fair value of $25,769, included in the fair value of debt balance of $25,769 was settlement of derivative liability of $25,769.The Company recorded a gain of $31,091 for less shares issued during the conversion than what was called for in the original agreement. On March 8, 2016, the debt holder made a conversion of a total of 20,000,000 shares of the company’s restricted stock satisfying $20,000 of the note with a fair value of $38,695, included in the fair value of debt balance of $38,695 was settlement of derivative liability of $38,695(See Note 4).



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DMH INTERNATIONAL, INC.

Notes to Consolidated Financial Statements


7.     Common shares (continued)


Date

 

Number of shares converted

 

Fair Value of Debt Converted

04/01/2015

 

19,000,000

 

$19,000

03/08/2016

 

20,000,000

 

$20,000


8.     Subsequent Events


We have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events.




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


Introduction


The Company was incorporated in the state of Florida on March 26, 2010.  In anticipation of a business combination, in December 2012, we entered into the merger agreement with Touch Medical Solutions, Inc., whereby we assumed TMSI’s business operations. On July 22, 2014 we merged with Virtual Physician's Network (VPN). We are currently in the business of developing and bringing to market a suite of medical software products.  Our principal executive offices are located at 12502 West Atlantic Blvd., Coral Springs, Florida.


We have never been the subject of a bankruptcy, receivership or similar proceeding.  Additionally, apart from the merger discussed herein, we have never been the subject of a material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.


Operating Strategy


Management is of the opinion that the leaders of the technology market as a whole are beating their competitors by presenting a more effective end user experience and fulfillment of base requirements.  We believe that products were typically judged by the number of features they offer; however, there has been an increasing trend towards not providing the greatest number of features, but rather to provide a simpler user interface than its competitors combined with a solid product workflow.  We will attempt, as a medical device provider, to offer products that are user friendly and which have a core workflow that clients can easily implement and use.  We believe that a goal of applying our product ideas efficiently will allow our customers to maintain high medical standards to help them to grow in their own individual markets.  


Virtual Physician's Network


There are over 100 million surgeries and procedures performed in the United States each year in over 6,000 hospitals and 5,000 surgery centers. These staggering figures combined with the archaic use of current technology to coordinate all these events between surgeons, institutions and medical vendors and their professional societies has created a chaotic, wasteful, and inefficient system.


Virtual Physician’s Network is a HIPAA compliant and private mobile and web based app solution specifically designed to help improve clinical and financial outcomes for all the stakeholders participating in these 100 million surgical events. These stakeholders include surgeons, hospitals, surgery centers, healthcare professionals, medical device/pharma vendors and medical associations and societies.


We currently provide the Virtual Physician’s Network solutions through the App Store (IOS devices) and Google Play (Droid devices) as well as a web based solution through our Virtual Physician’s Network website www.virtualphysiciansnetwork.com.


The adoption of the Virtual Physician’s Network technology will be initially driven through the our beta group and key industry trade shows such as NASS (North American Spine Society) and AAOS (American Academy of Orthopaedic Surgeons). Further adoption will then be driven by sales representation from participating medical vendors.


Beta Launch


Because surgeons in their particular specialties such as Spine or Orthopedics have an incredibly strong industry influence on all the stakeholders in the healthcare space, Virtual Physician’s Network will focus their initial implementation and marketing efforts on surgeon adoption.


We are currently in the process of rolling out the Virtual Physicians Network v 2.1 mobile and web based app technology to key industry thought leaders in the orthopedic spine and neurosurgical spine markets in the U.S. These initial beta users include but are not limited to groups in FL, CA, MI, WV, NV, and NJ. Upon the successful implementation of the beta release of Virtual Physicians Network v. 2.1, we anticipate additional adoption from the peers and colleagues of these key thought leaders. Our beta launch is scheduled to be completed by the end of 2016.


The Virtual Physician’s Network platform is designed to accommodate all surgical and procedural specialties. Our goal is to expand into general orthopedics and cardiology for all the associated stakeholders in late 2016.




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Surgeon members experience


We currently offer surgeon members five core practice building tools through the Virtual Physician’s Network as well as an interactive HIPAA compliant surgical calendar. These tools include: Book a Case, Contact My Rep, Education, Product Info, CME. The Clinical Outcomes tool is currently still in development for release in late 2016.


Medical Vendor members experience


We currently offer medical vendor representatives four core tools to help vendor reps streamline and effectively manage their communications and requests from their surgeon customers: Confirm a Case, My Messages, Education and Product Info.


We also have added, in version 2.1, visibility for vendor administration and sales management to allow them access to the cases their surgeon customers who are booking surgical case with their respective sales representatives. This visibility gives vendors the ability to better manage their inventory in regards to availability and shipping costs.


Our technology gives vendor sales representatives, vendor administrators and managment instant and secure communication with their customers for case booking and communication. This not only eliminates costly mistakes but also saves valuable time allowing them to work more efficiently. We also give the companies that they represent a compelling platform to promote new devices and techniques to their surgeon and hospital customers through marketing experiences in the app.


Virtual Physician’s Network will provide support and training to these organizations to effectively promote the use of their Virtual Physicians Network app throughout the beta rollout in 2016.


Healthcare Professional members experience


We have successfully released our Healthcare Professional experience in v. 2.1 of the Virtual Physician’s Network mobile healthcare platform. This experience has four core tools for healthcare professionals to effectively be linked to the surgeons and vendors that are working in their hospitals and surgery centers. These tools include: My Cases, My Messages, Education and Product Info.


This gives all healthcare professionals that are involved in these surgical events the ability to instantly keep track of and privately respond to all requests and communications between their surgeons and vendors. It also provides them with an intuitive and quick reference to industry specific education and product information.


Professional Societies and Associations


Each year there are over 2,000 medical societies and associations that have an annual meeting. These industry meetings host large numbers of their membership and are sponsored by medical device and pharma companies. They typically include surgeons that are industry thought leaders as faculty for each meeting and focus on the latest techniques, procedures, treatments and technology most relevant to their specialties.


We plan on showcasing the Virtual Physician’s Network technology at many of these key meeting over the next 18 months. These industry meetings represent an excellent marketing opportunity for Virtual Physician’s Network to gain adoption from all of their targeted stakeholders who attend these events together.


Virtual Physician’s Network also provides these organizations with a more effective way to deliver Continuing Medical Education (CME) experiences, meeting information, and other educational experiences to their membership through the Virtual Physician’s Network app.


TouchPACS


With a growing PACS market and an emergent Electronic Medical Record (“EMR”) market, we plan to provide a technically advanced but cost effective combined solution to medical practices that have been largely ignored by existing vendors.  We will offer as a primary foundation technology, a digital imaging and communications in medicine (“DICOM”) viewer on innovative hardware, a fully Certification Commission for Healthcare Information Technology (“CCHIT”) certified EMR solution, and safe and efficient storage of diagnostic images both as individual clinical assets and as parts of a larger enterprise.


Our goal is to bring a fully integrated PACS/RIS/EMR package to market within a realistic timeframe in order to meet FDA and the American Recovery and Reinvestment Act of 2009 (“ARRA”) standards, starting with an innovative EMR framework as a basis for future product expansions.   The stated project goal is to begin marketing a combined PACS/RIS/EMR solution in late 2016. With a CCHIT qualified EMR fully integrated with TouchPACS, we will be qualified for ARRA reimbursement.



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The PACS will support the DICOM v3 standards for both communication and visualization as a solution, a scope of service contained within the boundaries of the total TouchEMR package.  PACS is being modularized this way in order to allow for other such future standards/relational forks as laboratory control or inpatient expansion.  PACS will be deemed as v1 complete upon clearance of Food and Drug Administration (“FDA”) Class2 certification with all parts intact, and EMR v1 will be considered v1 complete on receiving CCHIT certification.  PACS/EMR will be implemented to include all necessary hardware and configuration for a customer, such that our expected target audience is considered “computer illiterate” and will not be expected to provide implementation equipment independently.  To that end, simplification of very complex workflow and diagnostic processes is a central focus within our developed interfaces.  We propose that smart implementation of clinical software as a workflow client/server process will allow us to market both products (PACS and EMR) as either standalone or paired.  


Technology


Over the next 18 months Touch Medical Solutions plans:


To market both individually and combined as a full Practice Management suite the following products:


TouchERP - Medical Enterprise Resource Planning (“Medical Enterprise RP”) –Is designed for a complete solution to various business sectors, including healthcare. A combination of products providing Clinical Management, Resource Management, Financial Management, and a Practice Information System, that are critical to the medical practices in today’s healthcare industry.


TouchPMS – Practice Management Suite – This is a category of software that deals with the day-to-day operations of a medical practice. Such software frequently allows users to capture patient demographics, schedule appointments, maintain lists of insurance payers, perform billing tasks, and generate reports.


TouchEMR – Electronic Medical (Health) Record – This is a locally kept copy of the patient health information located at each applicable healthcare provider, which can then be merged with the central EHR record as diagnostic information changes.  This record can be kept in any applicable form, as long as it contains the basic pieces of information necessary to resynchronize with a central provider.


TouchRIS–Radiology Information System – This is a computerized database used by radiology departments to store, manipulate and distribute patient radiological data and imagery. The system generally consists of patient tracking and scheduling, result reporting and image tracking capabilities. RIS complements HIS (Hospital Information Systems) and is critical to efficient workflow to radiology practices.


TouchPACS – Picture Archiving and Communications Systems - In medical imaging, PACS have been developed to provide economical storage, rapid retrieval of images, access to images acquired with multiple modalities, and simultaneous access at multiple sites.


TouchPHR – Personal Health Record – This is an abstract definition of copies of patient electronic health record information, such as radiology studies or lab results, which are provided to a clinic by a patient in electronic form.  This is relative to any type of portable copy device, such a CDR or USB, and defines import and export guidance for merging copies into a local (practice level) EMR.


TouchTranscription – Integrates voice recording and digital scripting into the patient record.


TouchPaperlessOffice – Through the use of a Paperless Office Solution, medical providers can store, index, search, retrieve, and modify all aspects of a patient’s medical records to provide a paperless office that can eliminate bottlenecks in a patient work flow.


Our potential for success will depend upon our ability to:


(i)

develop project synergy where our products are designed for projects to work both independently as well as in a multiple product suite;

(ii)

develop enhanced workflow and customization by creating a system workflow that will adopt an existing practices workflow as opposed to the practice needing to change their process and ideology based on the systems constraints. While the main portions of the software suite must be standardized, customization will be allowed to accomplish individual practice goals; and

(iii)

Training – All our customers will receive training before, during, and after implementation to fully understand how the systems are designed to be used.  




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PACS


In late 2016, we plan bring to market our Enterprise PACS system (TouchPACS) at a competitive price point.  The focus of TouchPACS is to keep hardware and subscription costs affordable, making it an option for any size or type of clinical practice.  In addition to a traditional PACS system on-site, TouchPACS will also offer offsite content storage, automated backup solutions, and remote software access via a web based portal product. These traditionally have been separate offerings and have represented a significant integration challenge for the small to mid-sized medical practice. We plan that TouchPACS will also provide the ability to link multiple offices, providing practices the ability to have a single system supporting all sites in which they practice.


Clinical Trial Management


By the end of 2016, we plan to launch a Clinical Trial Management Solution or Laboratory Information System (TouchCT). Both the Clinical Trial Management Solutions and the TouchEMR product share many core requirements offering an opportunity to expand functionality of the TouchEMR product to satisfy trial management needs.  An electronic Clinical Trial Management system can provide service to drug development and medical research companies who are in the process of bringing clinical products to market in a newly regulated drug certification process.


Form Factor


Our products will offer multiple suite configurations to fit customer needs. We will offer both traditional wall- mounted displays as well as portable laptops and tablet computers.


Management is of the opinion that having a portable solution will be most useful for physicians who treat patients in multiple locations as well as for other situations where the flexibility of being mobile is required.


We will also provide a web based DICOM viewer that will allow image presentation on smartphones including:


(i)

iPhones

(ii)

Android


but these will be used for preliminary diagnostics only (wet read), as such devices must be FDA Class-3 approved by equipment manufacturers in order to be used for final reads in a clinical setting.


Our systems will offer a touch screen display allowing easy manipulation of images without the need to sit at a workstation with a mouse and keyboard except where this is clinically required. Utilizing modern touch screen interface technology will be attractive to physicians who want to be ahead of the technology curve, or where a physician or physician assistant will be more effective without being tied to a keyboarded workspace.


For fully integrated PACS consumers, a multi-monitor diagnostic station solution will be used to assure full conformance with DICOM and diagnostic imaging standards.


Standards


DICOM Standard


Our imaging solutions are based on the DICOM medical imaging standard, as the service is compatible with virtually every digital imaging modality and PACS in use today. This makes it a solution for orthopedists, obstetricians, family practice physicians, dentists, and chiropractors, in addition to the traditional radiology market.  Increasingly, small non-radiological clinics make limited use of imaging as part of their everyday practice; we will provide a simplified, but industrial quality, answer to their software needs.


Platform


We will rely on Microsoft technologies as the backbone of our systems.  By utilizing the Microsoft Visual C# development tools, and the Microsoft Visual Studio .NET 2008/2010 development environments, management is of the opinion that TouchPACS will be able to leverage Microsoft’s extensive coding library and features, and to provide an assured vendor as a foundation technology partner for our customers.  We will use Microsoft Team Foundation Server to enforce an Agile software development and design philosophy. This philosophy emphasizes close collaboration between the programmer team and business experts, face-to-face communication, frequent delivery of new deployable business value and tight, self-organizing teams.




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DICOM Viewer


We will provide a DICOM viewer offering advanced layering, image manipulation and other features that are typically used in large-scale implementations. By utilizing touch screen technology, we will provide a feature to a physician looking to demonstrate technology advancement to its patients.  We will seeking FDA Class-2 certification for diagnostic imaging modality classifications, and will publish a formal DICOM conformance statement as a function of the development process.   We are not seeking certification for use with Digital Mammography (“MG”) during stage one development, but will seek to display high resolution MG in a non-diagnostic format.   The viewer product typically will deploy as a multi-monitor diagnostic station, and a touch-based tablet application, and will include a module for internet-based reading as part of the EMR portal project that we are attempting to develop.


Workflow Clients


We will provide support to our clients; in addition to DICOM PACS stations, for supporting medical records as a foundation of our product suite, including but not limited to:


(i)

transcription,

(ii)

management,

(iii)

paperless workstation, and

(iv)

export and reporting clients.


The clients’ products will be designed to work within the touch-based format or touch-assisted in cases like transcription, and are intended to be deployed on our branded encapsulated workstations and tablets.


Servers


TouchPACS has products to serve both Health Level 7 (“HL7”), a standard for exchanging information between medical applications and DICOM formatted messages natively, and allows for implementations to be unified to a central server or split into multiple servers, based on the scale needs of each customer.  TouchPACS is also developing web based portal system to allow for patient scheduling, non-diagnostic review, referring physician review, and remote diagnostic reading capabilities.  The web portal system will be implemented in a compatible way with both DICOM and HL7 needs in mind, allowing for a PACS web product to be developed concurrently with the EMR web product.


Critical Accounting Policies and Estimates


Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applied on a consistent basis.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.


We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements.  In general, management’s estimates are based on historical experience, information from third party professionals, and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management under different and/or future circumstances.


We believe that our critical accounting policies and estimates include our ability to continue as a going concern, revenue recognition, accounts receivable and allowance for doubtful accounts, inventory obsolescence, accounting for long-lived assets and accounting for stock based compensation.


Ability to Continue as a Going Concern:  Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity, and attain profitable operations.  In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.


Revenue Recognition: In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Provision for sales returns will be estimated based on the Company's historical return experience.




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Accounts Receivable and Allowance for Doubtful Accounts: Our accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.


Long-Lived Assets: The carrying value of long-lived assets is reviewed annually and on a regular basis for the existence of facts and circumstances that may suggest impairment. If indicators of impairment are present, we determine whether the sum of the estimated undiscounted future cash flows attributable to the long-lived asset in question is less than its carrying amount. If less, we measure the amount of the impairment based on the amount that the carrying value of the impaired asset exceeds the discounted cash flows expected to result from the use and eventual disposal of the impaired assets.


Derivative Financial Instrument: We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, we use the Black-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation dates. For complex embedded derivatives, we use a Dilution-Adjusted Black-Scholes method to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.


Share-Based Compensation: We record share-based compensation in accordance with FASB ASC 718, Stock Compensation. FASB ASC 718 requires that the cost resulting from all share-based transactions are recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. FASB ASC 718 also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions.


Results of Operations


Comparison of Three Months Periods Ended June 30, 2016 and 2015


Operating Revenues


Operating revenues since the Company’s inception has been $nil.


Operating Expenses


During the three months ended June 30, 2016, the Company incurred operating expenses of $73,173 compared with $109,403 during the three months ended June 30, 2015.  The decrease in operating expenses was attributed to a decrease in professional fees of $35,151 and a decrease in general and administrative expenses of $1,079.


Other expenses


Total other expense for the three months ended June 30, 2016 was $9,456 as compared to total other expenses for the three months ended June 30, 2015 of $6,790. The increase of $2,666 and approximately 39% in total other expenses was as a result of an increase of $5,694 in imputed interest relating to imputed interest at 8% per annum on related party loans and a decrease in gain on settlement of debt from $31,091 to $0, offset by a decrease in amortization of debt discount and interest expense from $11,659 to $8,425, and the change in fair value of derivatives from a loss of $11,840 to a gain of $19,045 relating to the fluctuation of the liability related to convertible debt carried at fair.


Net Loss


For the three months ended June 30, 2016, the Company recorded a net loss of $82,629 compared with $116,193 for the three months ended June 30, 2015. 




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Comparison of Six Months Periods Ended June 30, 2016 and 2015


Operating Revenues


Operating revenues since the Company’s inception has been $nil.


Operating Expenses,


During the six months ended June 30, 2016, the Company incurred operating expenses of $119,599 compared with $199,652 during the six months ended June 30, 2015.  The decrease in operating expenses was attributed to a decrease in professional fees of $70,616 and decrease in research and development of $9,930, offset by a slightly increase of $493 in general and administrative expenses.


Other expenses


Total other income for the six months ended June 30, 2016 was $16,150 as compared to total other expenses for the six months ended June 30, 2015 of $41,204. The decrease of $57,354 and approximately 139% in total other expenses was as a result of the change in fair value of derivatives from a loss of $2,197 to a gain of $3,220 relating to the fluctuation of the liability related to convertible debt carried at fair, a decrease in amortization of debt discount and interest expense from $38,622 to $20,426, and an increase in gain on settlement of debt from $30,454 to $73,818, and offset by an increase of $9,623 in imputed interest relating to imputed interest at 8% per annum on related party loans.


Net Loss


For the six months ended June 30, 2016, the Company recorded a net loss of $103,449 compared with $240,856 for the six months ended June 30, 2015. 


Working Capital


 

 

June 30,

2016

$

 

December 31,

2015

$

Current Assets

 

1,194

 

40

Current Liabilities

 

1,527,937

 

1,448,673

Working Deficits

 

(1,526,743)

 

(1,448,633)


Cash Flows


 

 

Six months ended

June 30, 2016

$

 

Six months ended

June 30, 2015

$

Cash Flows used in Operating Activities

 

(67,296)

 

(111,984)

Cash Flows from Financing Activities

 

68,450

 

117,500

Net Increase in Cash During Period

 

1,154

 

5,516


Liquidity and Capital Resources


As at June 30, 2016, the Company’s cash and total asset balance was $1,194 compared to $40 at December 31, 2015.


As of June 30, 2016, the Company had total liabilities of $1,527,937 compared with total liabilities of $1,448,673 at December 31, 2015.  The increase in liabilities is primarily due to increase in accounts payable and notes payable.


As of June 30, 2016, the Company had a working capital deficit of $1,526,743 compared with a working capital deficit of $1,448,633 as of December 31, 2015.  The increase in the working capital deficit is primarily attributed to increase in accounts payable and notes payable.



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Going Concern


Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity, and attain profitable operations.  In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.


Uncertainties and Trends


Our operations and possible revenues are dependent now and in the future upon the following factors:

 

·

Whether we successfully develop and commercialize products from our research and development activities.

·

If we fail to compete effectively in the intensely competitive medical software area, our operations and market position will be negatively impacted.

·

If we fail to successfully execute our planned partnering and out-licensing of products or technologies, our future performance will be adversely affected.

·

The recent economic downturn and related credit and financial market crisis may adversely affect our ability to obtain financing, conduct our operations and realize opportunities to successfully bring our technologies to market.

·

Software industry related litigation is substantial and may continue to rise, leading to greater costs and unpredictable litigation.

·

If we fail to comply with extensive legal/regulatory requirements affecting the medical software industry, we will face increased costs, and possibly penalties and business losses.


Off-Balance Sheet Arrangements


We have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under whom we have:


·

An obligation under a guarantee contract.

·

A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets.

·

Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument.

·

Any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.


We do not have any off-balance sheet arrangements or commitments (other than the potential effect of certain legal contingencies) that have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


Not applicable.


Item 4. Controls and Procedures


Disclosure Controls and Procedures


As of June 30, 2016, we carried out an evaluation under the supervision and the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2016, as defined in Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”).  Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, because of the material weaknesses in internal control over financial reporting discussed in Section 9A of our annual report on Form 10-K, our disclosure controls and procedures were not effective, at a reasonable assurance level, as of June 30, 2015. In light of this, we performed additional post-closing procedures and analyses in order to prepare the Condensed Consolidated Financial Statements included in this report. As a result of these procedures, we believe our Condensed Consolidated Financial Statements included in this report present fairly, in all material respects, our financial condition, results of operations and cash flows for the periods presented.  A control system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the company have been detected.




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Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is 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 in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, who also acted as our Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.


Changes in Internal Control over Financial Reporting


During the first quarter we continued the enhancement of our internal controls. Otherwise, there were 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 June 30, 2016 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION


Item 1. Legal Proceedings


We are not a party to any pending legal proceedings where any officer, director, affiliate of owner of 5% or more of our common stock is adverse to us or where the amount of damages claimed, exclusive of interest and costs, exceeds ten percent of our current assets. Pursuant to the terms of the Merger, responsibility for any liability emerging from our pre-merger business relies wholly with our pre-merger management.


Item 1A.  Risk Factors


A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.


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


On March 8, 2016, the debt holder made a conversion of a total of 20,000,000 shares of the company’s restricted stock satisfying $20,000 of the note with a fair value of $38,695, included in the fair value of debt balance of $38,695 was settlement of derivative liability of $38,695. The Company recorded a gain of $73,818 for less shares issued during the conversion than what was called for in the original agreement.


With respect to the securities issuances described above, no solicitations were made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of these securities as described above were exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.


Item 3. Defaults Upon Senior Securities


None


Item 4. Mine Safety Disclosure


Note applicable.


Item 5. Other Information


None.


Item 6. Exhibits

 

Exhibit No.

 

Title

31.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document




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SIGNATURES


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

 

 

 

DMH INTERNATIONAL, INC.

 

 

Registrant

 

 

 

Dated: August 19, 2016

 

/s/ George England

 

 

George England

 

 

Chief Executive Officer

 

 

 

Dated: August 19, 2016

 

/s/ Rik J. Deitsch

 

 

Rik J. Deitsch

 

 

Chief Financial Officer





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